Recent developments in the law as to when to defend or not defend an “additional insured” has identified two potential avenues the court may take in determining this issue. In some cases the court may find that a particular claim that potentially falls within coverage captures “the true nature of the overall claim” and that the insurer is obliged to defend the “entire action” regardless of whether there may be claims that are not covered by the policy: see, for example, RioCan Real Estate Investment Trust v. Lombard General Insurance Co. [2008] O.J. No. 1449 (S.C.J.). In other cases, the court may find that there are mixed claims, where the plaintiff advances both covered and non-covered claims, and the insurer is obliged to defend only those claims that potentially fall within coverage: see, for example, Atlific Hotels and Resorts Ltd. v. Aviva Insurance Co. of Canada [2009] O.J. No 2005. The problem for the “additional insured”, the insurer, risk managers and/or their respective counsel is to identify when a court may take one path or the other.
The following is a review of some of the case law outlining the paths taken in each case and a summary of the proposed legal principles which it is submitted can be taken from these cases. It is hoped that from this review the question as to when a defence is owed and to what extent a defence is owed can be better answered.
