The Ontario Superior Court recently delivered a critical ruling affirming the duty to defend insurers that provided historic comprehensive general liability (CGL) coverage to the Province of Ontario, despite the incident occurring many years later. In His Majesty the King in Right of Ontario v. Royal & Sun Alliance Insurance Company of Canada, 2025 ONSC 5670, the court clarified how the duty to defend applies in long-tail claims and set out the appropriate method to allocate defence costs among insurers with coverage spanning different periods.
Case Background
The claim arose from a 2018 collapse of a bridge in Elgin County, allegedly caused by inadequate design and maintenance over several decades when the Province had jurisdiction. The Province sought declarations that two insurers, covering the period from 1975 to 1984, owed a duty to defend the action. Insurers countered that the damage occurred after their policy periods and relied on exclusions to deny coverage.
Duty to Defend: Interpretation and Application
Applying settled Ontario jurisprudence, the court found that the duty to defend is triggered if the pleadings disclose a reasonable possibility of coverage based on allegations of progressive damage occurring during the insurers’ coverage periods. The policies’ “loss of use at any time” wording extended coverage to the 2018 collapse despite the time gap.
Exclusion clauses relating to ownership and care, custody, and control were narrowly construed. Due to uncertainty around the Province’s ownership of the bridge before 1997 and the timing of jurisdictional control, the court held exclusions did not clearly bar coverage at this stage. This nuance showcases how important precise and unambiguous exclusion language is.
Defence Costs: “Time on Risk” Prevails
The court rejected an equal sharing of defence costs and applied the principle of allocation based on insurers’ respective time on risk over the damage timeline. This method, rooted in prior Ontario decisions such as Loblaw v. RSA, ensures fairness and aligns risk with financial responsibility. It prevents arbitrary cost burdens, particularly in long-tail claims spanning multiple overlapping policy periods.
Practical Implications for Defence Counsel
- Duty to defend obligations can extend to historic CGL policies even when manifest damage occurs decades later (provided coverage periods overlap with the alleged damage).
- Exclusions must be drafted with clarity and precision to effectively negate defence obligations, especially in complex, multi-period scenarios.
- Policy provisions extending coverage to loss of use “at any time” are particularly significant in determining defence triggers.
- When faced with multi-insurer claims covering long-tail exposures, defence cost allocation should be argued based on time on risk rather than equal division.
- A close analysis of jurisdictional facts and the insured’s control over property is essential in coverage disputes involving care, custody, and control exclusions.
This decision reaffirms key principles shaping insurer duties and cost allocation in evolving liability claims. For insurance defence lawyers, a thorough grasp of these developments facilitates effective risk management and litigation strategy.
For more information on managing complex insurance defence claims, contact our team.
