Ruling rejects enhanced costs request, says insured's action raised important issue
In a case arising from a fire caused by cannabis oil production, the Alberta Court of King’s Bench awarded an insurer costs under column 1 of schedule C after removing the insured from coverage based on a criminal act exclusion.
In this proceeding, the plaintiffs owned a home with a detached garage. The defendant insurance company issued an insurance policy covering the residence, with a term from August 2017 to August 2018.
In October 2017, the first plaintiff was making cannabis oil using butane in the garage. This process caused a fire that damaged the garage and injured him and two visitors at the property at the time. In April 2019, he pleaded guilty to two criminal charges arising from the fire.
One of the injured visitors sued the plaintiffs for bodily injury and associated damages. The plaintiffs asked the insurer to defend and indemnify them in the visitor’s action under the policy coverage. The insurer defended them in this action as requested.
The plaintiffs filed the present action against the insurer. They wanted property coverage under s. I of the policy and liability coverage under s. II of the policy. They argued that the insurer breached its duty to indemnify and defend them for the visitor’s action under the policy terms.
The insurer applied for a summary trial dismissing the plaintiffs’ action and determining that they were not entitled to the requested policy coverage. When the summary trial began, the plaintiffs withdrew their property coverage claim.
On May 7, in McGregor v Wawanesa Mutual Insurance Company, 2025 ABKB 227, the Alberta Court of King’s Bench applied the criminal act exclusion in s. II of the policy, excluded the plaintiffs from liability coverage, dismissed their action, and ruled in the insurer’s favour.
The insurer asked for the costs of the action under column 4 of schedule C of the Alberta Rules of Court, Alta Reg 124/2010. Alternatively, it sought enhanced costs. The plaintiffs countered that costs under column 1 of schedule C, plus reasonable disbursements, were appropriate. They added that the lack of rare or exceptional factors rendered enhanced costs improper.
On June 10, in McGregor v Wawanesa Mutual Insurance Company, 2025 ABKB 352, the Court of King’s Bench of Alberta awarded the insurer, as the successful party in the action below, costs under column 1 of schedule C, plus reasonable disbursements.
The court exercised its discretion, deemed it appropriate to award costs, and considered the relevant cost rules.
The court said the plaintiffs approached the litigation consistently with r. 1.2, including by abandoning their property claim at the hearing’s outset and making arguments with some merit.
The court added that the parties agreed to a summary trial and an extensive statement of facts and offered helpful and necessary briefs.
The court noted that this proceeding involved:
The court acknowledged that the plaintiffs’ statement of claim included allegations of bad faith conduct against the insurer. However, the court refused to find these allegations inflammatory in the context of a claim seeking insurance coverage.
Lastly, given the parties’ mixed success, the court made no cost award for this cost application.
