Temple Insurance Company Appellant/Respondent by Cross-Appeal (Respondent) v. Aberdeen Specialty Concrete, 2021 SKCA 94

Court of Appeal for Saskatchewan Docket: CACV3593 Citation: Temple Insurance Company v Aberdeen Specialty Concrete Services , 2021 SKCA 94 Date: 2021-06-30 Between: Temple Insurance Company Appellant/Respondent by Cross-Appeal (Respondent) And Aberdeen Specialty Concrete Services, Hanneson Construction Inc., JLP Masonry Incorporated, and Vicwest Inc. Respondents/Appellants by Cross-Appeal (Applicants) Before: Jackson, Schwann and Tholl JJ.A.

Disposition: Appeal allowed, cross-appeal dismissed Written reasons by: The Honourable Madam Justice Jackson In concurrence: The Honourable Madam Justice Schwann The Honourable Mr. Justice Tholl On appeal from: 2020 SKQB 14 , Saskatoon Appeal heard: October 7, 2020 Counsel: Jane Ingman Baker and Matthew Milne for the Appellant Jennifer Pereira, Q.C., for the Respondents Jackson J.A. I. Introduction [ 1 ] A number of lawsuits arose out of the construction of Preston Park II, a seniors’ retirement living facility [the Project] in Saskatoon, Saskatchewan. This particular appeal concerns the

interpretation of the wrap-up liability policy of insurance [Wrap-Up Policy] for the Project. Under the terms of the Wrap-Up Policy, Temple Insurance Company [Temple] is the insurer. It issued the Wrap-Up Policy to All Seniors Care Living Centres Ltd. [All Seniors], an affiliate of the owner of the Project, its general contractor, and its subcontractors [the Respondents]. [ 2 ] The Wrap-Up Policy is a standard form contract. It provides coverage against lawsuits that might be brought against All Seniors, the general contractor and the Respondents for property damage caused by any of them in connection with the Project. However,

Part IX, s. 5(

a) of the Wrap-Up Policy requires written notice of an accident or occurrence. The notice must contain sufficient particulars to identify the insured and it must be given “by or for the Insured” to Temple. Further,

Part IX, s. 5(

c) provides that an insured “shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expenses other than for first aid to others at the time of an accident or Occurrence”. The correct

interpretation of

Part IX, s. 5(

a) and

Part IX, s. 5(

c) determines the outcome of this appeal. [ 3 ] The central issue, requiring

Part IX, s. 5(

a) and

Part IX, s. 5(

c) to be interpreted, is whether Temple is liable to pay for the Respondents’ legal costs in defending against third party proceedings that were brought against them by the general contractor before Temple acknowledged its liability to defend. The issue arises in the specific context described below. [ 4 ] When problems arose with the Project, the owner sued the general contractor who, in turn, sued the Respondents for damage alleged to have been caused by their work. When they were sued, the Respondents did not notify Temple. Instead, three of them contacted their own general liability insurers.

In due course, all four Respondents engaged their own lawyers. According to the evidence, the Respondents did not realize they had primary coverage under the Wrap-Up Policy until Temple advised them of that fact. By that time, all of the Respondents had incurred defence costs. [ 5 ] Determining whether and when the duty to defend is triggered are common questions in insurance litigation. Here, the insurer, Temple, accepts that it has a duty to defend the Respondents in the ongoing litigation.

Indeed, as I have indicated, it was Temple who reached out to the Respondents to notify them of the possibility of coverage under the Wrap-Up Policy. But Temple disputes that it is liable for defence costs voluntarily incurred by the Respondents before it came on board. [ 6 ] The Respondents, however, link the question of liability for defence costs to when Temple knew about the possibility of claims against them. They say Temple had such notice at least as of the date the general contractor sued each of them and potentially earlier.

They suggest the possibility of an earlier time because All Seniors mistakenly attempted to make a direct claim under the Wrap-Up Policy for remediation work under the policy before the owner sued the general contractor. [ 7 ] To resolve the dispute over the payment of prior defence costs, the Respondents applied to the Court of Queen’s Bench by way of an originating motion. In addition to claiming all of their legal costs incurred before Temple contacted them, they also asked for solicitor–client costs of the application.

Only the Respondents provided affidavit evidence on the motion. [ 8 ] A judge of the Court of Queen’s Bench agreed with the Respondents. She found Temple had acquired effective notice before the lawsuits were commenced against the Respondents: in part, by virtue of the knowledge gained by All Seniors’ mistaken claim under the policy. As a result of this finding, she ordered Temple to pay all of the Respondents’ legal fees. She awarded party and party costs of the application only: Aberdeen Specialty Concrete Service v Temple Insurance Company , 2020 SKQB 14 [ Chambers Decision ].

[ 9 ] Temple appeals against the determination of when it had notice according to the terms of the Wrap-Up Policy, but, more fundamentally, it asserts that the overriding issue is whether it is obliged to pay defence costs voluntarily incurred by the Respondents, even if it had early notice. The Respondents cross-appeal against the costs order, insisting that they should have received solicitor–client costs in the Court of Queen’s Bench. [ 10 ] For the reasons that follow, I have determined that the Chambers judge erred in her

interpretation of the Wrap-Up Policy; and, as a result, she erred by ordering the payment of the Respondents’ voluntarily incurred defence costs before Temple acknowledged it would provide defence coverage. I would therefore allow the appeal. It follows that the cross-appeal must be dismissed. II. Background [ 11 ] The owner of the Project is Armistice Way 2 Facility Inc. [Owner]. All Seniors is a corporate affiliate of the Owner. [ 12 ] The Owner engaged Man-Shield (Alta) Construction Inc. as the general contactor [Man-Shield or the General Contractor].

