Blue Mountain Log Sales Ltd. v. Lloyd's Underwriters, 2017 BCSC 1872

The duty to defend is not limited by the requisite elements of a cause of action

When deciding whether an insurer owes a duty to defend an action, the courts will take an expansive approach based on the "mere possibility" that a claim falls within an insurance policy. Recently, in Blue Mountain Log Sales Ltd. v. Lloyd's Underwriters, 2017 BCSC 1872, the British Columbia Supreme Court declared that the petitioners' insurer owed a duty to defend an action commenced in the Superior Court of Washington State. The Court further declared that the insurer was obligated to indemnify the petitioners for any reasonable post-tender defense costs incurred in the action.

In the underlying Washington action, the plaintiffs—four related companies incorporated in British Columbia to carry on business in Washington State—allege that the petitioners engaged in unfair competition by misappropriating its trade secrets to create a product for treating roofing materials. The