Full(ish) Legal Costs

Full Costs Awarded Against an Insurer following a groundbreaking Punitive Damages Decision in Baker v Blue Cross

By: Bogdan Miscevic, Partner & Simren Dhother, Articling Student


It’s not every day that a litigant is able to recover full legal costs. But sometimes, the Court will grant full indemnity costs when the conduct of the insurer is egregious, reprehensible or under special circumstances – as was recently considered by the Court.

That is exactly what happened after a five-week trial in the Ontario Superior Court case of Baker v Blue Cross.[1] In this case, a Toronto jury granted the individual Plaintiff the amount of $1,500,000.00 for punitive damages – the largest such award in a first party claim context (to date). After hearing submissions on costs, the Court granted the Plaintiff full indemnity costs for the wrongful denial of long-term disability (“LTD”) benefits – awarding an additional $1,083,953.50!  

[1] Sara Baker v Blue Cross Life Insurance Company of Canada, 2023 ONSC 1891 (Cost Endorsement Decision).

Facts & Analysis

The Plaintiff, Ms. Baker, suffered a stroke while exercising in October 2013. At the time of the stroke, Ms. Baker was enjoying a successful career as a Director at a Toronto hospital. The hospital had a group disability insurance policy with Blue Cross Life Insurance Company of Canada (“Blue Cross”). Blue Cross initially provided the Plaintiff with LTD benefits but terminated those benefits following a medical assessment that concluded that Ms. Baker did not meet the eligibility criteria for “total disability” as defined by its policy. Ms. Baker commenced a civil action against Blue Cross which proceeded by way of a jury trial over the course of five weeks.

The jury returned a verdict in favour of Ms. Baker that she was totally disabled within the meaning of the Blue Cross’ LTD policy granting her retroactive benefits to the date of the trial, aggravated damages for mental distress in the sum of $40,000 and, most significantly, punitive damages in the sum of $1,500,000.00. On costs submissions, Ms. Baker sought full indemnity costs and disbursements on the public policy basis that she should not have her LTD benefits, of which she was wrongfully deprived, eroded by costs.

Put simply, she argued that she should not be out of pocket by virtue of being forced to establish her rights to recover benefits that were properly payable under the LTD policy. The Court accepted her submissions and held that the wrongful denial of the LTD benefits by the insurer, given the unique character of LTD insurance policies, constitutes special circumstances to justify this elevated costs award.

Closing Remarks

This decision stands for the proposition that insurers may bear enhanced cost risk if they wrongfully deny coverage in a first party claim context. Such an outcome may become more common if insurers force their insured to pursue litigation that could take years to resolve and results in economic hardship.  

While the Court did not comment on the application of this case to other types of insurance disputes, one must wonder whether this case creates a new trend for full indemnity awards to the insureds who successfully challenge the denial of policy benefits. As the risk of an insurer’s responsibility to pay costs on a full indemnity basis increases, insurers should be aware of the potential judicial shift in awarding enhanced costs for other types of first party claims, including as against home insurers.