The General Contractor hired various subcontractors, including the Respondents: Aberdeen Specialty Concrete Services [Aberdeen], Hanneson Construction Inc. [Hanneson], JLP Masonry Incorporated [JLP], and Vicwest Inc. [Vicwest]. [ 13 ] The contract between the Owner and the General Contractor required the former to obtain the Wrap-Up Policy. The specific provision in question states as follows: “Appendix #22 – owner to provide and pay for builder’s risk/boiler & machinery insurance and wrap-up liability”. [ 14 ] In accordance with Appendix #22, All Seniors obtained the Wrap-Up Policy from Temple.

Temple engaged Encon Group Inc. [Encon] to manage the Wrap-Up Policy on its behalf. [ 15 ] Under the terms of the Wrap-Up Policy, Temple agreed to provide wrap up liability insurance to All Seniors, which is described as the “named insured”. The policy period was from June 13, 2010, to March 15, 2012, with a two-year completed operations coverage from March 15, 2012, to March 15, 2014 . [ 16 ] In addition to naming All Seniors as the insured, the Wrap-Up Policy lists a category of “additional insured”, which includes the Respondents: 3.

Additional Insured: All contractors, subcontractors, engineering and architectural consultants Manshield [ sic ] Construction Inc. [i.e., the General Contractor] [ 17 ] The Wrap-Up Policy covers property damage, which is a defined term in the policy. Briefly speaking, it means physical injury or destruction of personal property caused by an occurrence, which is also defined. An occurrence means an accident, including continuous or repeated exposure to conditions, that results in unexpected or unintended property damage.

Restoration, repair or replacement work required as a result of faulty workmanship is excluded. [ 18 ] During the course of construction, and following substantial completion of the Project, the Owner identified a number of deficiencies. All Seniors submitted a claim to Encon on August 28, 2014. Encon replied to All Seniors in a letter dated September 17, 2014, saying the following: We hereby acknowledge receipt of the email sent by your broker (the “notice documents”) on August 28, 2014 and thank you for forwarding these documents to our attention.

We are presently assessing coverage in this matter and will advise you of our position as soon as possible . In the interim, we have retained Mr. Jay Jeworski at Charles Taylor Adjusting to take the initial steps necessary to ensure that your interests are protected. In the event that coverage is confirmed, this adjuster will continue to represent your interests. However, his retainer at this stage should not be construed to be confirmation of coverage or an ongoing duty to investigate this matter. Please do not admit liability or offer to settle the claim without first obtaining ENCON’s consent.

Such action could inadvertently prejudice your defence which may jeopardize your coverage which would otherwise be available to you under the Policy. (Emphasis added) [ 19 ] Encon in a follow-up letter dated December 18, 2014, appeared to accept that All Seniors had coverage under the Wrap-Up Policy: We have now had an opportunity to review the notice documents, and we are pleased to advise that the Policy will provide coverage for this matter . This coverage will be afforded in accordance with the terms of the Policy, subject to the Reservation of rights set out below.

Please note that the information contained in this letter does not modify the terms and conditions of the Policy and should be read together with the Policy. In the event of any discrepancy between the information set out in this letter and the Policy, the Policy shall govern. (Emphasis added) [ 20 ] One month later, Encon realized its letter acknowledging coverage was in error in two ways. First, All Seniors was not the person being sued, i.e., the Wrap-Up Policy covers All Seniors for claims against it, not for claims it might have.

Second, All Seniors was advancing a first party property claim for damages incurred in remediating the Project, which was expressly excluded under the Wrap-Up Policy. Because of this, Encon wrote to All Seniors on January 14, 2015, advising of the following: (

a) its previous correspondence had been sent in error, (

b) if a negligent party elects to file a claim, coverage would be assessed at that time.

[ 21 ] On January 30, 2015, the Owner commenced an action against the architect, the window supplier, and the General Contractor [Underlying Action] – of the defendants listed here, only the General Contractor is a potential insured under the Wrap-Up Policy. [ 22 ] On successive dates, the General Contractor commenced third party claims against each of the Respondents as follows: (

a) March 30, 2015 – Hanneson; (

b) January 16, 2017 – JLP Masonry; (

c) March 7, 2017 – Vicwest; and (

d) March 20, 2017 – Aberdeen. [ 23 ] The Respondents, other than Vicwest, notified their commercial general liability insurers, who appointed counsel and took steps to provide a defence to the third party claims. Vicwest retained its own lawyers. [ 24 ] Then, on April 18, 2018, counsel for Encon wrote to the Respondents advising them that they were potentially insured parties under the Wrap-Up Policy.

According to the Respondents’ affidavit evidence, they did not know they had potential coverage under the Wrap-Up Policy until they received these letters. [ 25 ] Then, on June 14, 2018, counsel for Encon wrote to each of the Respondents [Defence Acknowledgment Letters]. In general terms, these letters confirm that Temple would assume the defence of the third party claims pursuant to the coverage provided by the Wrap-Up Policy and subject to a reservation of rights – on a go forward basis only. [ 26 ] All of the Defence Acknowledgement Letters provide a copy of the Wrap-Up Policy.

The letters advise the Respondents that Encon has reviewed the pleadings and various reports. Encon does not concede indemnification as the pleadings “identify a number of possible outcomes which would not trigger any duty to indemnify you for a variety of reasons”. Encon confirms that the policy covers “damages arising out of the insureds’ work because of Property Damage”.

