Case Summary: It’s too soon!
Premature evidence cannot be considered in the duty to defend analysis, even if it is extrinsic evidence.
Insurance law – Property insurance – Duty to defend – Exclusions – Extrinsic evidence – Practice – Appeals
AIG Insurance Co. of Canada v. Lloyd’s Underwriters,  O.J. No. 4509, 2022 ONCA 699, Ontario Court of Appeal, October 14, 2022, E.E. Gillese, G. Huscroft and L. Sossin JJ.A.
The Ontario Court of Appeal upheld the lower court’s decision that Lloyd’s Underwriters had a duty to defend the insured in a property damage claim. Lloyd’s denied that there had been an “occurrence” as required for coverage because the insured had received a report setting out how to remedy the cause of the damage before Lloyd’s issued a policy to the the insured. Lloyd’s argued that because the insured was made aware of the remedy but failed to proceed with it, the ongoing damage was no longer accidental. Lloyd’s also argued that the exclusion for “property damage expected or intended from the standpoint of the Insured” applied because the report provided advice that rendered the property damage expected by the Insured.
The Court affirmed the pleadings rule, which requires the assumption that the factual allegations in the pleading are true for purposes of the duty to defend analysis. The Court held that while the report was explicitly referred to in the pleading (ie. extrinsic evidence), the report was premature evidence as it would require findings to be made before trial that would affect the underlying litigation. As such, the report could not be considered in the duty to defend analysis.
This case was digested by Dionne H. Liu, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Dionne H. Liu at firstname.lastname@example.org.