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INSURERS - Duty to defend

Friday, March 19, 2021 @ 6:22 AM  

Lexis Advance® Quicklaw®
Appeal by CE Design from two decisions that declined to stay the proceedings of the respondent Saskatchewan Mutual Insurance (SMI) and granted SMI summary judgment. Homegrown Advertising, a Saskatchewan company insured by SMI, was engaged to provide advertising services in the state of Illinois. Homegrown sent unsolicited faxes to various recipients, including CE Design, which was prohibited by legislation. CE Design commenced a class action against Homegrown in Illinois. The class action was settled on the basis that the judgment could only be satisfied from the insurance policy issued by SMI and provided for an assignment of the SMI policy to the class as represented by CE Design. SMI had not participated in the settlement negotiations and had not consented to the assignment of the policy. CE Design subsequently obtained a default judgment against SMI in enforcement proceedings in Illinois. SMI was unsuccessful in setting aside the default judgment. SMI commenced an action in Saskatchewan against CE Design and its insureds for a declaration it had no duty to defend Homegrown in the class action, it had no duty to indemnify the class defendants with respect to the subject matter of the class action and it bore no liability to CE Design. CE Design did not appeal a decision that found Saskatchewan had territorial competence over SMI’s action. The chambers judge found the class action in Illinois fell outside the policy coverage.

HELD: Appeal dismissed. It was open for the chambers judge, based on the expert evidence proffered by SMI, to find the judgment in Illinois was rendered only on procedural issues. The chambers judge did not err in refusing to decline to exercise territorial competence. Allowing SMI’s claim to proceed did not bring the administration of justice in Saskatchewan into disrepute and did not result in unacceptable unfairness of CE Design. The chambers judge made no error in principle in proceeding by way of summary judgment. The essence of the class action was not a fortuitous accident, given that sending the faxes was an intentional, not accidental, act. As the allegations fell outside the scope of coverage because there was no accident within the meaning of the insurance policy, there was no duty to defend or indemnify. Even if the claim fell within the limits of coverage, the chambers judge did not err in concluding coverage should be denied because the claims fell within the exclusion clause.

CE Design Ltd. v. Saskatchewan Mutual Insurance Co., [2021] S.J. No. 24, Saskatchewan Court of Appeal, G.R. Jackson, L.M. Schwann and J.A. Tholl JJ.A., January 22, 2021. Digest No. TLD-March152021010