Insurers have a duty to defend where underlying pleadings raise the mere possibility of consequential damages.
The appellants appealed a motion judge's decision that their insurers had no duty to defend them in an underlying action regarding defective septic systems.
The Court of Appeal found that the motion judge erred by applying the 'Your Work' exclusion after correctly identifying that the underlying pleadings raised the mere possibility of consequential damages.
Because consequential damages are not excluded by the 'Your Work' exclusion, the mere possibility of such claims triggered the insurers' duty to defend.
The appeal was allowed and a declaration compelling the insurers to provide a defence was granted.
Parkhill Excavating Limited v. Royal & Sunalliance Insurance Company of Canada, 2016 ONCA 832