Baker v. Blue Cross, 2023 ONSC 1891

Full Decision

The recent costs endorsement in Baker v. Blue Cross, 2023 ONSC 1891, following the plaintiff’s successful jury trial, awarded $1,083,953.50 to the plaintiff for costs on a full indemnity basis, which the court considered “fair and reasonable”, having regard to the factors in Rule 57.01 and including a discount for “some likely duplication of work”.[1]

Given the unique character of long-term disability (“LTD”) insurance policies, the wrongful denial of LTD benefits by an insurer constitutes special circumstances justifying the elevated award, and the court therefore exercised its discretion under section 131 of the Courts of Justice Act to award full indemnity costs.[2]


The plaintiff suffered a sudden stroke (“brain bleed”) while exercising in 2013, at which time she had a successful career as a Director of a Toronto hospital.[3] Blue Cross initially provided Ms. Baker with LTD benefits under the group disability insurance policy provided through her employer. However, it terminated those benefits after assessing Ms. Baker did not meet the eligibility criteria for “total disability” under the policy.[4] The plaintiff commenced her lawsuit in 2017 seeking, among other things, a declaration that she met the definition of total disability, retroactive benefits and aggravated and punitive damages. The matter proceeded by way of a five-week jury trial, in which the jury returned a verdict in favour of Ms. Baker finding that she was totally disabled within the meaning of the policy; awarding retroactive benefits in the amount of $220,604; aggravated damages for mental distress in the amount of $40,000; and punitive damages in the amount of $1,500,000 (the punitive damages sum is currently under appeal).[5]


The plaintiff sought full indemnity costs of $1,163,337.03 (which reflected a reduction in fees of approximately $175,000), or alternatively partial indemnity costs to the date of her offer to settle and substantial indemnity costs thereafter, on the public policy basis that she should not have her LTD benefits, of which she was wrongfully deprived, eroded by costs.[6]

The plaintiff relied on the rationale in duty to defend caselaw that, where an insurer wrongfully denies its duty to defend, the insured should be fully indemnified so as to not have that duty to defend benefit eroded by legal costs. In those cases, however, the subject insurance policy provided that the insured was entitled to a defence without expense to them, and it was that contractual basis that justified the exception to the common law rule that costs on an elevated basis are awarded only in rare and exceptional circumstances (absent a Rule 49 offer).[7] There is caselaw, however, which has extended this rationale to cases dealing with the wrongful denial of insurance coverage.[8]

In Wright v. National Life Assurance Co. of Canada, 1987 CarswellOnt 708 (Ont Supreme Court), the insured was wrongfully denied LTD benefits under her policy, and while the court found the insurer did not act in bad faith and did not award punitive damages, the insurer forced the plaintiff to establish her rights to recover benefits that were properly recoverable under the policy, and the court therefore concluded “it should not cost her a single penny to have established it”.[9] The plaintiff was awarded the full costs payable under her contingency agreement (which exceeded her submission for costs).[10]

In Hoang v. The Personal Insurance Co., 2017 ONSC 4193, the insured plaintiff was represented by a lawyer appointed by his insurer, but when judgement was rendered against him, his insurer refused to indemnify in satisfaction of the judgement, which required him to bring an action under s. 258(1) of the Insurance Act to have the insurance money payable under his motor vehicle policy applied toward payment of the judgement.[11] The court noted “the position of insureds and their insurers are different that the position of ordinary litigants, insofar as insureds pay premiums for coverage and where that coverage is wrongfully denied, it would be unfair and burdensome to make their customers pay a premium plus legal fees in order to obtain the coverage they bought”.[12]

In Fernandes v. Penncorp, 2013 ONSC 2803, the court awarded full indemnity costs and punitive damages for the wrongful deprivation of LTD benefits. The costs awarded reflected the actual fees under the contingency fee agreement, with the court stating “the insured was faced with harsh and unreasoning opposition from an insurer whose policy he had purchased for peace of mind and protection in the event that he became disabled from working. I concluded that an insurance company which sells peace of mind should not try to exploit a person in need”.[13]

