Ultimate Windows Doors Ltd. v. Aviva Insurance Co. of Canada, 2014 NBQB 159
In 2006, Thomas and Catherine Cusack purchased siding for their house from Ultimate Windows Doors Ltd. ("Ultimate"). In 2010, the siding blistered and peeled and needed to be replaced, which the manufacturer did free-of-charge. Unfortunately, by 2012, the siding was again blistering and peeling and the Cusacks filed a lawsuit for $70,000.00, naming Ultimate as a Defendant.
Ultimate had a commercial general liability insurance policy (a 'CGL policy') with Aviva Insurance Company ("Aviva") and forwarded the Statement of Claim to Aviva's attention. Aviva responded, saying that it would not defend Ultimate as the window company was not covered under the CGL policy for the Cusacks' claim. The CGL policy did not provide coverage for replacing faulty products. Meanwhile, the Cusacks' claimed the siding was not of merchantable quality and was unfit for its purpose (i.e. the siding itself was faulty).
Aviva argued that while the CGL policy covered 'damage caused by a faulty product', like the damage caused by a leaky window, it not 'damaged or faulty products', like the cost of replacing a defective window. The Cusacks' claim alleged only that the siding was defective, not that it had leaked and damaged their home.
In response, Ultimate argued that the Cusacks' $70,000 claim may involve more than just removing and replacing siding. It may also involve replacing other building materials.
The New Brunswick Court of Queen's Bench ruled that Aviva must defend Ultimate. An insurer's duty to hire a lawyer and to defend their insured arises if there is the "mere possibility" that the policy covers the claim. If removing and replacing the allegedly defective siding would make it necessary to repair or replace other damaged property (such as saturated insulation, compromised vapor barrier, disturbed landscaping or even re-attaching a deck) then Aviva would be obliged to pay that portion of the Cusacks' damages. This risk, in turn, triggers Aviva's duty to defend Ultimate against the Cusacks' lawsuit.
The Court ordered Aviva to hire and pay a lawyer to defend Ultimate in the lawsuit filed by the Cusacks.
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