Encon then proceeds to review the various exclusions under the Wrap-Up Policy, including liability for restoration, repair or replacement work. [ 27 ] Since Temple was not prepared to pay for prior defence costs, on October 30, 2018, the Respondents filed an originating application in the Court of Queen’s Bench seeking the following relief: (

a) a declaration that Temple and Encon are obliged to defend the Respondents’ interests in relation to the third party claims; (

b) a declaration that Temple and Encon are responsible to pay all of the Respondents’ past legal costs as well as all future legal costs; (

c) a declaration that the Respondents are entitled to appoint (or to continue to use) independent legal counsel that is not instructed by either Encon or Temple; and (

d) costs of the Respondents’ application on a solicitor–client basis. According to The Queen’s Bench Rules , the service of an originating application imposes no obligation on the responding party to provide evidence and Temple did not file any affidavit evidence. All of the evidence presented to the Chambers judge came from the Respondents, by way of affidavit. [ 28 ] On November 27, 2018, the parties signed a Consent Order. Temple agreed that (

a) it is obliged to defend the Respondents in relation to the third party claims, and (

b) the Respondents could continue to be represented in the Underlying Action by their own counsel. The Consent Order removes Encon as a party to the application. [ 29 ] The Consent Order also addressed the question of fees incurred after June 14, 2018. The parties agreed that the Respondents’ present counsel would be permitted to “submit invoices for legal fees pertaining to the defence of the [Respondents] in the Underlying Action incurred after June 14, 2018 to Temple …”. [ 30 ] That left these issues for resolution: (

a) whether Temple was required to pay the legal fees incurred by the Respondents before the Defence Acknowledgement Letters were sent on June 14, 2018, and (

b) whether the Respondents were entitled to costs on a solicitor– client basis for the application. These matters were adjourned to another Chambers date. [ 31 ] In

summary, the timeline is as follows: Date Activity March 15, 2012, to March 15, 2014 two year coverage following completed operations under the Wrap-Up Policy August 28, 2014 All Seniors sends claim to Encon September 17, 2014 Encon writes to All Seniors saying it is assessing coverage December 18, 2014 Encon writes to All Seniors confirming coverage January 14, 2015 Encon writes to All Seniors denying coverage January 30, 2015 the Owner sues the General Contractor March 30, 2015 the General Contractor serves a third party notice on Hanneson January 16, 2017 the General Contractor serves a third party notice on JLP Masonry March 7, 2017 the General Contractor serves a third party notice on Vicwest March 20, 2017 the General Contractor serves a third party notice on Aberdeen April 18, 2018 Encon writes to the Respondents advising they are potentially insured parties under the Wrap-Up Policy

June 14, 2018 Encon writes to the Respondents advising it will provide defence coverage on a go forward basis October 30, 2018 the Respondents file an originating application seeking payment of legal fees incurred prior to June 14, 2018 III. Relevant Provisions of the Wrap-Up Policy [ 32 ] The Wrap-Up Policy between All Seniors and Temple contains these terms: DECLARATIONS 1. Named Insured: ALL SENIORS CARE LIVING CENTRES LTD. … 3. Additional Insured: All contractors, subcontractors, engineering and architectural consultants Manshield [ sic ] Construction Inc. 4. Insured Project: (

a) Description: CONSTRUCTION OF THE ARMISTICE WAY 2 FACILITY (new non-combustible construction) 5. Policy Period: 13 June 2010 to 30 October 2011 … Completed Operations: As respects the Completed Operations Hazard, the policy shall nevertheless continue to apply for a period of 24 months following such date of termination. …

PART 1 – INSURING AGREEMENTS To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay, or for any liability assumed by the Insured under Contract (as defined herein), for damages arising out of the Insured’s Work in connection with the Insured Project, because of: … 2. Coverage B – Property Damage (as defined herein) … . …

PART II – ADDITIONAL INSURING AGREEMENTS Under coverages A, B, C, E and F of

Part I, the Insurer further agrees to: (

a) defend in the name and on behalf of the Insured and at the cost of the Insurer, any civil action brought against the Insured on account of such Bodily Injury, Property Damage or Personal Injury, but the Insurer shall have the right to make such investigation , negotiation and settlement of any claim as may be deemed expedient by the Insurer ; … (

c) pay all costs taxed against the Insured in any civil action defended by the Insurer and any interest accruing after entry of judgment … . …

PART VI – POLICY TERRITORY This policy applies to any accident or Occurrence in connection with the Insured Project provided that suit to recover therefrom is brought within Canada or the United States of America, its territories or possessions.

PART VII – EXCLUSIONS This policy does not apply to any liability : … 2. Under Coverage B for: Injury to, or destruction of, or loss of use of: (

a) property owned or occupied by or rented to the Insured, property held by or on behalf of the Insured for sale or property entrusted to the Insured for storage or safekeeping; or (

b) except with respect to liability under sidetracked agreement that is covered by this policy, or the use of elevators or escalators at

premises owned, rented or controlled by or on behalf of the Insured: … (iv) that particular part of any property, not on premises owned by or rented to the Insured: … (

c) the restoration, repair or replacement of which has been made or is necessary by reason of faulty workmanship thereon by or on behalf of the Insured ; …

PART VIII –

DEFINITIONS … 13. Occurrence The word Occurrence means an accident, including continuous or repeated exposure to conditions, which result in Bodily Injury or Property Damage neither expected nor intended from the standpoint of the Insured and includes: (

a) the use of reasonable force for the lawful protection of persons or property; and (

b) with respect to Personal Injury: An offence described in the definition of Personal Injury contained in this policy. … 17. Property Damage Means: (

a) physical injury to or destruction of tangible property caused by an Occurrence (as defined herein) during the policy period, including the loss of use thereof resulting therefrom; or (

b) loss of use of tangible property which has not been physically injured or destroyed providing such loss of use is caused by an Occurrence during the policy period. …

PART IX – CONDITIONS … 5. Insured’s Duties in the Event of an Accident, Occurrence, Claim or Suit (

a) In the event of an accident, Occurrence , claim or suit, written notice containing particulars sufficient to identify the Insured and also information that can be reasonably obtained with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given as soon as practicable by or for the Insured to ENCON Group Inc . at the address indicated in the Declarations. (

b) If a claim is made or suit is brought against the Insured, the Insured shall immediately forward to ENCON Group Inc. every writ, letter, document or advice received by him or his representative . (

c) The Insured shall co-operate with the Insurer and, upon the Insurer’s request, assist in making settlements, in conduct of suits and in enforcing any right of contribution or indemnity against any person or organization who may be liable to the Insured because of injury or damage with respect to which insurance is afforded under this policy; and the Insured shall attend hearings and trials and assist in securing and giving evidence and obtaining the attendance of witnesses.

The Insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expenses other than for first aid to others at the time of an accident or Occurrence . (Emphasis added) IV. Chambers Decision [ 33 ] The Chambers judge interpreted the application as requiring the Court to “determine the date” Temple became obliged to defend the Respondents (at para 1). In her reasons, the Chambers judge limited the issue of Temple’s liability to pay the pre-June 14, 2018, costs to whether the letter that All Seniors sent to Encon on August 28, 2014, constituted sufficient notice under

Part IX, s. 5(a): “written notice containing particulars sufficient to identify the Insured and also information that can be reasonably obtained … shall be given as soon as practicable by or for the Insured to ENCON Group Inc” (emphasis added). [ 34 ] Relying on Sovereign General Insurance Company v Walker , 2011 ONCA 597 , 343 DLR (4th) 143 [ Walker ], the Chambers judge found that “All Seniors was ‘sufficiently proximate to the claim’ in order to provide effective notice within the meaning of subsection 5(a)” as of January 14, 2015 (at para 35). From this, she held as follows:

(

a) Temple knew, as early as January 14, 2015, that All Seniors intended to issue a statement of claim against the parties it believed responsible for having improperly installed and deficiently manufactured windows, deficiently constructed balconies, and for water ingress issues; (

b) one or more of the allegedly negligent parties might file a claim pursuant to the Wrap-Up Policy; and (

c) as of January 14, 2015, Temple had effective notice under the Wrap-Up Policy. [ 35 ] The Chambers judge did not accept that the Respondents were entitled to costs on a solicitor–client basis. She held that there was no evidence of litigation misconduct on Temple’s part. Temple contacted the Respondents and extended defence coverage on a go forward basis and then entered into a consent order one month after an application had been brought. Finally, she indicated that the issue regarding the payment of legal fees incurred by the subcontractors prior to June 14, 2018, was a “legitimate one to be argued” (at para 39). [ 36 ] In the result, the Chambers judge held the following: (

a) Temple was obligated to pay all of the Respondents’ legal fees incurred in the Underlying Action as of the dates on which they were each named as defendants to the third party claims; and (

b) the Respondents were entitled to the costs of the application on a party and party basis only. [ 37 ] Temple appeals the decision requiring that it pay all legal fees arising before it sent the Defence Acknowledgement Letters on June 14, 2018. The Respondents cross-appeal the refusal to order solicitor–client costs. V. Positions of the Parties A. Temple [ 38 ] Temple contests the Chambers judge’s conclusion that it received notice under

Part IX, s. 5(a), but argues that notice is irrelevant to its liability to pay the pre-June 14, 2018, costs in any event. It takes this position because of the wording of

Part IX, s. 5(c), which it asserts is not linked to notice. [ 39 ] In addition, Temple asserts that its duty to defend was not triggered in August of 2014 or at any time thereafter by notice “by or for” the Respondents within the meaning of

Part IX, s. 5(

a) of the Wrap-Up Policy. As part of this argument, it states that at no time did any party with sufficient proximity to the Respondents provide adequate detail regarding the claims that had been made against them. Further, Temple asserts that there is no evidence showing it had knowledge of the specific claims against the Respondents before June 14, 2018. [ 40 ] With respect to the cross-appeal, Temple submits there is no basis to interfere with the Chambers judge’s exercise of discretion refusing costs on a solicitor–client basis. B. Respondents [ 41 ] The Respondents rely on the Chambers Decision .

They submit that when All Seniors wrote to Encon on August 28, 2014, about a potential claim against the General Contractor, this constituted notice “by or for” them. In addition, the Respondents assert that “it is only necessary that the Appellant [Temple] had notice as of” the dates of the various third party claims, i.e., March 30, 2015; January 16, 2017; March 7, 2017; and March 20, 2017. They argue that Temple had a copy of the statement of claim against the General Contractor, which put “the Appellant on further notice of a potential occurrence under the Policy”.

From this, the Respondents allege that “the Appellant had sufficient information to determine who might be an insured under the Policy and what loss the potential insured might have caused”. Relying on Walker , they say that the Owner and the General Contractor “were sufficiently proximate to provide notice of the claim to the Appellant pursuant to the terms of the Policy” and both gave copies of the statement of claim to Temple.

Finally, the Respondents insist that Temple had the third party pleadings as of the dates they were issued and those documents gave them all the detail necessary to determine whether there would be defence coverage. [ 42 ] On the second issue of voluntary payments, the Respondents argue that the “duty to defend, and provide for defence costs, arises at the commencement of proceedings”. They cite Carneiro v Durham (Regional Municipality) , 2015 ONCA 909 , 55 CCLI (5th) 1 [ Carneiro ], and Markham (City) v Intact Insurance Company , 2017 ONSC 3150 , 68 CCLI (5th) 267 [ Markham ].

