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Suing Your Own Insurance Company for Denying Your Claim > $5,000 in Damages and $75,000 in Legal Costs

Whether on a home insurance policy (i.e. fire loss or theft) or a automobile policy, an insured may claim against their own insurance policy in the event of loss, subject to the rights of the insurer to investigate and adjust the claim.

What happens if your insurer denies your claim on the basis that the alleged theft did not occur as described?  Meaning that the insurer has concerns that the loss was either as a result of your own actions or the actions of people on your behalf – i.e. that you were involved in fraud?

Can you sue your own insurer?  If so, then who will pay for your legal fees to start and proceed with such a lawsuit?

In the recent 2010 Ontario Superior Court of Justice decision of Bonaiuto v. Pilot Insurance Company (2010) 101 O.R. (3d) 157 (S.C.J.), an insured made a claim for theft and loss to her vehicle in the amount of $22,000.00.  The insurer investigated and denied the claim.

Approximately 5 years after the theft, this case went to Trial for a week before a Jury.  In the end, the Jury awarded the plaintiff $5,000.  Before Trial, the insurer had offered nothing and the plaintiff had offered to settle the file for $15,000 inclusive of prejudgment interest.

On the issue of costs, the plaintiff’s substantial indemnity costs claimed were $75,000.

In awarding the plaintiff her substantial indemnity costs, Young, J. noted that the insurer did not offer to settle the file at any point and also had thin evidence on the issue of fraud as presented at Trial.

Further, Madam Justice Young found that the plaintiff had properly commenced the action in the Ontario Superior Court of Justice – and not under the Simplified Rules regime or the Small Claims Court jurisdiction (see our previous blog on March 11, 2010 for detail) – because it was reasonable for the plaintiff to assess that this would have been an all or nothing award.