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INSURERS - Duties - Duty to defend

Friday, May 05, 2017 @ 8:43 AM  

Lexis Advance® Quicklaw®
Appeal by the plaintiff, Mason Homes, from the dismissal of its action against the defendant, Lombard General Insurance. The plaintiff, a property development company, entered a subdivision agreement with a municipality in respect of construction of a residential home on a steep slope that exceeded the maximum municipal standards. The agreement required the plaintiff to include a warning regarding the slope steepness in the agreement of purchase and sale for the eventual homeowners. The plaintiff failed to include the warning and the agreement for purchase and sale included a rendering that displayed the land parcel as level. The homeowners sued the plaintiff alleging the omission of the warning regarding the grading was deliberate, and that the plans for the overly steep property grading were grossly negligent. The plaintiff settled the homeowners' claim and sought indemnification from its insurer, the defendant. A motion judge dismissed the plaintiff's action on the basis the defendant had no duty to defend or indemnify the plaintiff under its commercial general liability policy. The judge found that the plaintiff's claim was based on deliberate conduct rather than an accident, and that the policy's exclusions expressly precluded coverage. The plaintiff appealed.

HELD: Appeal dismissed. The plaintiff admitted it intentionally graded the steepness of the property beyond maximum municipal standards and failed to provide the requisite warning to the eventual homeowners. As the motion judge correctly found, even if the homeowners' underlying claim could be read to include a negligent accidental failure to warn, the claim was clearly excluded under the policy. There was no dispute the plaintiff intended to create a steep grading that gave rise to a claim arising from loss of property use. In addition, a claim for damage arising from a failure to warn was expressly excluded under the policy. There was no error in dismissal of the plaintiff's action.

Mason Homes Ltd. v. Lombard General Insurance Co. of Canada, [2017] O.J. No. 1870, Ontario Court of Appeal, K.N. Feldman, D.M. Brown and L.B. Roberts JJ.A., April 10, 2017. Digest No. TLD-May12017013