They say, “it would be patently unfair to hold that an insured would be deprived of the essential bargain they bargained for, namely defence coverage, simply because the insurer has declined to notify the insured that they may have coverage”. Finally, they assert that “it is questionable as to whether ‘defence costs’” can be considered a voluntary payment within the meaning of

Part IX, s. 5(

c) of the Wrap-Up Policy. [ 43 ] As to costs, the Respondents rely on Markham , which they submit stands for the proposition that an insured is entitled to solicitor–client costs when an application must be brought to obtain defence coverage. According to this argument, they assert they are entitled to be placed in the same position they would have been in if there had been compliance with the Wrap-Up Policy from the outset. VI. Issues [ 44 ] The following issues emerge from the arguments: (

a) What standard of review applies to the

interpretation of the Wrap-Up Policy?

(

b) What principles of contract

interpretation apply to the Wrap-Up Policy? (

c) Did the Chambers judge err by finding that Temple had received notice of the Respondents’ claim in accordance with

Part IX,s. 5(

a) of the Wrap-Up Policy? (

d) Did the Chambers judge err by finding that Temple was liable for payments made before the June 14, 2018, letters, in light ofPart IX, s. 5(

c) of the Wrap-Up Policy? (

e) Did the Chambers judge err by declining to award the Respondents costs on a solicitor–client basis? [45] As I discuss below, I find that the Chambers judge erred with respect to issues (

c) and (d), so it is not necessary to considerissue (e). VII. Analysis A. The applicable standard of review [46] The primary issues concern the

interpretation of the Wrap-Up Policy.

Temple asserts that it is a standard form contract and,therefore, the standard of review to apply is that of correctness: Ledcor Construction Limited v Northbridge Indemnity InsuranceCompany, 2016 SCC 37, [2016] 2 SCR 23 [Ledcor]. [47] In Mosten Investments LP v The Manufacturers Life Insurance Company (Manulife Financial), 2021 SKCA 36, [2021] 3 CTC5 [Mosten], the Court summarized the Ledcor criteria to determine if a contract is a standard form contract: (a) “there must be an identical or a substantially identical form of contract language capable of standardized use by multiple,different parties” (at para 52); (b) “there must be no factual matrix that is specific to the parties to the contract and that is probative of the issue of contractinterpretation” (at para 53); and (c) “the standard form contract must be one that has been or will be repeatedly entered into” (at para 54). [48] The Wrap-Up Policy, beginning with “Part I – Insuring Agreements”, easily meets the Ledcor criteria for a standard formcontract.

It employs substantially identical language that is used by multiple, different parties. There is no factual matrix specific to theparties that is probative of the issue of contract

interpretation. It is a contract that has been repeatedly entered into by others. Indeed, “PartIX – Conditions”, which is the part of the Wrap-Up Policy that must be interpreted, appears regularly in the leading jurisprudence: Walkerand Lloyd’s Underwriters v Blue Mountain Log Sales Ltd., 2016 BCCA 352, [2017] 1 WWR 627 [Blue Mountain], and the cases citedtherein. Since the Wrap-Up Policy satisfies the three Ledcor criteria, its

interpretation has precedential value and is, therefore, a questionof law that attracts the correctness standard of appellate review. [49] Relying on Ledcor and Mosten, I will apply the correctness standard of review to the

interpretation of

Part IX, s. 5(

a) and PartIX, s. 5(

c) of the Wrap-Up Policy. [50] At one point in these reasons, I find that the Chambers judge made an error in her fact finding. In so doing, I have applied thestandard of review of palpable and overriding error as defined in Benhaim v St-Germain, 2016 SCC 48 at paras 38 and 39, [2016] 2 SCR352, and Deren v SaskPower, 2017 SKCA 104 at para 46. B. The applicable principles of contract

interpretation [51] Recently, in CE Design Ltd. v Saskatchewan Mutual Insurance Company, 2021 SKCA 14, 455 DLR (4th) 417 [CE Design],Schwann J.A., for the Court, extensively reviewed how insurance contracts are to be interpreted. These are the principles taken from CEDesign that apply to the

interpretation of the Wrap-Up Policy: [109] As noted by the Supreme Court in Ledcor, the

interpretation of a policy of insurance involves a two step process: “The primaryinterpretive principle is that where the language of the insurance policy is unambiguous, effect should be given to that clear language,reading the contract as a whole” (citations omitted, at para 49). If ambiguity remains, the general rules of contract construction must beemployed to resolve the ambiguity: [50] … These rules include that the

interpretation should be consistent with the reasonable expectations of the parties, as long as thatinterpretation is supported by the language of the policy; it should not give rise to results that are unrealistic or that the parties would nothave contemplated in the commercial atmosphere in which the insurance policy was contracted, and it should be consistent with theinterpretations of similar insurance policies. See Progressive Homes, [2010 SCC 33] at para. 23, citing Scalera, [2000 SCC 24, [2000] 1SCR 551] at para. 71; Gibbens, [2009 SCC 59] at paras. 26–27; and Consolidated-Bathurst Export Ltd. v.

Mutual Boiler and MachineryInsurance Co., (SCC), [1980] 1 S.C.R. 888, at pp. 900–902. [52] Neither party suggests that

Part IX, s. 5(

a) and s. 5(

c) are ambiguous. Therefore, the first principle from paragraph 49 of Ledcorcited in CE Design applies: effect should be given to clear language, reading the contract as a whole. C. The Chambers judge erred by finding that Temple had received notice ofthe Respondents’ claim

1. The subsection to be interpreted [ 53 ] The crucial phrase is “by or for the Insured” in s. 5(a), which is found in “Part IX – Conditions” and reads as follows (repeated here for reference): 5. Insured’s Duties in the Event of an Accident, Occurrence, Claim or Suit (

a) In the event of an accident, Occurrence , claim or suit, written notice containing particulars sufficient to identify the Insured and also information that can be reasonably obtained with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given as soon as practicable by or for the Insured to ENCON Group Inc. at the address indicated in the Declarations. (Emphasis added) [ 54 ] A great deal has been written about whether the failure to give notice or to give notice in a timely manner is a breach of a fundamental condition or whether it is possible to relieve against such a term.

