The New Brunswick Court of Appeal held that the Insurer had a duty to defend the defamation claim brought against the Insured. The Insurer did not demonstrate that the allegations in the Statement of Claim clearly fell outside the policy.

Conservation Council of New Brunswick Inc. v. Encon Group Inc., [2006] N.B.J. No. 190, New Brunswick Court of Appeal

A defamation action was commenced against the Insured. The Insured brought an application for an order compelling the Insurer to defend it in accordance with the policy. The application judge found that the Insurer had a duty to defend. The Court of Appeal dismissed the appeal.

The Court of Appeal noted that apart from the alleged “publication” of defamatory material on the Insured’s website, the Plaintiff was, in effect, suing the Insured for defamatory comments which had been made to newspaper reports in the hope that the comments would be published in the newspapers.

Under the policy, the Insurer agreed to indemnify the Insured for third party claims for injury arising out of the conduct of the Insured’s business and arising from “oral or written publication of material that libels or slanders a person….” The clause defining coverage had a built-in exception under which damages caused by defamation as a result of “publishing” done by or for the Insured were not covered. Furthermore, an exclusionary clause excluded indemnification if the Insured published a defamatory statement “with knowledge of its falsity….”

The Court of Appeal noted that the use of the expression “publication” in the coverage clause could not be attributed the same meaning as the word “publishing” in the built-in exception in the coverage defining clause. However, many arguments were possible with respect to how the built-in exception should be interpreted. The Court found that it was not clear that the allegations in the Statement of Claim fell outside the insuring agreement. There was a possibility that the claim against the Insured was covered under the policy. The appeal was dismissed.

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