Appin Realty Corp. v. Economical Mutual Insurance Co., (2008) 233 O.A.C. 191 (CA)

• Judge: Laskin, Moldaver and Feldman, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: Friday January 18, 2008
• Jurisdiction: Ontario
• Citations: (2008), 233 O.A.C. 191 (CA);2008 ONCA 95

Appin Realty v. Economical Mutual (2008), 233 O.A.C. 191 (CA)

MLB headnote and full text

Temp. Cite: [2008] O.A.C. TBEd. FE.035

Appin Realty Corporation, Limited (applicant/respondent in appeal) v. Economical Mutual Insurance Company (respondent/appellant in appeal)

(C47682; 2008 ONCA 95)

Indexed As: Appin Realty Corp. v. Economical Mutual Insurance Co.

Ontario Court of Appeal

Laskin, Moldaver and Feldman, JJ.A.

February 12, 2008.

Summary:

A motions judge held that an insurance policy's exclusion clause respecting mould did not absolve the insurer of its duty to defend the insured because the insured had pleaded that his injuries arose from mould and bacteria and, if it were found that the injuries were due solely to bacteria, the exclusion clause would not apply. The motions judge further determined that the insured could require the insurer to retain counsel of the insured's choice. The insurer appealed.

The Ontario Court of Appeal dismissed the appeal.

Insurance - Topic 723

Insurers - Duties - Duty where insurer's interest at variance with insured - A motions judge held that an insurance policy's exclusion clause respecting mould did not absolve the insurer of its duty to defend the insured because the insured had pleaded that his injuries arose from mould and bacteria and, if it were found that the injuries were due solely to bacteria, the exclusion clause would not apply - The insured asserted that because of the coverage issue, a counsel appointed by the insurer might "steer" the conduct of the case to an outcome that would require indemnity because of the concurrent exclusion clause - The insurer expressed a similar concern about using the insured's counsel and proposed a set of safeguards to keep its trial counsel separate from its coverage claims representative - The motions judge referred to the principle that an insurer's right to control the defence of the action was not absolute and rejected the insurer's proposal as impractical and ineffective - Given the insurer's initial refusal to defend the action and given the ongoing coverage dispute, a reasonable person would still perceive a conflict despite the proposed safeguards - The motions judge ordered the insurer to retain the insured's counsel to defend the action at the insurer's expense - The Ontario Court of Appeal held that the motions judge's solution was appropriate and one that he was entitled to make in the exercise of his discretion - There was no basis to interfere with it - See paragraphs 8 to 14.

Insurance - Topic 725

Insurers - Duties - Duty to defend - A motions judge held that an insurance policy's exclusion clause respecting mould did not absolve the insurer of its duty to defend the insured because the insured had pleaded that his injuries arose from mould and bacteria and, if it were found that the injuries were due solely to bacteria, the exclusion clause would not apply - The insurer appealed, asserting that the effect of the word "alleged" in the exclusion clause was to absolve it of a duty to defend in any case where bodily injury from mould was alleged - The insurer further asserted that the effect of the clause was that the duty to defend was narrower than the duty to indemnify - The Ontario Court of Appeal rejected the assertions - The exclusion clause was unclear and ambiguous in its effect - A plain reading of the clause did not support the insurer's position - The insurer's position stood on its head the general proposition that the duty to defend was broader than the duty to indemnify - If the clause was meant to convey such, clear and unambiguous language was required - The language used fell well short of the mark - See paragraphs 1 to 7.

Insurance - Topic 3081

Payment of insurance proceeds - Actions - General - Insured's right to control defence or appoint counsel - [See Insurance - Topic 723].

Cases Noticed:

Nichols v. American Home Assurance Co., [1990] 1 S.C.R. 801; 107 N.R. 321; 39 O.A.C. 63, refd to. [para. 6].

Brockton (Municipality) v. Cowan (Frank) Co. (2002), 154 O.A.C. 125; 57 O.R.(3d) 447 (C.A.), refd to. [para. 11].

Counsel:

Marcus B. Snowden and W. Colin Empke, for the appellant;

J. Stephen Cavanagh, for the respondent.

This appeal was heard on January 18, 2008, by Laskin, Moldaver and Feldman, JJ.A., of the Ontario Court of Appeal. The following decision of the court was released on February 12, 2008.