It appears that the courts have not interpreted late or imperfect notice as being an impediment to indemnification in all cases. However, this appeal is not about those issues, none of which were argued in this appeal in any event. Rather, the question here is whether All Seniors gave notice for the Respondents in accordance with

Part IX, s. 5(

a) at any relevant time so as to trigger defence coverage. 2. Possible dates when notice might have been given [ 55 ] The Respondents presented the Chambers judge with three possible dates when Temple might be considered to have had notice under

Part IX, s. 5(a): (

a) August 28, 2014 – the date All Seniors wrote to Encon advising of a claim; (

b) January 14, 2015 – the date Encon wrote to All Seniors declining coverage; and (

c) various dates between 2015 and 2017, when Man-Shield began third party proceedings against each of the Respondents. [ 56 ] As I interpret the Chambers judge’s reasons, she did not find that All Seniors gave notice “for or on behalf” of the Respondents on August 28, 2014, or on any of the dates of the third party claims. Instead, she held that Encon, and therefore Temple, had effective notice as of January 14, 2015, because All Seniors was in sufficient proximity to the Respondents and because of what she found Temple knew as of that date.

On appeal, the Respondents seek to sustain the Chambers judge’s decision for the reasons that she gave. They also rely on Temple having received notice under the policy on all three sets of dates. I will structure my analysis accordingly. a. All Seniors did not give notice for the Respondents on August 28, 2014 [ 57 ] To state the obvious, a wrap-up policy is a liability policy that provides insurance coverage for owners, contractors and subcontractors involved in a project from lawsuits that may be brought against them for property damage they caused.

Notwithstanding the clear terms of the Wrap-Up Policy, which would not permit All Seniors to make a claim under the policy or claim for remediation work, All Seniors wrote to the insurer, i.e., Temple’s agent, Encon, for the purposes of doing just that: making a claim for itself for such work. [ 58 ] In some sort of comedy of errors, Encon appeared to seriously entertain the notion that All Seniors could make a direct claim on the policy.

By doing so, Encon became aware that All Seniors might potentially have a claim against someone who might be insured under the Wrap-Up Policy and thereby gained some knowledge of a lawsuit that might ensue. But this could hardly satisfy

Part IX, s. 5(

a) as of August 28, 2014. That subsection requires notice to be given “by or for” the named insured under the policy, i.e., All Seniors, or “by or for” the additional insured under the policy, i.e., the Respondents – with respect to lawsuits for property damage against them. All Seniors did not give notice about a coverable claim against it – or the Owner. All Seniors clearly did not give notice for the Respondents, against whom no claim had yet been initiated on August 28, 2014.

I reach this latter conclusion for two reasons. [ 59 ] First, All Seniors intended to make a claim on its own behalf for remediation work, not to provide notice about a potential third party claim that might be made by the General Contractor against any of the Respondents. [ 60 ] Second, All Seniors did not provide the balance of the information required for the purposes of giving notice of claims against the Respondents under

Part IX, s. 5(a), namely (a) “written notice containing particulars sufficient to identify the Insured [the Respondents]”; and (b) “information that can be reasonably obtained with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses”. [ 61 ] Thus, All Seniors did not give notice for the Respondents as of August 28, 2014. It was giving notice for itself of a claim that did not fall within the Wrap-Up Policy. Using the language of Ledcor , at paragraphs 49 and 50 , it would not give effect to the clear language of the contract to hold otherwise. Such an

interpretation would not meet the terms of the contract to provide coverage for known parties for known claims as neither the parties nor the claims were known as such. I take this also to be the decision of the Chambers judge. b. Temple did not have effective notice as of January 14, 2015 [ 62 ] The Chambers judge held that “All Seniors was ‘sufficiently proximate to the claim’ in order to provide effective notice” of the

Respondents’ claim within the meaning of

Part IX, s. 5(

a) of the Wrap-Up Policy as of January 14, 2015 (at para 35). It was on this date that Temple reversed position and denied All Seniors coverage under the policy. In coming to her decision, the Chambers judge relied on Walker . The insurance policy in Walker contained similar language to

Part IX, s. 5(

a) of the Wrap-Up Policy: “written notice containing particulars sufficient to identify the Insured … shall be given promptly by or for the Insured …” (emphasis added, at para 21). [ 63 ] Walker involved a direct and specific action by Marie Walker and Albert Walker for serious injuries incurred by falling on ice brought against the owner of the property, Emshih Developments Inc. [Emshih], and the maintenance company responsible for ice removal, Sun Shelters Industries Inc. [Sun Shelters]. Emshih cross-claimed against Sun Shelters for contribution and solicitor–client costs.

Sun Shelters was bankrupt, so it did not defend the action. Emshih discovered that Sun Shelters was insured by Sovereign General Insurance Company [Sovereign]. Emshih’s counsel notified Sovereign of the Walkers’ claim, forwarded all the pleadings to it and arranged for a lengthy adjournment of the trial to permit Sovereign to participate in the action. After taking legal advice, Sovereign declined to participate. Emshih settled with the Walkers, who had obtained a judgment against Sun Shelters.

