Insurer appeal dismissed, exclusion language found ambiguous

An insurer has a duty to defend an insured against a plaintiff’s claim for bodily injury arising from his exposure to mould and/or bacteria despite a policy exclusion that suggests otherwise, an Ontario court has ruled.
The court also disallowed the insurer from requiring the insured to retain counsel of the insurer’s choice.
In Appin Realty Corporation, Limited v. Economical Mutual Insurance Company, the insurer denied a mould claim, relying on a clause of the policy under the heading “Common Exclusions.” In the clause, “fungi and fungal derivatives” are listed.
The wording of the clause was ambiguous and unclear, the three-party panel of judges wrote. “The insurer’s position stands on its head with the general proposition that the duty to defend is broader than the duty to indemnify,” the decision says.
“If, as the insurer submits, the clause was meant to convey that the insurer’s duty to defend is narrower than its duty to indemnify, clear and unambiguous language was required. The language used falls well short of the mark.”
With regard to the retaining of counsel as chosen by the insurer for the insured, The Economical’s counsel suggested an alternative approach would be for the parties to agree on an independent counsel to defend the plaintiff’s claim on behalf of the insured and pursuant to the insurer’s duty to defend.
The panel decided to uphold the trial judge’s decision not to interfere.
“Accordingly, the insurer’s appeal is dismissed,” the decision says.