Liability Insurers: Beware Of Hasty Denials Of Coverage!

Article by Dominic Naud and Laurent Durocher-Dumais

Clyde & Co

In liability insurance matters, the control of the defence is a recurring issue before the courts.  A recent ruling of the Superior Court dealt with this issue after an insurer had denied coverage following its own investigation of the facts. This ruling may cause liability insurers to reconsider the way they handle their insureds’ files where no formal claim has yet been filed.

In this case, a house partially collapsed following work performed by a contractor. The latter quickly informed his liability insurer of a possible claim. After having conducted its own investigation of the facts, the insurer denied coverage on the basis of two exclusions.

A year later, a claim for damages was filed against the contractor. Following its analysis of the statement of claim, the liability insurer indicated that the allegations confirmed its investigation and therefore, its coverage position.

The contractor then presented a Wellington motion in order to determine whether the insurer owed a duty to defend and, if necessary, decide who would choose defence counsel: the insurer or the insured?

Having concluded that the insurer did not establish that the exclusions applied in a clear and unequivocal manner at this stage of the proceedings, the Court held that the insurer had the duty to defend its insured. The Court then considered the second issue, noting that:

[translation] “[T]he fact that an insurer had initially wrongfully refused to defend its insured does not cause it to automatically lose its right to appoint counsel and control the defence where the court subsequently orders it to defend its insured. For the insurer to lose this right, the circumstances must be such that the insured can no longer have confidence in the grounds of defence that the insurer will put forth.”

Given that the insurer justified its position on the exclusions by its own investigation of the circumstances of the accident rather than its analysis of the allegations contained in the statement of claim, the Court held that [translation] “the insured was justified in losing confidence in the defence that his insurer will now be forced to provide him following this ruling.” The insurer was thus [translation] “in a conflictual situation regarding the specific performance of its duty to defend“.

The Court therefore left the choice of attorney and the control of the defence up to the insured. It also ordered the insurer to pay the defence costs incurred to date by the insured and those to come, except for those incurred for the Wellington motion.

This decision highlights that it is in the interest of liability insurers to wait for the statement of claim before taking a final position on insurance coverage if they wish to retain control of the defence. Indeed, it seems that a denial of coverage based solely on a factual investigation before a claim is made against the insured might allow the latter to later invoke its loss of confidence in the insurer in regard to the control of the insured’s defence. It will be interesting to see if the courts find other circumstances amounting to the legitimate loss of confidence in the insurer that allow the insured to gain control of its defence.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Source: Mondaq

BC: August windstorm tops $25 million in insured damage

VANCOUVER, Oct. 6, 2015 /CNW/ – The windstorm that swept through southern British Columbia on August 29 caused over $25 million in insured damage, according to a preliminary estimate by Catastrophe Indices and Quantification Inc. (CatIQ)*.

The storm affected Metro Vancouver and surrounding areas, bringing rain and strong winds that toppled fences, trees and power lines and left hundreds of thousands without power. The storm also closed businesses and attractions, including Stanley Park and the annual Pacific National Exhibition.

“Extreme weather events, such as this one, are increasing in frequency and severity,” said Bill Adams, IBC Vice-President, Western and Pacific. “Since the late ’90s, claims payouts as a result of severe weather in British Columbia have more than doubled. The facts point to the importance of being prepared.”

Canadians, governments, businesses and the insurance industry recognize the toll that severe weather events take year after year. IBC has made adapting to severe weather a priority because it’s a phenomenon that continues to impact families and communities.

One way to be better prepared is to understand insurance coverage options, Adams explains. “Know what’s in your insurance policy and research ways to reduce your property’s vulnerability to damage. For more information, British Columbians should speak with their insurance representative or call IBC’s Consumer Information Centre at 1-844-2ask-IBC. We’re here to help.”

*Catastrophe Indices and Quantification Inc. (CatIQ) compiles and combines comprehensive insured loss amounts and related information to serve the risk management needs of the insurance and reinsurance industries.

About Insurance Bureau of Canada
Insurance Bureau of Canada (IBC) is the national industry association representing Canada’s private home, auto and business insurers. Its member companies make up 90% of the property and casualty (P&C) insurance market in Canada. For more than 50 years, IBC has worked with governments across the country to help make affordable home, auto and business insurance available for all Canadians. IBC supports the vision of consumers and governments trusting, valuing and supporting the private P&C insurance industry. It champions key issues and helps educate consumers on how best to protect their homes, cars, businesses and properties.

P&C insurance touches the lives of nearly every Canadian and plays a critical role in keeping businesses safe and the Canadian economy strong. It employs more than 118,000 Canadians, pays $6.7 billion in taxes and has a total premium base of $48 billion.

For media releases and more information, visit IBC’s Media Centre at If you have a question about home, auto or business insurance, contact IBC’s Consumer Information Centre at 1-844-2ask-IBC.

If you require more information, IBC spokespeople are available to discuss the details in this media release.

SOURCE Insurance Bureau of Canada

For further information: To schedule an interview, please contact: Celyeste Power, Manager, Media Relations, 416-362-2031 ext. 4312 (office), 647-384-9872 (after hours),

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National reporting program to help battle cargo theft in Atlantic Canada

Source: Journal Pioneer

The Cargo Theft Initiative, which IBC and the Canadian Trucking Alliance (CTA) launched in Ontario in 2014, brings together industry stakeholders to raise awareness of the dangers and costs associated with cargo theft and to assist in the recovery of stolen goods.

Historically, cargo theft has often gone unreported because there are so many different parts of the transportation process that it can be overlooked.

The success of the program is illustrated in a case that occurred last summer in Ontario. The cargo theft reporting database – the heart of the program – facilitated communication between insurance companies and law enforcement regarding the return of goods. This communication led to a police raid in which the police were able to identify the owners of about $1.4 million in stolen goods.

“To fight cargo theft, we must be as organized as the criminals,” said Amanda Dean, vice-president, Atlantic, IBC. “Cargo theft is not a victimless crime. It is exacting a human toll, costing the Canadian economy billions of dollars and threatening the security of Canadians.

Officials say reporting crime as soon as possible is one of the most effective ways to solve and prevent further incidents.

“As the police, we need that information. By knowing where and when criminals are active, we’re able to investigate and do the analysis required to catch and charge those responsible and help prevent further incidents,” said RCMP Chief Superintendent Wayne Gallant.

Transportation officials and police report that cargo theft involves a sophisticated network of criminals who commit the thefts and distribute the stolen goods. The stolen goods are usually items that people use on a daily basis, such as laundry detergent, T-shirts, dry goods and electronic components.

Well-organized systems are in place to move the products for quick sale in the underground economy. Often the products are parcelled out and sold well before the theft is reported. A thriving black market keeps sophisticated and networked thieves in business.

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