Robert Emblem

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.

The appellant, a project owner/developer, appealed a summary judgment dismissing its crossclaim against engineering consultants/subcontractors (respondents).

The crossclaim sought contribution and indemnity for damages paid to adjacent property owners, arguing the respondents were not covered under the appellant's wrap-up liability policy for professional services claims, despite a waiver of subrogation clause.

The Court of Appeal upheld the motion judge's decision, finding the respondents were "additional insureds" and the waiver of subrogation applied.

The court affirmed that the policy, a standard form contract, was unambiguous and that the appellant's crossclaim was indeed a subrogated claim, regardless of the timing of payments.