Jonathan D. Meadows

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.

Following successful applications for declarations that the respondent insurers had a duty to defend, the applicants sought costs on a full indemnity basis.

The insurers did not dispute the scale but argued the amounts claimed were disproportionate and unreasonable.

The court found the insurers' criticisms unhelpful as they did not disclose their own dockets.

The court awarded $50,000 all inclusive to each applicant.

The applicants, GFL Infrastructure Group Inc. and Ashland Construction Group Ltd., sought declarations that their insurer, Temple Insurance Company and Aviva Insurance Company of Canada, had a duty to defend them under a Specific Project Wrap-Up Liability Insurance Policy.

The underlying actions involved claims for property damage due to alleged construction defects in a condominium project.

The court granted the applications, finding that the pleadings, including extensive incorporated expert reports, revealed a "mere possibility" that the claims fell within the policy's coverage, thus triggering the duty to defend despite the insurer's arguments regarding faulty workmanship exclusions.