For purposes of determining whether a duty to defend exists, the court may look at the Statement of Defence drafted by the insured

Appeal by insurer from an order requiring it to defend the insured in a third party proceeding was dismissed. Chambers judge correctly concluded that the statement of claim should be considered in the determination of whether a duty to defend arose. Since the Statement of Claim alleged negligence arising from the insured’s use and operation of a motor vehicle, the insurer was obligated to defend the allegations.

Tarrabain v. Wawanesa Mutual Insurance Co., [2010] A.J. No. 50, January 8, 2010, Alberta Court of Appeal, P.T. Costigan, K.G. Ritter JJ.A. and R.P. Belzil J.

Appeal by insurer from an order to defend its insured in a third party proceeding. The plaintiff was injured in a motor vehicle accident. He was riding as a passenger in a motor vehicle which was struck by another vehicle operated by defendant Tarrabain and owned by defendant Erikson Nissan. Negligence was alleged in the Statement of Claim against both defendants. Erikson filed a Statement of Defence admitting it was the owner of the vehicle but denying that the vehicle was operated with its consent. Erikson then issued a third party notice against the insured, the father of Tarrabain. Erikson alleged that the insured brought the vehicle to Erikson for servicing and signed a service loan agreement

The insurer admitted that the loaned vehicle qualified as a temporary substitute vehicle under the policy, entitling the insured to indemnification from its use. However, it argued that the third party notice claimed indemnity on the basis of contract, the service loan agreement, and did not involve liability arising from the ownership, use or operation of a motor vehicle. The chambers judge rejected this submission, finding that the Third Party notice had to be considered in conjunction with the Statement of Claim, which alleged negligence. The chambers judge found a duty to defend. The insurer appealed.

On appeal, the court found that the chambers judge had correctly considered the Statement of Claim alongside the Third Party Notice. Although the Court of Appeal acknowledged that it had previously found that a Statement of Defence should not be considered when deciding whether a duty to defend exists, it noted that the concern that existed there, of the insured drafting the pleadings in a way to extend coverage, did not exist in the case at bar. Further, pursuant to Rule 65(2) of the Alberta Rules of Court, the Statement of Claim is appended to the Third Party Notice, and the Third Party Notice makes express reference to it. The Court of Appeal further found that the Statement of Claim alleged that the plaintiff’s injuries arose out of the ownership, use, or operation of a motor vehicle, and therefore a duty to defend existed. The appeal was dismissed.

This case was originally summarized by Natasha Morley and originally edited by David Pilley of Harper Grey LLP.

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