No Duty to Defend Where Claim Cannot be Determined from Pleadings

No duty to defend was found where the true nature of the claim could not be determined from the pleadings.

University of Waterloo v. Scottish & York Insurance Co., [2014] O.J. No. 1103, February 24, 2014, Ontario Superior Court of Justice, D.J. Gordon J.

A defendant property owner sought a declaration it was entitled to a defence under a policy of insurance issued to a co-defendant contractor.

The property owner hosted a Canada Day celebration on its property. The property owner had contracted with the contractor to provide inflatable amusement rides for the event. The action involved a trip and fall over a metal stake “near one of the inflatables”. The pleadings did not state who owned or was responsible for the metal stake. It was not clear as to the purpose of the stake.

The contractor’s insurer had issued a certificate of insurance naming the property owner as an additional insured but only with respect to liability arising out of the operations of the contractor. The property owner was also insured under its own policy of insurance.

The claim against the property owner and the contractor was based in negligence and breach of the Occupier’s Liability Act. The property owner and the contractor’s alleged breach of duties were identical. The pleadings alleged the two parties acted jointly and severally. The pleadings did not contain separate allegations as to the acts of the contractor.

The court reiterated the principle that where pleadings are not framed with sufficient precision to determine whether the claims are covered by a policy, the insurer’s obligation to defend will be triggered where, on a reasonable reading of the pleadings, a claim within coverage can be inferred, with any doubt resolved in favor of the insured.

The court held it could not conclude the true nature of the claim arose out of the operations of the contractor and so the insurer had no duty to defend the property owner. The court emphasized that the metal stake at issue was only described in the pleadings as being “near one of the inflatables”. There were no allegations of ownership or responsibility for installation of the stake. Although the physical cause of the loss was identified, the liability for this cause was not specified as arising out of the operations of the contractor. As the true nature of the claim could not be determined from the pleadings, there was no duty to defend the property owner under the contractor’s policy at this stage.

This case was originally summarized by Djuna M. Field and originally edited by David W. Pilley of Harper Grey LLP.

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