The Walkers then sued Sovereign, seeking the balance of their losses. [ 64 ] In defending against the Walkers’ claim, Sovereign argued that Sun Shelters breached the statutory conditions of the policy requiring it (i.e., Sun Shelters) to give notice and to co-operate in the defence. Sovereign submitted that compliance with the equivalent to

Part IX, s. 5(a) “by or for the Insured” was a condition precedent to its liability to Sun Shelters – and, therefore, it could deny coverage to the Walkers. [ 65 ] The Ontario Court of Appeal did not accept Sovereign’s arguments. It found that Emshih’s (the owner’

s) notice was effective notice to Sovereign (the insurer) because Emshih was sufficiently proximate to Sun Shelters’s and the Walkers’ (the insured’

s) claim. Justice Laskin for the Court determined that the provision “should be interpreted in light of its purpose”, which is to make the insured “aware of a claim against its insured so that it has the timely opportunity to deal with it” (at para 35). He found that if the notice is to be given for an insured “the person giving it should have sufficient proximity to the claim to have knowledge” of the required information (at para 36).

Justice Laskin also commented that “the delivery and content of the notice is important” to the insurer because it triggers the duty to defend (emphasis added, at para 35). [ 66 ] The Chambers judge followed Walker and found that All Seniors was in sufficient proximity to the Respondents to give notice of a claim against the latter. I agree that an owner or an owner’s agent may well be in sufficient proximity to give notice under a wrap-up liability policy.

Having regard for the purpose of a wrap-up liability policy, which is to provide coverage for named and unnamed insured, it is not difficult to come to that conclusion, but that is not really the issue in this case. In Walker , the insurer had notice but insisted that the right person did not give notice. Here, the issue is when the insurer had notice according to the terms of

Part IX, s. 5(a). [ 67 ] As of August 28, 2014, and January 14, 2015, All Seniors was seeking to have Temple reimburse it for costs incurred to remedy deficiencies on the Project, not to give notice of a potential claim the Respondents might make under the policy. The claims against the Respondents were not yet known. [ 68 ] As of January 14, 2015, Temple had determined that not even All Seniors had a claim on the policy because its claim fell within the remediation exclusion.

Nonetheless, the Chambers judge impressed Temple with sufficient knowledge of the Owner’s lawsuit that would ultimately be brought against Man-Shield, which would then, in turn, sue the Respondents. The Chambers judge’s exact words are as follows: [35] Employing the same reasoning as did Laskin, J.A. in Walker , I have determined All Seniors was “sufficiently proximate to the claim” in order to provide effective notice within the meaning of subsection 5(a).

In arriving at this conclusion, I have considered the following factors: • By January 14, 2015, Encon had reviewed All Seniors’ notice of loss and attachments, had subsequent discussions with All Senior[s]’s representative, and reviewed reports prepared by Charles Taylor Adjusting.

This information was sufficient to allow Encon to identify the subject matter of All Seniors’ proposed claim; namely, improperly installed and deficiently manufactured windows, deficiencies in the construction of balconies, and water ingress from below-window air conditioning units. • By January 14, 2015, Encon knew that All Seniors intended to issue a statement of claim against “parties they feel are responsible for damages arising from the poor construction of Preston Park II”. • In its letter of January 14, 2015, Encon acknowledged the possibility that one or more of the allegedly negligent parties would file a claim under the policy. • Temple, to some extent, remained apprised of the progress of the underlying action.

In support of my conclusion in this regard, I note that, in its letter of June 14, 2018, Temple acknowledges having received and reviewed the pleadings delivered in the third party proceedings, two expert reports it received from the plaintiffs, and various other documents. [36] Against this backdrop, it is clear Temple knew, as early as January 14, 2015, that All Seniors intended to issue a statement of claim against the parties it believed responsible for improperly installed and deficiently manufactured windows, deficiently constructed balconies, and water ingress issues.

It also knew that one or more of the allegedly negligent parties might file a claim pursuant to the wrap-up policy of insurance.

Under these circumstances, it is also clear that, as of January 14, 2015, Temple – the provider of a project specific, wrap-up liability policy of insurance that names as insured not only the general contractor, but all contractors, subcontractors, engineering and architectural consultants – had effective notice. [ 69 ] In essence, the Chambers judge pieced together the notice given by All Seniors on August 28, 2014, and what she believed Temple must have discovered by January 14, 2015, to make a whole claim as of the latter date. But, as of that date, no third party claim had been commenced.

The effect of her finding is that Temple is deemed to have notice of a claim that had not yet been made and for which no details had been provided, including the identity of the insured – on the basis of knowledge that Temple had gleaned by investigating a claim that did not fall within the terms of the Wrap-Up Policy. [ 70 ] In my respectful view, the Chambers judge has strayed from the wording and intent of

Part IX, s. 5(

a) of the Wrap-Up Policy.

As of January 14, 2015, the record does not show that either All Seniors or Temple had any knowledge of the Owner’s claim or the third party claims later brought by Man-Shield against the Respondents. At this point, it is useful to take a closer look at the January 14, 2015, letter sent from Temple to All Seniors. It reads in essential part as follows: We have reviewed the circumstances of this claim as outlined in your August 28, 2014 notice of loss, attached documents and subsequent discussions with you.

We have also reviewed reports prepared by Charles Taylor Adjusting containing information relevant to our assessment of coverage relative to this matter. We understand that you have submitted a claim for reimbursement of pending expenses you have incurred or will incur, relating primarily to the rectification of deficiencies at Preston Park II – 118 Armistice Way, Saskatoon, Saskatchewan.

The documents submitted to date appear to point to the following alleged deficiencies triggering said expenditures: • Improperly installed and deficiently manufactured windows • Deficiencies in the construction of balconies • Water ingress from several below-window packaged terminal air conditioning units … The Policy was designed and intended to respond to claims against All Seniors Care Living Centres Ltd. and all contractors, subcontractors, engineering and architectural consultants and Manshield [ sic ] Construction Inc., all listed as Named or Additional Insured on the Policy Declarations during the term of the Policy . … The Wrap-Up Liability Policy affords coverage for costs which an Insured is legally obligated to pay to third party claimants, subject to any exclusions that might apply to certain situations or types of property.

