An “occurrence” is one of the essential conditions required to trigger the insurer’s duty to defend
In December 2017, the Superior Court rendered a noteworthy decision in Syndicat Lofts Wilson v. 1061 St-Alexandre1 regarding the insurer’s duty to defend. The court reviewed the essential conditions for triggering this duty, including the necessity to prove an “occurrence” within the meaning of the insurance policy.
The plaintiff, Syndicat Lofts Wilson, sued Les Constructions Reliance du Canada Ltée (hereinafter “Reliance”) and four other defendants for damages, following a building renovation and condominium conversion.
During construction, Reliance acted as the general contractor. Once the work was finished, a technologist conducted an inspection and issued two reports in which he identified multiple deficiencies. Reliance then contacted its subcontractors to have them carry out the remedial work.
Syndicat Lofts Wilson was dissatisfied with the remedial work and sued Reliance and the four other defendants for approximately $1,233,570. The application for damages (the “Application”) alleged deficiencies in the building’s cooling, plumbing, and ventilation systems, as well as in the roof; architectural deficiencies; and the collapse of concrete slab covering the patio. Syndicat Lofts Wilson also claimed the costs that it had to incur because of the deficiencies caused by Reliance and the other codefendants.
Reliance’s insurer, Royal & Sun Alliance Insurance Company of Canada (“RSA”), agreed to take up the defence of Reliance, but solely with respect to the collapse of the patio concrete slab.
During the proceedings, Reliance made an application to force RSA to take up its defence with respect to all claims made by plaintiff; designate a law firm to represent it; and pay the costs and expenses incurred by Reliance, with the exception of the costs related to such application.
RSA took the position that the duty to defend Reliance had not been triggered, since no occurrence had taken place within the meaning of the liability insurance policy issued to Reliance (the “Policy”).
Section 2503 of the Civil Code of Québec provides a framework for the insurer’s duty to defend. It reads as follows:
The insurer is bound to take up the interest of any person entitled to the benefit of the insurance and assume his defense in any action brought against him.
Legal costs and expenses resulting from actions against the insured, including those of the defense, and interest on the proceeds of the insurance are borne by the insurer over and above the proceeds of the insurance.
The Superior Court referred to the Supreme Court of Canada’s 2010 landmark decision on the duty to defend, Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada2. This decision, which continues to be one of the most relevant decisions on the subject, provides a more fulsome explanation of the scope of this duty:
An insurer is required to defend a claim where the facts alleged in the pleadings, if proven to be true, would require the insurer to indemnify the insured for the claim. It is irrelevant whether the allegations in the pleadings can be proven in evidence. That is to say, the duty to defend is not dependent on the insured actually being liable and the insurer actually being required to indemnify. What is required is the mere possibility that a claim falls within the insurance policy. Where it is clear that the claim falls outside the policy, either because it does not come within the initial grant of coverage or is excluded by an exclusion clause, there will be no duty to defend.3 (emphasis ours)
Thus, the onus was on Reliance to demonstrate that the claim fell within its insurance policy. Generally speaking, to trigger insurance coverage in a liability insurance contract, three conditions must be met:
- The existence of bodily injuries or material damages;
- that happened during the coverage period;
- The fact that these damages or injuries result from an occurrence.4
In this case, the term “occurrence” is defined as follows in the Policy: “23. ‘Occurrence’ means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”
In citing, amongst others, the Prêtres de Saint-Sulpice de Montréal5 decision, the Court confirmed RSA’s position: aside from the damages related to the collapsed concrete slab, damages claimed for costs incurred by Syndicat Lofts Wilson were not related to any material damages resulting from an occurrence, since the issue concerned “repairs required in the wake of a construction defect.”6 [unofficial translation] The Court came to the same conclusion regarding the part of the claim dealing with the alleged deficiencies since, aside from the concrete slab, these deficiencies did not result from an occurrence within the meaning of the Policy.
The Court also dismissed Reliance’s argument that the remedial work required to correct the deficiencies had led to “consequential damages” caused by an occurrence during the coverage period. In fact, it came to the conclusion that this assertion was unfounded,7 since the work did not constitute an accident within the meaning of the Policy and took place after the coverage period. RSA’s duty to defend was therefore not triggered, since Syndicat Lofts Wilson’s Application clearly did not fall within the coverage provided by Reliance’s Policy.
The insurer’s duty to defend is triggered as soon as there is a “mere possibility that a claim falls within the insurance policy.”8 Thus, when an insured contends that the insurer’s duty to defend has been triggered, it is responsible for demonstrating that the claim is covered by the insurance policy. In turn, the insurer could then demonstrate that exclusions apply.
In the Syndical Lofts Wilson decision, the Superior Court came to the conclusion that the damages claimed for remedial work were not the result of an occurrence and therefore did not trigger the insurer’s duty to defend, with the exception of the concrete slab, which RSA had agreed to from the outset.
By Me Léonie Gagné, Lawyer, and Me Jonathan Lacoste-Jobin, Partner at Lavery, LLP
1. Syndicat Lofts Wilson c. 1061 St-Alexandre, 2017 QCCS 5988. [in French only]
2. Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada,  2 SCR 245, 2010 SCC 33 (CanLII).
3. Ibid., par. 19.
4. Syndicat Lofts Wilson c. 1061 St-Alexandre, 2017 QCCS 5988, par. 36.
5. Prêtres de Saint-Sulpice de Montréal c. Couverture Montréal-Nord ltée, 2016 QCCS 3221 (CanLII).
6. Syndicat Lofts Wilson c. 1061 St-Alexandre, 2017 QCCS 5988, par. 40.
7. Ibid., par. 45.
8. Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada,  2 SCR 245, 2010 SCC 33 (CanLII), par. 19.