Commercial general liability insurer was under obligation to defend insured in respect to claims relating to allegedly defective valves in HVAC units, which resulted in flooding.
Insurance law – Commercial general liability insurance – Multiple policies – Duty to defend – Property damage – Pleadings – Underlying action
Versa Fittings and Manufacturing Inc. v. Berkley Insurance Co.,  O.J. No. 1378, March 19, 2015, Ontario Superior Court of Justice, G. Mew J.
In this decision, the court ruled on a series of motions involving insurance coverage issues arising from the alleged failure of the insured’s valves which were components in heating ventilation and air conditioning units that were installed in newly built condominium towers. There were floods in some of these condominium towers allegedly as a result of valve failures in the HVAC units. The insured was sued in a series of actions arising from these floods. The motions were brought by two commercial general liability insurers who insured the insured during different periods. Both policies covered liability for property damage occurring while the policy in question was in force.
The respondent insurer Continental Insurance Company (“Continental”) took the position that leaks which took place after its policy expired were not covered and therefore sought a declaration that it had no duty to defend or indemnify the insured with respect to the underlying actions. The respondent insurer Berkley Insurance Company (“Berkley”) took the position that Continental’s motion was premature since the question of coverage under its policy turned on the material facts in dispute and that, accordingly, resolution of the coverage issues raised by the insured should not be determined at that stage. In the alternative, Berkley argued that any property damage alleged to have been caused by the insured occurred prior to Berkley’s time on risk.
The court dismissed Continental’s motion for a declaration that it had no duty to defend the insured. The insured’s motion for a determination that there was a mere possibility that the claims fell within the insuring agreement of the Berkley policy was answered in the affirmative, without prejudice to Berkley’s defences of waiver, estoppel, misrepresentation, or policy exclusions. The insured’s motion for a determination that there was a mere possibility that the claims made against it fell within the insuring agreement of the Continental policy was also answered in the affirmative and, accordingly, the court declared that Continental was bound by the terms of its policy to defend the insured.
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