Focus On

THE INSURANCE CONTRACT - Interpretation

Friday, August 06, 2021 @ 12:31 PM  


Lexis Advance® Quicklaw®
Appeal by Temple Insurance from a decision ordering it to pay the respondents’ legal costs in defending a third-party claim. Temple provided insurance coverage under a Wrap-Up Policy to the owner, general contractor and subcontractor for property damage claims arising out of the construction of a retirement residence. The Policy required written notice of an accident or occurrence. The notice was to contain sufficient particulars to identify the insured and it was to be given by or for the insured to Temple. The Policy also provided that an insured could not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expenses other than for first aid to others at the time of an accident or occurrence. When problems arose with the Project, the owner sued the general contractor who, in turn, sued the respondents for damage alleged to have been caused by their work. When they were sued, the respondents did not notify Temple but contacted their own general liability insurers and engaged their own lawyers. The respondents did not realize they had primary coverage under the Wrap-Up Policy until Temple advised them of that fact. By that time, the respondents had incurred defence costs. Temple disputed that it was liable for defence costs voluntarily incurred by the respondents before it acknowledged its liability to defend. The Queen’s Bench judge found Temple had acquired effective notice before the lawsuits were commenced against the respondents in part, by virtue of the knowledge gained by the owner’s mistaken claim under the policy. Because of this finding, she ordered Temple to pay all the respondents’ legal fees.

HELD: Appeal allowed. The Chambers judge erred in her interpretation of the Wrap-Up Policy and by ordering the payment of the respondents’ voluntarily incurred defence costs before Temple acknowledged it would provide defence coverage. The owner did not give notice for the respondents but was giving notice for itself of a claim that did not fall within the Wrap-Up Policy. The Chambers judge pieced together this notice and what she believed Temple must have discovered by a later date to make a whole claim as of the latter date. But, as of that date, no third-party claim had been commenced. The effect of her finding was that Temple was deemed to have notice of a claim that had not yet been made and for which no details had been provided, including the identity of the insured, based on knowledge that Temple had gleaned by investigating a claim that did not fall within the terms of the Wrap-Up Policy. The Chambers judge did not correctly interpret the notice provisions in the Policy. She extended their application to include a claim unknown at the time she found notice had been given. Since the claim did not exist, nothing could be known about it, including whether claimants would even elect to seek coverage under the Wrap-Up Policy. This constituted an error of law. There was also no merit to the respondents’ further claim that Temple had notice as of the dates the General Contractor served them with a third-party claim. While Temple had some knowledge of the potentiality of other claims, there had been no compliance with the notice provisions of the Wrap-Up Policy as of any of the identified dates. The Chambers judge erred in any event by finding that Temple was liable for voluntary payments made before the alleged notice date. Having regard for all the circumstances, Temple was entitled to rely upon the voluntary payments clause.

Aberdeen Specialty Concrete Services v. Temple Insurance Co., [2021] S.J. No. 290, Saskatchewan Court of Appeal, G.R. Jackson, L.M. Schwann and J.A. Tholl JJ.A., June 30, 2021. Digest No. TLD-August22021008