The Latest Word On Allocation Of Defence Costs Between Covered And Uncovered Claims

The Ontario Court of Appeal recently advanced the discussion as to how insurers and the insureds allocate defence costs between covered and uncovered claims.

In Tedford v. TD Insurance Meloche Monnex, 2012 ONCA 249, the Ontario Court of Appeal was faced with a claim by the insured, Tedford, for a defence to be paid for by the insurer.

Significantly, the Court's decision in Tedford on this topic differed from, or at least clarified to a degree, the Court's decision in Hanis v. Teevan, [2008] OJ No. 3909. In Tedford, there were two distinguishing features from the Hanis decision. The first was that the insured was seeking a defence at the outset of the underlying action whereas the Hanis decision on allocation of defence costs was made after the action was over. Secondly, in Hanis, the covered claims represented only a small portion of the total damages sought.