The right of equitable contribution for defence costs is limited by the scope of coverage

Dominion was not entitled to equitable contribution because Bay of Quinte’s policy was not in force over the same period of time and thus Dominion was only incurring costs for damage alleged to have occurred within the period of its policy.

Insurance law – Homeowner’s insurance – Multiple policies – Apportionment and contribution of claim – Duty to defend – Costs – Misrepresentation in obtaining insurance

Dominion of Canada General Insurance Co. v. Bay of Quinte Mutual Insurance Co., [2024] O.J. No. 1390, Ontario Superior Court of Justice, March 14, 2024, G.W. Tranmer J.

The insured had policies from two different insurers, for different periods of time.  Dominion sought equitable contribution from Bay of Quinte for the cost of defending underlying claims against the insured.

Dominion issued a liablity policy to a company and its principal from 2010 and 2013 (the “Liability Policy”). The insured company built a residence in 2011. The principal added his wife onto title for the property in 2011 but she was not named as an additional insured. In 2020, the property owners (the “Vendors”) sold the property. In 2021, the purchasers discovered deficiencies in the property allegedly causing ongoing damage, and the purchasers claimed against the Vendors for both negligent construction (the “Construction Claims”), negligent misrepresentation and breach of contract in the home sale (the “Vendor Related Claims”). Dominion agreed to defend the Construction Claims for deficiencies that occurred while the Liability Policy was in force only, and denied any duty to defend the Vendor Related Claims. Dominion offered a gratuitous defence to the Vendor who was not an additional insured, but no indemnity for damages.

Bay of Quinte insured the Vendors under a homeowner’s liability policy from 2020 to 2021 (the “Homeowner’s Policy”), during which time the alleged negligent representations were made. Bay of Quinte denied coverage to the Vendors on the basis that the Vendor Related Claims did not cause bodily injury or property damage, as was required under the Homeowner’s Policy.

Dominion claimed both that Bay of Quinte had a duty to defend the Vendors and that it was entitled to equitable contribution from Bay of Quinte for the cost of defending the Construction Claims. The court held that the application turned on the wording used by Dominion in its coverage letters. The wording clearly limited the defence of the Construction Claims to the period of 2010 to 2013 only, and therefore any defence costs incurred with respect to that period were not costs that would have been incurred by Bay of Quinte under its policy, had Bay of Quinte agreed to provide coverage. Therefore, Dominion had no equitable right of contribution from Bay of Quinte, and the application was dismissed. The court did not consider whether Bay of Quinte had a duty to defend the Vendors.

This case was digested by Mark A. McPhee and edited by Steven W. Abramson 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 feel free to contact them directly at [email protected] or [email protected].