This application involved a contest between two Insurers over who had the duty to defend an Insured in a third party action. The Court held that, because the third party claim as pled was potentially within the coverage provided by each of the policies and did not fall squarely within the relevant exclusionary clauses; both Insurers were required to provide a defence to the Insured.

Portage La Prairie Mutual Insurance Co. v. Commission du District d’amenagement du Madawaska, [2006] N.B.J. 454, New Brunswick Court of Queen’s Bench

The claim by the third party against the Insured was for serious damage caused to a large poultry-processing plant as a result of fire. The particular allegations of negligence against the Insured related to its approval of plans and specifications, issuing of permits for the construction of the third party’s property and for failing to carry out appropriate building inspections.

Both Insurers claimed to have no duty to defend the Insured on the basis of specific exclusion clauses in the policies. In reference to the seminal decision in Nichols v. American Home Assurance Company, [1990] 1 S.C.R. 801, the Court noted that the duty to defend arises where the pleadings allege claims that could possibly be covered under the policy. The Court confirmed that the duty to defend and obligation to provide indemnification are separate issues; with the duty to defend being broader.

After citing these principles, the Court concluded that the Insured had established there was a possibility that the claim advanced by the third party was covered by both policies and the Insurers had not demonstrated that the allegations in the Statement of Claim clearly fell outside of coverage.

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