Insurers Beware: Duty To Defend Insured Can Arise Even Without Ongoing Duty To Indemnify

We have invited Zohar Levy, a lawyer in our insurance defence practice group, to do a guest blog on a topic we thought might be relevant to some of you.

In the recent decision in Jevco Insurance Company v. Malaviya, Morgan J. held that an insurer must continue to defend its insured even after paying out the policy limits to the plaintiffs. Characterizing the Standard Automobile Policy as taking "muddled and contradictory drafting to a rarefied level", the court held that there is a fundamental ambiguity in the language of the contract as to whether those defence costs should be covered. The insurer relied on two earlier decisions – Boreal Insurance Inc. v. Lafarge Canada Inc., and Dominion of Canada General Insurance Co. v. Kingsway General Insurance Co. – for the principle that it made no sense for a duty to defend to arise when there is no possibility of indemnification.