Failing to obtain a wrap-up policy may result in payment of defence costs

08. October 2019 0

A property owner that contracted to obtain insurance to cover its contractor but neglected to obtain the policy was found liable to the contractor for legal costs incurred that would have been covered by the policy, had it been obtained as promised.

Insurance law – Property insurance – Wrap-up policies – Breach of policy – Contractor – Damages – Costs

Ashcroft Homes Inc. v. Aviva Insurance Co. of Canada, [2019] O.J. No. 4207, 2019 ONSC 4634, Ontario Superior Court of Justice, August 2, 2019, R.P. Kaufman J.

A property owner alleged its contractor caused damage to the building’s foundation while performing excavation services. The owner was contractually bound to obtain a wrap-up policy that would have covered at least some of the claims against the contractor. The contractor sought an order that the owner was liable for its defense costs.

The Master found that there was no genuine issue requiring a trial as the owner breached the term of its contract that required it to obtain a wrap-up policy. In assessing whether the allegations against the contractor would have fallen within the wording of a wrap-up policy, the Master concluded there was a mere possibility that some of the claims may have fallen within a typical wrap-up policy.

The court held that the appropriate damages were the defence costs that would have been paid by an insurer. The owner retained the right to seek an apportionment of the defence costs at the end of the proceeding, to the extent they deal solely with claims that would not have been covered by the policy.

This case was digested by Jaeda B. Lee, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Jaeda B. Lee at

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