When a liability claim threatens to exceed policy limits, the defence is no longer only about minimizing the claimant's recovery. The insured has personal exposure beyond the policy, and decisions about settlement can affect the insured's own financial survival.
Lau v Insurance Corporation of British Columbia, 2026 BCSC 574, is a detailed example of how those interests can collide. The underlying motor vehicle claim produced a judgment far above the insured's $2 million liability limit. The insured later sued ICBC, counsel appointed to defend him and independent counsel, alleging that settlement opportunities were not handled in a way that adequately protected him.
The Court found that ICBC and both sets of lawyers fell below the duties they owed. In the insurer's case, control of the defence carried a duty of good faith and required the insured's interests to receive at least equal consideration when an excess judgment was a real possibility. Communication about settlement and personal exposure mattered because the insured needed a meaningful opportunity to protect himself.
Causation was not treated as certain. The Court assessed a 15% lost chance that better conduct would have avoided or reduced the eventual loss. That approach recognized that no one could know whether a different settlement path would definitely have succeeded.
The result, however, was shaped by limitation law. The claims against ICBC and insurer appointed defence counsel were statute barred even though the Court found substantive failures in their conduct. Independent counsel remained liable for $326,758.70 plus 15% of proven bankruptcy expenses. Mental distress damages were refused.
The practical lesson is uncomfortable but useful. Good claims handling and defence communication matter most when the insured's exposure exceeds the available limit. At the same time, an insured who believes the defence has left personal interests unprotected cannot assume that the dispute can wait until every consequence of the underlying litigation has finished unfolding.