Lessons from Manitoba Case Law
Bad Faith Allegations in Insurance Claims: Lessons from Manitoba Case Law
For insurance professionals, sound decision-making on coverage claims is more than prudent business practice—it is a safeguard against legal exposure. Yet, when does a denial of coverage cross the line from defensible to dangerous? Specifically, when does it give rise to an allegation of bad faith?
Understanding the Duty of Good Faith
Insurers owe a duty of good faith to their insureds. This obligation requires that claims be processed, investigated, assessed, and decided upon fairly, thoroughly, and promptly—even when the outcome is a denial. A breach of this duty, known as bad faith, is not merely a matter of delay or error. It is a serious legal allegation suggesting that an insurer acted with improper motive, recklessness, or intentional disregard for the insured’s rights.
In Manitoba, insureds who are dissatisfied with a denial of coverage may initiate legal proceedings against their insurer, seeking contractual damages or coverage entitlements. Increasingly, these actions include claims of bad faith, which carry reputational and evidentiary consequences.
Disclosure Risks in Litigation
Once litigation is commenced, insurers should be aware that the privilege typically shielding internal communications may no longer apply. Any correspondence relevant to the coverage decision—emails, notes, reports, and other internal documentation—may be subject to disclosure. Courts require insurers to justify their decisions with clear evidence of the reasoning and process behind them.
Importantly, a coverage decision later found to be incorrect by a judge does not, in itself, constitute bad faith. There must be demonstrable evidence of an improper motive or recklessness in the insurer’s conduct.
Judicial Interpretation: Manitoba Case Law
Bad faith remains a high-threshold allegation in Manitoba jurisprudence. Two recent appellate decisions illustrate how courts assess these claims.
Linde v. Max Insurance Company (2023; aff’d 2025)
Following a house fire in December 2019, the plaintiff filed a claim with her insurer, which assessed the repair cost at $248,000. She was offered the option to repair or receive a payout to rebuild independently. Dissatisfied, the plaintiff sued for additional coverage and alleged bad faith, citing:
- A brief initial meeting post-loss
- Delayed communication of repair quotes
- Failure to consider rebuilding options
- Reliance on a single expert for valuation
- Lack of assistance with personal contents
- Absence of photographic documentation
Both the Manitoba Court of King’s Bench and the Court of Appeal found that the insurer’s conduct did not meet the threshold for bad faith. The claim and appeal were dismissed.
Martens v. MPIC (2020; rev’d 2021)
The plaintiff, injured in a 1998 motor vehicle accident, received benefits under MPIC’s Personal Injury Protection Plan (PIPP). Years later, MPIC received a confidential tip alleging undeclared income. Without investigation or discussion, MPIC terminated the plaintiff’s benefits.
In litigation, internal correspondence revealed troubling language:
- A query about “wiggle room” to cut benefits
- A suggestion to “come up with a plausible plan” to close the file
- An email stating, “I think we have trouble,” referencing the plaintiff’s objections
The trial judge found that MPIC sought to deny benefits rather than assist the plaintiff. However, on appeal, the Court concluded that while MPIC’s conduct may have been flawed or unprofessional, it did not rise to the level of “overwhelmingly inadequate” required to establish bad faith.
Practical Guidance for Insurers
Courts continue to apply a stringent standard for bad faith findings. Nonetheless, insurers must remain vigilant and proactive. To mitigate risk:
- Ensure all coverage decisions are well-documented and supported by evidence
- Recognize that an incorrect decision is not inherently bad faith—but poor process may be
- Operate under the assumption that internal correspondence may be disclosed and scrutinized in court
By maintaining transparency, procedural rigor, and clear communication, insurers can uphold their duty of good faith and protect themselves from reputational and legal harm..*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*