This November 2015 decision (2015 ONSC 6601) from Justice Roger speaks to whether or not an insurer (Intact) had a duty to defend the Applicants (Hill) against the plaintiffs (Kirst) for a loss that occurred on an uninsured property. This question turned on whether the substance of the litigation fell within the terms of the broadly worded Intact policy.
Case law addressing the duty to defend is well established. This decision draws attention to how the natural conclusion for an insurer’s duty to defend can yield absurd results when it involves a policy without clear exceptions/limits. In this matter, due to the very broad wording with respect to coverage for personal conduct/negligence, it was found that the personal injury case triggered coverage and therefore Intact had a duty to defend, even though Intact did not actually insure the subject property on the date of loss.
This Application arose from an August 16, 2012 loss involving the Kirst plaintiffs, which occurred on the Applicant’s uninsured property. Ms. Jennie Hill had a homeowner’s policy with Intact Insurance Company with respect to a residential property at 31 Harvard Avenue, in the City of Ottawa (“Ottawa home property”) at the relevant time. Ms. Hill also had two recreational properties (“Rideau River properties”), which were insured 2006-2010. On March 9, 2010 Ms. Hill was advised by Intact that the Rideau River properties were uninsurable and so the policies would not be renewed. The Rideau River properties did not have insurance as of the date of loss. It was not disputed that at the time of loss Ms. Hill only had liability insurance coverage in place for her Ottawa home property. The loss occurred on one of the Rideau River properties.
A duty to defend turns on whether the allegations of negligence engage the terms of Ms. Hill’s policy of insurance for her Ottawa home property. In their tort pleadings the Kirst plaintiffs alleged that they suffered losses due to negligence on the part of the Hills relating to their failure remove the trees on the Rideau River properties between 1998-2002, as ordered by the Municipality. It was alleged that this failure resulted on a tree falling on a plaintiff when the Hills knew that the tree that fell was damaged and dangerous, and when they failed to take reasonable steps to eliminate the danger. It was alleged by the Kirst plaintiffs that if the Hills had heeded the Municipality’s order, then the accident would not have occurred. It was stated by the Kirst plaintiffs that rather than the Hills hiring a competent contractor to remove the tree involved in the accident, they instead hired a driveway sealer to remove the tree, and this individual in turn hired an incompetent and non-certified arborist, stating that if they hired competent labourers then the accident would not have occurred.
The general rule that triggers a duty to defend is whether the pleadings against an insured contain alleged facts which, if proven, would fall within the coverage provided by the policy. An insurer is obliged to provide a defence regardless of the truth or falsity of such allegations. A determination of whether a suit falls within coverage is based upon the “true nature of the claim”, and that “labels must be ignored in favour of substance of the allegations”. 
Justice Roger’s coverage analysis turned on the extremely broad wording contained in the Intact Policy, which extended coverage for personal conduct or negligence “anywhere in the world”. Justice Roger’s utilized the test laid out in Sclalera (at paragraphs 50-52), wherein the Court must:
- Determine the true nature of the claims;
- Ascertain if any claims are entirely derivative in nature (e.g. claims of negligence that would be subsumed within an intentional tort, which would not be covered in any event); and
- Decide whether any of the properly pleaded (non-derivative) claims could potentially trigger the insurer’s duty to defend.
The key to triggering the duty to defend was the obligation imposed by the Intact policy to defend claims against its insured for personal negligence anywhere and at any time (other than related to the use or operation of an automobile). There was no specific restriction placed in the policy for negligence of the insureds on property that is not specifically insured on the policy. Logic might dictate that if there is no insurance on a property where an accident occurs, and the claim is framed as negligence flowing from a breach of the Occupiers’ Liability Act, that there is no coverage for the claim. However, if the policy language does not articulate such restrictions, the duty to defend will still be triggered.
As an aside, the court noted more recent cases that found that in some circumstances the duty to take reasonable care may be discharged by hiring (and in some cases supervising) a competent contractor to perform the particular work. This is a strong indication of the best argument that may be available to the Hill family (wherein they are defended by Intact) in the Kirst tort claim.
If there is one lesson to take away from this Application, it is that when examining an Insurer’s duty to defend, one must look to the terms of the policy, and ask whether the allegations of negligence in the pleadings, in their essence, appear to engage same. Sometimes a broadly worded or vague provision in a policy could result in coverage extending to an incident or location that, on its surface, seems absurd. A clearly written policy, with clear parameters and exclusions, helps to define the scope of coverage, and absent such language a court is likely to find coverage and a duty to defend.