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Simon Shields, LLB

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Insurance - Duty to Defend

Unifund Assurance Company v. D.E. (Ont CA, 2015)

In this insurance case the Court of Appeal cited with approval the following test for determining when an insurer has a duty to defend an insured, particularly as it bears on claims sounding in negligence as opposed to intentional torts:
[18] In Non-Marine Underwriter, Lloyd’s of London v. Scalera, 2000 SCC 24 (CanLII), Iacobucci J. set out a three-part test for interpreting insurance policies in the context of the duty to defend and duty to indemnify. He said, at paras. 50-52:
Determining whether or not a given claim could trigger indemnity is a three-step process. First, a court should determine which of the plaintiff’s legal allegations are properly pleaded. In doing so, courts are not bound by the legal labels chosen by the plaintiff. A plaintiff cannot change an intentional tort into a negligent one simply by choice of words, or vice versa. Therefore, when ascertaining the scope of the duty to defend, a court must look beyond the choice of labels, and examine the substance of the allegations contained in the pleadings. This does not involve deciding whether the claims have any merit; all a court must do is decide, based on the pleadings, the true nature of the claims.

At the second stage, having determined what claims are properly pleaded, the court should determine if any claims are entirely derivative in nature. The duty to defend will not be triggered simply because a claim can be cast in terms of both negligence and intentional tort. If the alleged negligence is based on the same intentional tort, it will not allow the insured to avoid the exclusion clause for intentionally caused injuries.

Finally, at the third stage the court must decide whether any of the properly pleaded, non-derivative claims could potentially trigger the insurer’s duty to defend.

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