Canadian Lawyer

January 2011

The most widely read magazine for Canadian lawyers

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LEGAL REPORT/LITIGATION It's all in the wording L Supreme Court of Canada ruling weighs heavily on the side of the insured in duty-to-defend case. BY ANDI BALLA awyers working with com- panies in the construc- tion sector will tell you the industry is a magnet for lawsuits. There are so many variables in any major project that can lead to litigation. The defence of such suits comes with great costs, which is why companies get insurance. But what happens when the insurance company says the claim falls outside the policy? There is more litigation, of course. It happened to Progressive Homes Ltd., which was contracted by a public housing authority in British Columbia to build new homes. It was sued for shoddy workmanship when alleged faulty constructions led to water leaks that ultimately made the buildings unfit for habitation. Insured by five con- secutive policies, Progressive asked its insurance company, Lombard General Insurance Co. of Canada, to pick up the tab for its legal defence. Disagreements over whether the policy covered duty to defend in this case led the dispute to the B.C. courts and eventually all the way to the country's highest court. But when the Supreme of Court of Canada ruled in Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada last September, it caught some by surprise. Not because the court ruled in favour of the insured, but how far it went in ruling against the insur- ance company. The gist of the SCC decision did not break new ground and is in line with previous rulings. The court decided the insurance company must pay for defence costs if the mere possibility the policy exists would mean it would cover the damages. "An insurer is required to defend a claim where the facts alleged in the pleadings, if proven www.CANADIAN Lawyermag.com JAN UARY 2011 39 PIEERE-PAUl PARISEAU

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