An Alberta court rejected a $137,000 costs claim against a major insurer, ruling good-faith coverage denials don't trigger automatic full-indemnity costs.
In a decision filed February 18, 2026, Justice Michael J. Lema of the Court of King's Bench of Alberta awarded lump-sum all-inclusive costs of just $38,000 in Tragger v Intact Insurance Company, 2026 ABKB 112 - well short of the $137,252.66 that judgment creditors David Alexander Tragger and Hypocrite Productions Inc. had sought from Intact Insurance Company and the now acquired and rebranded Royal & Sun Alliance Insurance Company of Canada.
The dispute traces back to a 2007 stone siding installation. The plaintiffs hired a contractor to supply and install stone siding on two buildings. When the siding began to delaminate in 2014, they were forced to remove and replace all of it. They sued, and AJ Summers found faulty workmanship amounting to negligence by the subcontractor and a breach of contract by the contractor, awarding a judgment for approximately $310,000.
The plaintiffs couldn't collect any amount. Both of the contractor's commercial general liability insurers had advised that, in their view, the claim fell outside coverage, and the contractor apparently never disputed those denials.
With the judgment unsatisfied, the plaintiffs turned to section 534 of Alberta's Insurance Act, which lets judgment creditors go after the debtor's insurers directly. In the main coverage ruling (Tragger v Intact Insurance Company, 2025 ABKB 678), Justice Lema found the losses were in fact covered under some of the policies, obliging the insurers to pay.
Then came the costs battle.
The plaintiffs argued they stood in the shoes of the insured and were owed full-indemnity costs, leaning on case law — particularly M(E) v Reed and McAllister v Calgary (City) - holding that insureds shouldn't have to eat into their recovery just to prove coverage exists.
Justice Lema wasn't persuaded. This wasn't about an insurer's obligation to pay for a policyholder's legal defence - the so-called duty to defend. It was about the obligation to pay the underlying judgment - the duty to indemnify. Those are separate duties under a liability policy, and cost principles from one don't automatically carry over to the other.
Even if they did, the court adopted the reasoning from the British Columbia Court of Appeal's decision in West Van Holdings Ltd v Economical Mutual Insurance Co, 2019 BCCA 110, which held that insurance contracts are silent on the cost of enforcing coverage, that no industry custom requires insurers to cover full costs when a claimant wins, and that the special nature of insurance contracts does not justify a different costs regime for policyholders.
Justice Lema also praised both insurers for conducting the litigation in what he called an "unobjectionable - in fact, commendable" manner. Both had cooperated on an Agreed Statement of Facts and a streamlined trial to resolve the coverage question efficiently.
For the industry, the takeaway is clear: Alberta insurers who contest coverage questions collaboratively and in good faith should not face automatic full-indemnity costs simply for getting the coverage call wrong.