After reviewing the denial of coverage caselaw, the court in Baker noted that insurers are “entitled to challenge the eligibility of insureds to the requested insurance benefits in court”,[14] however, “insurers must bear the risk if they wrongfully deny coverage in long-term disability policies, forcing an insured, who is economically disadvantaged from challenging the insurer by reason of a wrongful denial of benefits, to pursue costly litigation that can take years to resolve”.[15]

In denial of LTD benefits cases, the insured must pursue litigation against her insurer to obtain the contractual monthly benefits she purchased in an LTD policy to provide for basic living expenses.[16] It would therefore “not be fair or reasonable to erode her fixed monthly income replacement benefits by payment of unrecoverable legal fees.”[17]

Costs Award

In fixing fair and reasonable costs, the court considered the factors under Rule 57.01. Notably, the court found that the burden of preparation on the plaintiff was heavier as it is the plaintiff’s onus to prove her entitlement to benefits, and therefore it is “not reasonable to assume” the plaintiff’s costs should be similar to Blue Cross’ costs.[18] The hourly rates charged by the plaintiff’s lawyers were substantially higher than those charged by the defence,[19] and the court noted that “the reality of the law market is that personal injury lawyers who take these types of cases with no guarantee of payment tend to justifiably charge higher hourly rates than insurance defence lawyers who will be paid whether they win or lose”, finding that the hourly rates charged by the plaintiff’s lawyers were “within the realm of reasonableness” for this type of case.[20]

The plaintiff recovered just in excess of $1,700,000 and sought costs of $920,000 plus HST and disbursements, or approximately 54% of the amount recovered, which the court found was “not a disproportionate amount”, in a moderately complex proceeding with an “all or nothing” proposition for the plaintiff: if she had been found to not meet the criteria for total disability, she would have lost her sole income replacement source.[21]

The plaintiff’s reliance on two senior lawyers and two junior lawyers likely led to duplication of work beyond the plaintiff’s voluntary reductions, and therefore the court awarded $850,000 in fees plus $110,000 in HST, plus disbursements.[22]

Overall, this decision provides plaintiffs who are unreasonably denied LTD benefits a measure of solace that they can recover their costs at trial on a full indemnity basis.

[1] Baker v Blue Cross, 2023 ONSC 1891 at 38-39

[2] Ibid at 19

[3] Ibid at 1

[4] Ibid at 2-3

[5] Ibid at 4-5

[6] Ibid at 6, 8

[7] Ibid at 9-10

[8] Ibid at 11

[9] Ibid at 12

[10] Ibid

[11] Ibid at 13

[12] Ibid

[13] Ibid at 14

[14] Ibid at 15

[15] Ibid at 16

[16] Ibid at 18

[17] Ibid

[18]Ibid at 27

[19] Defence senior counsel billed $420 hourly, Plaintiff senior counsel charged $750 and $650 hourly, plus had junior counsel charging $400 and $375 hourly

[20]Ibid at 28, 29

[21] Ibid at 30-33

[22]Ibid at 29, 38

Written by

Alexa practices personal injury law at Cohen Highley LLP in London, with an emphasis on disability law and human rights. She is passionate about helping others, and is active in the local community to promote diversity and access to justice. She is currently a member of the Board of Directors of the Regional HIV/AIDS Connection, and volunteers as a committee member for the Brain Injury Association of London and Region.

Alexa completed her undergraduate studies at Western University in Political Science and was honoured to attend Osgoode Hall Law School to complete her Juris Doctor degree. During her time at Osgoode she had the opportunity to work with the Barbra Schlifer Commemorative Clinic, which provides legal services and advocacy for women who have experienced violence.

Alexa’s practice interests include sexualized violence and historic abuse, discrimination and other human rights abuses, and she is always interested in collaborating on matters that promote fairness and equality in the community.