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Insurance - Specific Terms (2). Loblaw Companies Limited v. Royal & Sun Alliance Insurance Company of Canada
In Loblaw Companies Limited v. Royal & Sun Alliance Insurance Company of Canada (Ont CA, 2024) the Court of Appeal considered an insurer appeal of a complex interlocutory application to declare 'duties to defend' and if so, the allocation of legal expenses between defendants, in five merged opioid class actions against several retailers, each with multiple insurers.
Here the court considers the meaning of the term "risk insured" (aka 'peril insured'):(vi) Defence costs are not a peril in the nature of an insured risk
[111] Sixth, I reject the respondents’ submission that the duty to defend the Class Actions is a “risk insured” by the appellants, such that the Primary Insurers have overlapping duties. As Denis Boivin notes in Insurance Law, 2nd ed. (Toronto: Irwin Law, 2015), at p. 28, the concept of “risk” involves two variables: the object of the insurance and the insured peril. The insured object is the person or thing covered by the insurance while the insured peril is the unanticipated occurrence that causes the loss, or as he describes it, the danger that has materialized. Barbara Billingsley, in General Principles of Canadian Insurance Law, 3rd ed. (Toronto: LexisNexis Canada Inc., 2020), at p. 17, similarly characterizes “risk” as the cause of loss or peril.
[112] In my view, defence costs are not a danger or peril in the nature of an insured risk. The relevant peril for which the respondents sought insurance under most of the primary policies was their unintentional infliction of “bodily injury”. That is the harm that is causing the respondents to incur losses. Defence costs are a consequence of that peril, not the peril itself.
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