In liability insurance matters, the control of the defence is a
recurring issue before the courts. A recent ruling of the Superior Court dealt with
this issue after an insurer had denied coverage following its own
investigation of the facts. This ruling may cause liability
insurers to reconsider the way they handle their insureds'
files where no formal claim has yet been filed.
In this case, a house partially collapsed following work
performed by a contractor. The latter quickly informed his
liability insurer of a possible claim. After having conducted its
own investigation of the facts, the insurer denied coverage on the
basis of two exclusions.
A year later, a claim for damages was filed against the
contractor. Following its analysis of the statement of claim, the
liability insurer indicated that the allegations confirmed its
investigation and therefore, its coverage position.
