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policy to a place where the insurance industry would not have expected it to go," says Ava Kanner, a partner at Davies Howe Partners in Toronto. The insur- ers "are probably reading this case over and over again and all going to go back law, and it's not new if there is a mere possibility that the claim can fall within the policy, that can rise to the duty to defend," says Kanner. An important outcome from the deci- sions came from the fact that Canada's "This decision is of critical importance for liability insurers in Canada, as it resolves divergent lines of case law. . . ." DAVID MACKENZIE, BLANEY MCMURTRY LLP to the policies to see the coverage in their policies. And look at their exclu- sions to see if they can tighten them up further." At issue is that commercial general liability insurance usually covers damag- es to third parties and accidents — and it comes with a lot of exclusions, includ- ing when dealing with subcontractors, which Progressive used as a defence. "What is new in this case is that they have given a very extensive interpreta- tion of the actual coverage and a very narrow interpretation of the exclusions," adds Kanner. Another important distinction is the case dealt only with the duty to defend, not the duty to indemnify, and the standards for having defence costs covered are weaker than actually get- ting the insurance company to pay the damages. "The court clarified that its ruling pertained only to the duty to defend, and that the determination of what damage was actually covered by the insuring agreement, and excluded by the exclusions, would have to wait until the evidence was established at trial. However, the Supreme Court ruled that the allegations in the under- lying claim triggered Lombard's duty to defend under each of its policies," says David Mackenzie, a partner at Blaney McMurtry LLP in Toronto. So why would the Supreme Court take the case if the result is in line with previous rulings? After all, the ruling for the duty to defend doesn't break any new ground. "That's very old case highest court wanted to solve conflict- ing decisions by lower courts. "This decision is of critical importance for liability insurers in Canada, as it resolves divergent lines of case law, which have emerged across the country in respect of coverage for claims alleging construc- tion deficiencies," says Mackenzie. The ruling might also have gone the other way, particularly because the facts of the case appeared to favour the insur- ance company, which had won all prior steps of appeal in the B.C. courts. "I think there was enough there of interest for the court to say, 'Yes, I will hear that case,' but on the biggest issue, on the duty to defend, they then chose to leave the law as it was," says Legrand. In the end, it might take a few more years in court for the other litigation related to the case to end before courts rule whether Progressive will actually have to pay damages to the B.C. Housing Commission or whether Lombard will have to cover those damages. But in the process the company managed to write some new case law, which is important because it affects many companies — "particularly in a field where there is a lot of litigation," says Legrand. "Construction law, construction projects, you get claims, people sue each other a lot, and everyone is insured up to a certain level." GOOD FAITH IN CANADIAN INSURANCE LAW Roderick S.W. Winsor This resource provides practitioners and insurance professionals with the timely and accurate information they need when dealing with this area of the law. Topics covered include: whether there is an implied obligation of good • Looseleaf • $125 Subscription updates invoiced as issued (1-2 /yr) P/C 0176030000 ISBN 978-0-88804-465-5 • • • faith in contract the issues raised by such an obligation the application of the obligation of good faith to insurance in Canada a critical analysis and summary of existing law ... and more! canadalawbook.ca For a 30-day, no-risk evaluation call: 1.800.565.6967 Canada Law Book, a Thomson Reuters business. CL0111 Prices subject to change without notice, to applicable taxes and shipping & handling. www.CANADIAN Lawyermag.com JAN UARY 2011 41