COURT OF APPEAL FOR ONTARIO

DATE: 2004-05-26

DOCKET: C40338

RE:

The Co-Operators General Insurance Company, Thomas and Diane McCauley (Plaintiffs) – and – Lyle Ross and Gerry Gareau (Defendants (Respondent)) – and – Economical Mutual Insurance Company (Appellant) and Lloyd’s Underwriters (Third Party)

BEFORE:

Abella, Cronk and Juriansz JJ.A.

COUNSEL:

David Waterhouse for Lloyd’s Underwriters

Marcus Snowden for Economical Mutual Insurance Company (appellant)

Shawn O’Connor for Co-Operators General Insurance et al

Maurice Gatien for Lyle Ross

HEARD AND ENDORSED:

May 26, 2004

On appeal from order of Justice D.J. Power of the Superior Court of Justice dated June 10, 2003.

APPEAL BOOK ENDORSEMENT

[1] We agree with the reasons of Power J. that Economical and Lloyd’s have a duty to contribute to the defence cost funding of the Defendant Lyle Ross. There is no dispute that the fire occurred in 1997, when the policies had expired. The statement of claim determines whether a duty to defend arises. It explicitly alleges that the damage by pyrolisis commenced when the fireplace was first used in 1988 and continued until the actual combustion in 1997. Both policies limit coverage to “property damages…which occurs during the policy period.”

[2] As the motions judge concluded, there is a possibility that, after the relevant evidence is heard, coverage under the insurance policies might apply based in particular on Alie v. Bertrand & Freres Construction Company Limited, 2002 31835 (ON CA), [2002] 62 O.R. (3d) 345 (Ont. C.A.). In Alie, the court held that consequential losses which manifest themselves after the policy has expired, may nonetheless be covered by the policy if the damage occurred during the period of coverage.

[3] There are 2 remaining issues. Lloyd’s argued that the pleadings were manipulated to trigger a duty to defend. On the record before us, there is no basis for this conclusion. Secondly, the appellants in their factums had requested this court to provide guidance on the apportionment of the defence costs contributions between them. In oral argument, the parties accepted the motions judge’s direction that they seek further direction from him on this issue.

[4] The appeals are dismissed, with costs on consent, payable by Economical and Lloyd’s to Lyle Ross in the amount of $3,500 and to the Plaintiffs in the same amount.