INTRODUCTION
Recently, in
FACTUAL BACKGROUND
Multiple class actions relating to the manufacture, distribution, and sale of opioid drugs in
The Respondents sought declarations that the primary insurers had a duty to defend the claims and that that they were entitled to select any single policy under which there was a duty to defend and to require that insurer to defend all the claims against it.
APPORTIONMENT OF DEFENCE COSTS
One of the issues on appeal was the proper apportionment of defence costs amongst the primary insurers. The primary insurers appealed the lower court's ruling that the Respondents were entitled to select a policy and require the selected insurer to defend the claim for the entire class action period.
Firstly, the primary insurers argued that language of the policies limited the scope of the duty to defend to a portion of the class period. In considering this issue, the
In determining whether a duty to defend had been triggered, the court looked to the policy and the claims in the pleadings to determine the possibility of the claims falling within the coverage. The court agreed with the primary insurers' argument and found that the lower court failed to meaningfully assess the pleadings, which reflected a temporal nature. Although the claims fell outside of the policy periods, the policy periods were "readily identifiable." The court disagreed that the defence of the claims was inseparable between covered and uncovered claims. The court determined that a time-on-risk allocation reflects the temporal nature of the claims against the Respondents. Further, the court rejected the finding that the primary insurers were concurrent insurers. As such, equitable contribution was not available.
The court agreed with the primary insurers that the lower court misapplied the principles in Hanis v. Teevan, 2008
The Court of Appeal accepted the primary insurer's arguments that the proper approach to allocation of defence costs was the pro rata time-on-risk approach not the "all sums approach." This is the appropriate approach in the context of multiple policy periods and reflects the true nature of the policies, which are "time-limited bargains."
TAKEAWAY
The Court of Appeal's decision confirms the primacy of the policy language in determining the duty to defend. Further, In the context of multiple insurers and consecutive coverage periods, a pro rata time-on-risk allocation is the correct approach in the allocation of defence costs.
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