On October 29, 2009, the Court of Appeal rendered a judgment in
Hôtel Fairmount Inc. Société en
commandite Manoir Richelieu vs. Schecter dealing with
the duty to defend. The Court of Appeal concluded that although the
insurer had a duty to defend the proceedings as instituted in first
instance, it did not owe defense costs in appeal since it was clear
that an exclusion applied.
In essence, the court of first instance concluded that
Respondent was injured during a horseback riding excursion on
Appellant's property and that the injuries resulted from
dangerous helicopter maneuvers which scared a horse. The helicopter
pilot and Mr. Kevin Coutts were looking for a horse lost since the
previous days. At the time of the excursion, Coutts was also
responsible for the equestrian activities. The Superior Court
concluded that Coutts was responsible for the faulty maneuvers in
relation to the piloting of the plane in proximity to a group of
The Court of Appeal reviewed the facts and concluded that there
were no manifest errors of fact allowing the Court of Appeal to
It then reviewed an exclusion clause contained in Lloyd's
insurance policy which excluded liability resulting from the use,
by or on behalf of the insured, of an aeronef and concluded that
the Superior Court had not erred in applying this clause.
The Court of Appeal was then called upon to address the issue of
the duty to defend and the defense costs. The court analyzed the
introductory motion and in particular, the paragraph in which it
was alleged that Coutts was responsible for the damages caused by
the horse. The Court of Appeal stated that although the
introductory motion was drafted in such a way that it clearly
focused on the use of the helicopter it could also lead one to
conclude that the liability of Coutts could be engaged as a result
of the horses for which he was responsible. As such, the Court of
Appeal concluded that at that stage of the proceedings the Superior
Court had not erred in concluding that Lloyd's had the
obligation to assume the defense of its insured.
The court however added that the situation was different in
appeal. The allegation that the damages could be imputable to the
animal became not only secondary but insignificant with respect to
the entirety of the proof.
In the circumstances, the Court of Appeal concluded that
Lloyd's no longer had the obligation to defend its insured at
the stage of the appeal. As such, Lloyd's was only ordered to
pay the defense costs incurred within the scope of the principal
proceedings and not in appeal.
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