Insurer ordered to defend negligence claim, after insured sold and vacated property

A recent Ontario Superior Court decision suggests that, depending on the wording of a policy and what is alleged, an insurer may be obliged to defend insureds who have made misrepresentations with respect to the sale of an item — including realty, said Michael Teitelbaum, a senior partner at Hughes Amys LLP.
Teitelbaum made the observation while writing about McGrimmon v. Personal Insurance in the Hughes Amys newsletter, Noteworthy.
In McGrimmon, the plaintiffs purchased a home from insureds of Personal. When the plaintiffs took possession of the home, they allegedly discovered numerous defects and deficiencies, Teitelbaum wrote.
The third party liability coverage in Personal’s homeowner’s policy states the insurance “applies to your legal liability for injury to others or damage to their property arising out of your premises or your personal actions.”
Personal argued the claim was essentially for breach of contract and breach of warranty and that the “nature of homeowner’s liability insurance is to cover accidental or unforeseen losses only.”
The case turned on whether or not a breach of contract is covered by a homeowner’s policy, wrote Teitelbaum.
In his decision, Ontario Superior Court Justice Robert MacKinnon wrote: “In the instant case, the third party liability coverage is broad and portable and I find the claim gives rise to the duty to defend.”
The judge found the policy did contain an exclusion for claims “made against you arising from damage to property you own, use, occupy or lease.”
But because the wording did not also include the past tense — i.e. covering claims for property “owned, used, occupied or sold” — the exclusion did not apply to the insureds who had vacated the premises.