Title insurer has a duty to defend insured subject to claim for damages

Insurance law – Title insurance – Duty to defend – Practice – Appeals

1152729 BC Ltd. v. Chicago Title Insurance Co. Canada, [2022] O.J. No. 1969, 2022 ONCA 321, Ontario Court of Appeal, April 27, 2022, K.N. Feldman, S.E. Pepall and M.H. Tullock JJ.A.

The insurer provided the insured with title insurance.   The insured called on the insurer to defend an action brought by the previous owner against it.  The insured had acquired the property under a power of sale.  The plaintiff alleged the power of sale was exercised without notice to him and that the sale was under value.  The plaintiff asked the court to set aside the sale or in the alternative sought damages for unjust enrichment.

The insurer initially defended the claim under a reservation of rights.  In the course of the litigation the property was sold again by power of sale.  Once the insured was no longer on title to the property, the insurer advised the insured that it no longer had duty to defend or indemnify it.

The insured brought an application for a declaration that the insurer had an ongoing duty to defend.  The insured argued that although the defects in title were no longer in issue, the plaintiff also claimed damages against it.  The application judge concluded that the claim included a claim for damages against the insured.  The insurer appealed.

The Ontario Court of Appeal dismissed the appeal.  The court could find no error in the application judge’s analysis or conclusion that the claim included a claim for damages against the insured and therefore there was an ongoing duty to defend.

This case was digested by Cameron B. Elder, 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 Cameron B. Elder at [email protected].

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