What Lau v. ICBC Teaches Insurance Defence Counsel About Client Communication, Settlement Duties and Loss of Chance Liability
The Supreme Court of British Columbia’s decision in Lau v. Insurance Corporation of British Columbia, 2026 BCSC 574, is a significant and cautionary judgment for insurance defence counsel and independent counsel alike. The case arises from a catastrophic motor vehicle accident and a failed opportunity to resolve the underlying personal injury claim within policy limits. While the factual background is tragic, the legal analysis is exacting and, at times, unforgiving.
At its core, Lau is a decision about lawyer inertia, divided loyalties, and the real consequences of delay. The Court’s careful distinction between loss of opportunity and loss of chance, alongside its sharp criticism of both defence counsel and independent counsel, will resonate well beyond British Columbia. For insurance defence lawyers in particular, the judgment recalibrates expectations around duties to insureds when policy limits are plainly at risk.
The Duty of Defence Counsel to Instruct and Protect the Insured
Defence counsel appointed by insurers routinely act for two clients: the insurer and the insured. In Lau, the Court reaffirmed that this dual retainer is not merely theoretical—it carries substantive obligations.
Justice Caldwell held that defence counsel must actively ensure that the insured’s interests are protected at least equally with those of the insurer. Counsel’s role is not confined to passively following insurer instructions, particularly where those instructions create a foreseeable risk of personal exposure to the insured.
The Court was unequivocal that Mary‑Helen Wright failed this duty. Wright adopted, and advanced to ICBC, a “wait and see” strategy that served ICBC’s interests but exposed Lau to catastrophic personal liability. The Court emphasized that this imbalance triggered a positive obligation on defence counsel to advise the insured:
Critically, Wright did not explain these risks to Lau, either directly or through independent counsel. Nor did she advise ICBC of how its tactical decisions prejudiced the insured. Justice Caldwell summarized the failure succinctly:
“She had an obligation… to advise ICBC regarding their duty to Lau and to ensure that Lau’s interests were protected to at least the same extent as those of ICBC. She failed to meet the standard of a reasonably competent solicitor.”
For insurance defence counsel, the lesson is clear: exclusive conduct of the defence does not excuse exclusive fidelity to the insurer.
The Duty of Independent Counsel to Promptly and Actively Advise
If defence counsel failed by strategic delay, independent counsel failed through silence.
Andrew Epstein was retained precisely to protect Lau from exposure beyond policy limits. The Court emphasized that the November 17, 2015 settlement offer represented “far and away the best chance for Lau to avoid financial devastation.” Yet Epstein failed to treat it with the urgency and seriousness required.
The Court was particularly critical of Epstein’s failure to communicate, to negotiate, and to advise Lau of the stakes:
“By any reasonable measure, Epstein’s provision of legal services to Lau during this period of the outstanding offer to settle did not meet the standard of a reasonably competent solicitor.”
What distinguishes Lau from many solicitor’s negligence cases is the Court’s clear expectation that independent counsel must do more than observe. Epstein’s “watching brief” approach was incompatible with the purpose of his retainer. Justice Caldwell rejected the notion that limited authority or concern over legal fees justified inaction.
Independent counsel, the Court made clear, must not merely wait for instructions—they must drive the advice, communicate urgency, and actively pursue protective steps when an insured faces potential ruin.
Loss of Opportunity vs. Loss of Chance: A Precise and Disciplined Analysis
One of the most important doctrinal contributions of Lau lies in its careful treatment of causation.
Despite finding that all defendants breached their duties, the Court rejected Lau’s argument that he would have avoided loss altogether but for those breaches. The Court held that acceptance of the November 17 offer was legally and practically uncertain:
“I am unable to find, on a balance of probabilities, that… a settlement would have been reached at or within policy limits.”
Accordingly, the Court found no loss of opportunity.
However, the analysis did not end there. Applying loss‑of‑chance principles, the Court held that Lau lost a real and substantial chance to avoid or reduce his loss:
“Their breaches caused Lau to lose a chance to avoid or to reduce his loss.”
Justice Caldwell emphasized that this chance need not be probable—only meaningful and non‑speculative. He assessed the lost chance at 15%, reflecting both the severity of Cole’s injuries and the uncertainties surrounding court approval and Lau’s net worth.
This disciplined approach reinforces that loss of chance is not a fallback theory of sympathy, but a principled tool grounded in evidence and realism.
Implications for Insurance Defence Counsel
The impact of Lau on insurance defence practice is substantial.
First, the decision sharpens expectations around active, early investigation. Waiting for police reports and opposing counsel’s disclosure—while doubting its reliability—was characterized as “self‑induced wilful blindness.”
Second, the judgment underscores that defence counsel must proactively communicate risk to insureds and insurers alike. Silence, delay, or tactical deference to insurer instructions can amount to professional negligence.
Third, Lau signals increased litigation risk for lawyers even where insurers ultimately escape liability through limitation defences. Here, ICBC and Wright avoided judgment solely because the limitation period had expired—not because their conduct met the required standard.
For defence counsel, the case is a reminder that files are not insulated simply because policy limits cap the insurer’s exposure.
Conclusion
Lau v. ICBC is not merely a case about a missed settlement—it is a broader indictment of complacency in insurance defence practice. Defence counsel must actively safeguard insureds whose personal assets are at stake. Independent counsel must respond promptly and decisively when rare opportunities arise. And courts will continue to scrutinize delay, deference, and disengagement with increasing rigor.
In an era of escalating damage awards, Lau stands as a warning: when policy limits are in play, inaction is itself a risk—and sometimes, a liability.
*The law may have changed since this article was first published. You should consult with your lawyer to confirm the current state of the law*
For further information please contact:
| Denim R. Martyn Direct Line: (306) 477-7261 Email: dmartyn@cuelenaere.com |