The insured, a general contractor, was sued for negligence and breach of contract after water damage caused rot and deterioration in several housing complexes it built.
The insured sought a declaration that its insurer owed a duty to defend under its commercial general liability policies.
The Supreme Court of Canada held that the insurer owed a duty to defend, finding that the pleadings revealed a possibility of coverage.
The Court clarified that 'property damage' is not limited to third-party property and that defective workmanship can constitute an 'accident' if the resulting damage was neither expected nor intended by the insured.
Furthermore, the 'work performed' exclusions did not clearly and unambiguously exclude the claims, particularly given the involvement of subcontractors.
