The applicant insurer sought a declaration that three other insurers had a duty to defend a construction company in an action for damages resulting from an allegedly defective mechanical system.
One insurer, AIG, denied a duty to defend based on faulty workmanship and loss of use exclusions.
The court found that the allegations in the statement of claim regarding consequential damage and loss of use were sufficiently broad to raise the possibility of coverage, triggering AIG's duty to defend.
The court further held that the defence costs should be allocated among the insurers on a 'time on risk' basis, rather than equally, and that a self-insured retention clause did not alter one insurer's obligation to contribute to defence costs at this stage.
