Alberta Court Releases Precedent-Setting Decision On Insurers' Right And Duty To Defend

In its recent decision in Temple Insurance Company v. Sazwan, the Court of Queen's Bench of Alberta (Court) considered the scope of, and exceptions to, an insurer's right and duty to defend. This is the first decision in Alberta to conclude that, in an appropriate case, an insurer may have to surrender its right and duty to defend to its insured, thereby permitting the insured to control his or her own defence and to appoint defence counsel of his or her own choosing, at the insurer's cost.

BACKGROUND

Clark and Denise Sazwan (Insureds) made a claim on a directors' and officers' policy (Policy) in relation to three actions against them by, among others, corporations for which they had previously served as directors and officers (Underlying Actions). The Policy had a limit of C$12-million. In a reservation of rights letter, the insurers of the Policy denied any duty to indemnify the Insureds, except with respect to defence costs incurred in connection with the