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PROFESSIONAL LIABILITY INSURANCE - Duty to defend

Tuesday, July 23, 2019 @ 8:38 AM  


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Appeal by the insurer from a trial decision finding that the appellant was notified of a potential claim against the respondents during the policy period and was thus required to defend them. The appellant specialized in the provision of professional liability coverage to investment industry advisors. It provided errors and omissions coverage to investment advisors working for Keybase National from July 2008 to July 2012 under four annually renewable policies. The respondents were Keybase advisors who assumed responsibility for clients of Allen, another Keybase advisor who was dismissed in 2007 for negligent and fraudulent handling of client accounts. Beginning in 2009, various clients sued Allen, Keybase and a previous Allen employer. Beginning in 2010, Keybase’s insurance consultant began to report potential claims to the appellant from former Allen clients, nine of whom eventually sued the respondents in the 2015 action. The trial judge found that these reports, taken collectively, complied with the notice requirements and that this notice was not confined to the liability of Allen. The judge was satisfied that the appellant acknowledged receipt of complaints against the respondents from at least seven clients who sued in 2015.

HELD: Appeal dismissed. The judge did not err in law or make a clear and material error of fact in allowing the respondents’ claim to have the appellant defend the 2015 action. The trial judge made no error in focusing on what the appellant knew and when it knew it in determining whether proper notification was given. The evidence showed that the potential risk of claims against the respondents arising from their assumption of Allen client accounts was reported to the appellant during the currency of its coverage. Although the respondents were not initially named in any suit by investors who had sued Keybase and Allen, the appellant was still bound by the notice that the judge found it had been given since the claimants were all known to the appellant during the policy period and ultimately made virtually identical claims against the respondents. The judge did not err in finding that the respondents were not aware of the potential claims against them at the time of coverage placement.

Trisura Guarantee Insurance Co. of Canada v. Duncan, [2019] N.S.J. No. 261, Nova Scotia Court of Appeal, D.R. Beveridge, P. Bryson and A.S. Derrick JJ.A., June 18, 2019. Digest No. TLD-July222019004