In Canadian Northern Shield Insurance Company v. Intact
Insurance Company, 2015 BCSC 767, the British Columbia Supreme
Court considered whether an insurer has a duty to defend an insured
with respect to claims arising from damage that occurred outside
the policy period.
In 2005, unusually heavy rainfall
caused a landslide in North Vancouver. The landslide originated
from a property situated at the top of an escarpment and caused
substantial damage to the property situated below the escarpment.
One of the inhabitants of the lower property died. Lawsuits were
brought against the former and present owners of the property at
the top of the escarpment. Canadian Northern Shield (CNS) was the
insurer of the current owners of the upper property. Intact
Insurance had issued a policy to the former owners of the upper
property, but the policy had expired three months before the
The North Vancouver District retained an engineer to survey the
upper property in 1980. The engineer recommended removal of debris
from the property, control of vegetative growth and periodic
inspection of drainage and slopes for signs of distress, improved
property drainage, and removal of abandoned septic tanks. The
owners at the time, who eventually sold the property in 2004, did
not follow these recommendations. The parties agreed at trial that
this failure contributed materially to the landslide of January
For a ten year period ending in October 2004, Intact issued a
personal lines homeowners' policy to the former owners. Between
October 2004 and October 2005, CNS issued a personal lines
homeowner's policy to the former owners. CNS responded to the
multiple actions brought with respect to the landslide of January
2005. Intact refused to indemnify or defend the former owners in
the actions. Thus, CNS defended and settled the actions and then
sought a declaration of entitlement to equitable restitution or
contribution from Intact toward defence and settlement costs.
The question before the court was whether the terms
"accident" or "occurrence" in the Intact policy
applied to acts or omissions done within the policy period, where
the damage does not arise until after the expiration of the policy
The parties both submitted that the Intact policy was
unambiguous, but argued for different results. CNS took the
position that the Intact policy should be interpreted broadly to
encompass the acts of the former owners notwithstanding that the
landslide damage occurred three months after the Intact policy
expired. Intact took the position that a negligent act or omission
does not constitute an "accident" or
"occurrence", unless there is damage that occurs during
the policy period. It argued that CNS' interpretation wrongly
conflated negligent with the terms "accident" or
"occurrence" in the policy and there should be a close
temporal nexus between the negligent act and the resultant damage
to attract coverage from the policy.
The court found that the terms "accident" or
"occurrence" in the policy were not ambiguous themselves,
but in the context of the Policy as a whole there was ambiguity as
there was no express definition providing some temporal restriction
to damage. Despite that, the court found that the plain
meaning of the words "accident" or
"occurrence", when considered in the context of the
contract as a whole, requires that at least some resulting damage
must occur within the policy period. There is no need for a
temporal restriction in the definition of property damage because
said damage must arise from ownership, use, or occupancy of the
premises maintained by the insured during the policy period. At the
time of the landslide, the former owners were neither using nor
occupying the property.
When considering the reasonable expectations of both parties,
the court found that the policy could not be construed to cover
accidents or occurrences outside of the coverage period. If this
were the case, the former owners would be unable to determine
whether their negligence constituted an accident or occurrence
until the damage arose. Furthermore, the insurer would not know
when the insured would call upon it to defend a claim. The wording
of the policy indicated that neither party reasonably expected this
The court found that each individual policy must be construed
from its own wording. The Intact policy did not contain express
language regarding a temporal restriction of coverage. Despite this
absence of express language, the reasonable expectations of both
parties were that Intact would not be obliged to defend the former
owners for damage arising after the policy expired.
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