Wrapping up the duty to defend

Insurance law – Liability insurance – Wrap up policies – Property damage – Duty to defend – Exclusions – Construction development – Duties and liabilities of insurer

GFL Infrastructure Group Inc. v. Temple Insurance Co., [2021] O.J. No. 1538, 2021 ONSC 1909, Ontario Superior Court of Justice, March 23, 2021, P.M. Perell J.

The insureds were subcontractors for the construction of a condominium building. The insurer issued a wrap up liability policy for the building. The condominium owners commenced an action after several deficiencies were identified as part of a warranty audit. The insurer denied coverage to the insureds on the basis that the claims did not constitute “property damage”, or were excluded through the faulty workmanship exclusion or “own work” exclusion.

The insurer argued that the pleadings had been particularized and expanded by several expert reports, which supported the insurer’s argument that the claims were not genuinely property damage claims, or were excluded. The Court noted that CGL policies do not generally cover the cost of repairing the insured’s own defective work product, and that it might ultimately be determined that none of the alleged property damage claims were proven. However, that was not the test for the duty to defend. The pleadings revealed the possibility of claims against the insureds for property damage, which is all that was required for the duty to defend to be triggered. The Court confirmed that it was not appropriate to make findings of fact regarding expert reports on an application for a duty to defend.

This case was digested by Joe Antifaev, 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 Joe Antifaev at jantifaev@harpergrey.com.

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