INSURANCE – THE DUTY TO DEFEND

There are secrets in this world - things that others would prefer you didn’t know.  The duty to defend is one of those secrets.  There are at least a few insurance companies who would prefer that you didn’t know about the duty to defend.

What is the duty to defend?  Lawyers will tell you that insurance covers two costs which the insured party might otherwise have to pay.  The first of those costs is obvious:  the cost of paying for the damage which the insured party has caused.  The second is less obvious: the cost of hiring the lawyer and paying the court costs related to the claim.  When an insurance company has a duty to defend, it will pay the lawyer – even if it eventually turns out that the insured party was not to blame.

An obvious example is motor vehicle insurance.  When you’re in an accident, you might be sued even if the accident wasn’t your fault.  The insurance company should pay for your lawyer.

Most of us in the Cariboo probably feel a bit detached from the leaky condo crisis – but the problem continues to work its way through the legal system.  The recent Supreme Court of Canada decision in the case of Progressive Homes Ltd. v. Lombard General Insurance Company [2010 SCC 33] was a leaky condo case where the duty to defend was front and centre.  Progressive built some leaky condos and was sued.  When it was sued, Progressive turned to Lombard, its insurer for assistance.  Lombard refused to assist Progressive in its defence of the claims and so Progressive sued Lombard.  The Supreme Court of Canada held that if there was even a possibility that the facts alleged by the people suing Progressive would fall within the insurance coverage, then Lombard had a duty to defend.

The moral of the story is that you should never overlook the less obvious benefit of carrying insurance:  the insurance company’s duty to defend.

Article provided by Centennial Law Corp.