This grouped appeal concerned four applications seeking declarations that the appellant insurers had a duty to defend the respondent corporations against claims of property damage arising from condominium construction deficiencies.
The application judge found a duty to defend based on the "mere possibility" test and refused ex ante allocation of defence costs.
The Court of Appeal dismissed the insurers' appeal, affirming the application judge's findings that the "mere possibility" test applies to exclusions and that courts should not conduct a "trial within a trial" on duty to defend applications.
The court also upheld the order for pre-notification defence costs and dismissed a cross-appeal regarding the assessment of past defence costs.
