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  • Writer's pictureAaron Peterkin

Homeowner’s Insurer Proves ALE Fraud by Insured, Awarded Costs of $290K

Last week, in Legault v. TD General Insurance Company, 2023 ONSC 680, an insurer was awarded costs in the amount of $289,610 following a 16-day trial of the insured’s action to enforce the provisions her homeowner’s insurance policy. The insured alleged that the insurer failed to provide and/or explain the effect of a Proof of Loss, thereby prolonging the claims process; failed to conduct a fair and thorough investigation into the allegation of fraud; and wrongfully denied her insurance claim. The insurer counterclaimed for an order requiring the plaintiff to repay benefits paid out under that policy; alleging that she received $208K of additional living expenses under fraudulent pretenses. The fraud was proven, the insured’s claims were dismissed, and the insurer’s counterclaim was granted.


Following trial, the successful insurer requested that its costs be assessed on a substantial indemnity basis. Healy J. observed that the law allows for an award of substantial indemnity costs only in narrow circumstances, which included a consideration whether the losing party has engaged in conduct, either in the proceeding or in the circumstances giving rise to the cause of action, that is worthy of being sanctioned. The Court referenced the Supreme Court of Canada’s reason in Young v. Young, [1993] 4 SCR 3, in which McLachlin J. explained “Solicitor‑client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties.”


Healy J. noted “The plaintiff perpetrated a fraud on the defendant, sued for $1M, and put the defendant through litigation for seven years, including a lengthy trial. That is conduct that should attract the sanction of costs on the higher scale.” Noting also that the insurer had served a genuine offer to settle (offering to pay the insured $1,000) that had been withdrawn immediately prior to trial, costs were fixed in the amount of $289,609.84.

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