Pre-Tender Legal Costs Are "Voluntary Payments"

In Lloyd's Underwriters v. Blue Mountain Log Sales Ltd., 2016 BCCA 352, the British Columbia Court of Appeal determined for the first time that legal costs incurred before an insured gives its insurer notice of a claim can fall within a "voluntary payments" clause in an insurance policy.

Lloyd's insured a group of Canadian affiliated companies and individuals, including Blue Mountain Log Sales Ltd. and Scott Clarke (collectively, the "Clarke Group"), under annual general liability insurance policies. The Clarke Group carried insurance with Evanston Insurance Company in the United States. In June 2012, Washington affiliates of the Clarke Group became engaged in actions in Washington State and tendered their defence to Evanston. Allegations were later made against the Canadian members of the Clarke Group, but notice of the claim was not given to Lloyd's until April 18, 2014, by which time the insured and Evanston had incurred approximately $558,000 in defence costs.