Ontario Superior Court rules “saving harmless” implies a duty to defend

A title insurer agreeing to “indemnify and save harmless” an insured against a negligence suit has a duty to defend, even if the allegations against the insured ultimately prove to be false or do not fall under the policy coverage.
The Ontario Superior Court came to this conclusion on Jan. 27, 2009 in Stewart Title Guarantee Company v. Zeppieri.
In that case, Stewart Title signed an agreement with the Law Society of Upper Canada, Ontario’s legal regulator. In the agreement, the title insurer agreed to “indemnify and save harmless” any member of the law society facing claims arising from the title insurance policy, except for claims of gross negligence or willful misconduct.
Shortly after it signed the agreement with the law society, Stewart Title denied that it had to pay ongoing defence costs to Ontario real estate lawyer, Enio Zeppieri, who was sued by clients concerning a real estate purchase. 
Among other things, Stewart Title argued that it had a duty to defend only when the claim arose from the title insurance policy. But in this matter, the title insurer argued, the allegations did not arise from an issue covered by the policy.
Ontario Superior Court Justice David M. Brown found otherwise. The judge noted that the use of the phrase “save harmless” in the title insurer’s contract with the law society entailed that the title insurer had a duty of defence extending beyond mere indemnification.
“To make a person whole after the fact may satisfy an obligation to indemnify in the proper case,” Brown wrote. “But, to require a person protected by a promise to save him harmless first to pay out monies in respect of a claim, before he can call on his counter-party to honour his promise, hardly saves him harmless.”