In a coverage extension case, a series of policies counts as continuous coverage, Appeal Court finds

If an insurer provides continuous coverage by means of issuing a series of one-year policies, then this amounts to a single “system of successive insurance coverage” for the purpose of determining the application of an extension of coverage provision, the Ontario Court of Appeal has decided.
In Boland v. Allianz Insurance Company of Canada, an extension of coverage provision in a D&O policy covered a condominium corporation director against any “wrongful acts” occurring prior to a one-year policy period as long as:
(a) the claim itself was made during the policy period; and
(b) the director, at the effective date of the policy, “had no knowledge of and could not reasonably foresee any circumstances that might result in a claim.”
In Boland, the event resulting in a claim made against a 2005-06 D&O policy happened in 1994.
Lawrence Allan Boland was a director of a condominium corporation in 1994 and again in 1997-98. Boland and the condominium board were sued in 2001 by the purchaser of an illegal suite. The corporation turned around and sued Boland in 2005, alleging that Boland was aware of the existence of the illegal suite as early as 1994, but failed to disclose his knowledge prior to the sale of the illegal unit to the purchaser in 1998.
The purchaser’s 2001 action against Boland and the condominium board is still ongoing. The allegations in the statement of claim have yet to be proved.
When Boland was sued by the condominium corporation in 2005, he made a claim against Allianz’s 2005 D&O policy, saying the insurer had a duty to defend the claim. A lower court found the insurer had no duty to defend Boland’s claim, but the Court of Appeal overturned the lower court decision.
Boland made his claim in 2005, during the year of the policy.
Thus, a central question in determining whether the extension of coverage applied was: for the purpose of determining Boland’s knowledge about a potential claim, when was the “effective date of the policy” (considering the fact that Allianz had issued a number of one-year policies in succession)?
The court ruled: “the effective date of the policy for the purpose of looking at the knowledge of the insured director that could preclude extension of coverage is the effective date of the first policy of succession, in this case, September 1994.”
At this point, the Appeal Court ruled, Boland had been aware of an illegal unit in his condo building and had asked the owner at that time to resolve the issue. The court found further that Boland could not have foreseen at the time that the owner of the illegal unit would do nothing to fix the problem before selling the illegal unit to a new owner in 1998.
As a result, the extension of coverage applied and Allianz had a duty to defend Boland.