The Ontario Superior Court of Justice holds that there is no duty to defend where an absolute asbestos exclusion applies.
The Ontario Superior Court of Justice recently considered the application of an absolute asbestos exclusion in an insurance policy. The Applicant company was insured with Lloyds Underwriters pursuant to an Owners, Landlords and Tenants Liability Coverage Rider. The policy provided coverage for amounts that the Applicant might become legally obligated to pay as compensatory damages because of bodily injury or property damage arising out of the ownership, maintenance or use of the insured premises and all operations incidental thereto.
The Applicant undertook repairs and renovations to the building which allegedly released particulate containing asbestos into the building. One of the Applicant’s tenants commenced action on the basis that she had allegedly inhaled asbestos and may suffer a permanent disability, future health problems and loss of expectation of life. Another tenant who operated a retail clothing business, claimed that the particulate had covered his inventory of clothing and damaged it “beyond economic salvage”.
The Applicant called upon Lloyd’s Underwriters to defend the actions pursuant to the terms of its insurance policy. The underwriters refused on the basis that there was no coverage by reason of an absolute asbestos exclusion and hence no duty to defend. The Court reviewed the principles relating to duty to defend, namely:
(a) The duty to defend is independent of and broader than the duty to indemnify;
(b)The duty to defend arises where the Statement of Claim alleges acts or omissions which potentially fall within the policy coverage, while the duty to indemnify only arises where such obligations are proven at trial;
(c)The duty to defend is governed by the allegations in the Statement of Claim together with admissible extrinsic evidence, which, for that purpose, are to be read with the widest latitude;
(d)It is not necessary to prove that the obligation to indemnify will, in fact, arise in order to trigger the duty to defend-the mere possibility that a claim within the policy may succeed, suffices;
(e) The bare assertions in the Statement of Claim are not necessarily determinative of the duty to defend.What matters is not the labels crafted by plaintiff’s counsel but the true nature and substance of the claim;
(f)If, having regard to the true nature and substance of the claim, there is no duty to indemnify because an exclusion or other limiting condition applies, then there is no duty to defend; and
(g)Where it is clear from the pleadings that the suit falls outside the coverage of the policy by reason of an exclusion clause, the duty to defend does not arise.
The Court questioned whether the claim for potential bodily injury would be covered by reason of the policy wording which required that the injury be “sustained” in fact for coverage to be engaged. However, the Court considered that this point was moot in any event, given the wording of the asbestos exclusion which clearly applied to the circumstances of this case. The underwriters were found to have no duty to defend the actions.
1604945 Ontario Inc. v. Lloyds Underwriters, 2010 ONSC 1327 (CanLII)