Intentional business decisions are not an accidental “occurrence”

Insurance law – Commercial general liability insurance – Builder’s risk policy – Duty to defend – Negligent misrepresentation – Occurrence – Class actions

Theberge Developments Ltd. v. Aviva Insurance Co. of Canada Inc., [2021] O.J. No. 6589, 2021 ONSC 7662, Ontario Superior Court of Justice, November 19, 2021, R.J. Smith J.

No duty to defend claim for negligent misrepresentation entirely derivative of the claim of breach of contract alleging an intentional business decision.

The insured developer brought an application against two insurers seeking a declaration that they have a duty to defend a class action claim brought against it for damages for negligent misrepresentation and breach of contract.

The class action claimed for damages for: (1) negligently misrepresenting that a storage locker was included with condominium units and for the loss of use of a storage locker when it was not provided; (2) negligently misrepresenting that a forced air furnace was included with condominium units and for the loss of use of a forced air furnace; (3) and breach of contract for failing to include a storage locker and for failing to provide a forced air furnace with each unit. The class action also claimed that the developer was unjustly enriched.

One insurer issued a Commercial General Liability policy, while the other insurer issued a Builder’s Risk policy. The Court held that neither insurer had a duty to defend or indemnify the insured. The Statement of Claim sought damages that arose out of an intentional business decision and did not qualify as an accidental “occurrence” under either policy. It was further held that the harm allegedly inflicted on the purchasers of units by negligently representing that the two items would be included with the units was derivative of the harm caused by the insured’s intentional conduct. The insured’s intentional actions and the negligent misrepresentations arise from the same actions and caused the same harm and as such, the negligence claim was subsumed in the intentional tort. The claim of negligent misrepresentation was the same as and is entirely derivative of the claim of intentional breach of contract.

This case was digested by Kora V. Paciorek, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Kora V. Paciorek at [email protected].

To stay current with the new case law and emerging legal issues in this area, subscribe here.