These exclusions are explicitly stated in the body of the Policy . Following our review of this matter we ascertain that All Seniors Care Living Centres Ltd. has not “ become legally liable to pay ” for the claimed damages as a result of a negligent act. In fact you are the party making allegations of damages to your property as a result of the alleged negligence of third parties.

The claim as presented does not appear to trigger the Insuring Agreement or a response from the Wrap- Up Liability Policy . … We understand from correspondence with Charles Taylor Adjusting that All Seniors Care Living Centres Ltd. will be filing a legal Statement of Claim against parties they feel are responsible for damages arising from alleged poor construction of Preston Park II.

Should the allegedly negligent party or parties elect to file a claim under this Policy, we would assess coverage for said party or parties based on the Policy terms and conditions, and in accordance with the above noted Insuring Agreement . (Italic emphasis in original, underline emphasis added) [ 71 ] As will be seen from this, there is no indication as of January 14, 2015, that Temple knew that a lawsuit would be commenced by Man-Shield against the Respondents for damage caused by their work.

Here, the initial August 28, 2014, letter fell far short of telling Temple the essential facts of who was claiming what and as of when. By January 14, 2015, nothing had changed on that front. In such circumstances, it is not possible to say that All Seniors was in sufficient proximity of the Respondents to give Temple effective notice of the Respondents’ claim as additional insured parties under

Part IX, s. 5(

a) of the Wrap-Up Policy as of January 14, 2015. In so far as the Chambers judge found otherwise, it must be considered a palpable and overriding error of fact. [ 72 ] Respectfully, I conclude that the Chambers judge did not correctly interpret

Part IX, s. 5(a). She extended its application to include a claim unknown at the time she found notice had been given. Since the claim did not exist, nothing could be known about it, including whether claimants would even elect to seek coverage under the Wrap-Up Policy. This constitutes an error of law. c. Temple did not have effective notice as of the dates of the third party claims [ 73 ] In its alternative argument, the Respondents say that it was not necessary for the Chambers judge to find that Temple had effective notice as of January 14, 2015.

It was only necessary for Temple to have effective notice as of the dates of the third party claims. The Respondents assert that, as of those dates, Temple had such notice because it had received copies of the pleadings from the General Contractor (Man-Shield), who gave notice for them. Put simply, there is no evidence of this and the Chambers judge did not make a finding of fact to that effect. [ 74 ] As I noted earlier, the Chambers judge found as follows (at para 35): • Temple, to some extent, remained apprised of the progress of the underlying action .

In support of my conclusion in this regard, I note that, in its letter of June 14, 2018, Temple acknowledges having received and reviewed the pleadings delivered in the third party proceedings, two expert reports it received from the plaintiffs, and various other documents. (Emphasis added) [ 75 ] This statement was made in support of the Chambers judge’s conclusion that Temple had effective notice as of January 14, 2015. I have held that the Chambers judge erred in so finding.

Nonetheless, the judge’s remark is some support for the assertion that Temple had knowledge of the Respondents’ claims sometime between January 14, 2015, and June 14, 2018. But it falls far short of

allowing a court to say that Temple had notice as and when the General Contractor served a third party claim on each of the Respondents as of March 30, 2015; January 16, 2017; March 7, 2017; and March 20, 2017, respectively. [ 76 ] As I have indicated, the Respondents chose to pursue recovery of defence costs by way of an originating application, which imposed no obligation on Temple to respond. Clearly, the Chambers judge was troubled by this as is this Court, but Temple was entitled to ask for a ruling on the basis of the Respondents’ evidence only.

Having chosen a procedure to follow, the Respondents cannot now ask the courts to speculate about what is not in evidence. [ 77 ] One might suppose that the General Contractor would have forwarded the third party claims to Temple, but it would be only that – a supposition. This Court is in no better position to make such a finding than the Chambers judge and she did not make it. 3. Conclusion on notice [ 78 ] In short, and with much respect, I conclude the Chambers judge erred by finding that Temple had notice as of January 14, 2015.

I also find no merit to the Respondents’ further claim that Temple had notice as of the dates the General Contractor served them with a third party claim. While Temple had some knowledge of the potentiality of other claims, there had been no compliance with

Part IX, s. 5(

a) of the Wrap-Up Policy as of any of the identified dates. [ 79 ] If I am in error in this conclusion, I have also found, in any event, that the Chambers judge erred by finding that Temple was liable for voluntary payments made before June 14, 2018, under

Part IX, s. 5(c). This is the next issue. D. The Chambers judge erred by finding that Temple was liable for voluntary payments made before June 14, 2018, under s. 5(c) 1. Subsection to be interpreted [ 80 ] The subsection of the Wrap-Up Policy that must be interpreted reads as follows (repeated here for reference): [Part IX, s. 5](

c) The Insured shall co-operate with the Insurer and, upon the Insurer’s request, assist in making settlements, in conduct of suits and in enforcing any right of contribution or indemnity against any person or organization who may be liable to the Insured because of injury or damage with respect to which insurance is afforded under this policy; and the Insured shall attend hearings and trials and assist in securing and giving evidence and obtaining the attendance of witnesses.

The Insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expenses other than for first aid to others at the time of an accident or Occurrence . (Emphasis added) 2. The Respondents voluntarily made payments contrary to clause 5(c) [ 81 ] The central issue between the parties was this: Who should pay for the pre-June 14, 2018, defence costs incurred without Temple’s consent and in seeming contravention of

Part IX, s. 5(c)? The Chambers judge resolved that question by finding the following: (

a) Temple had effective notice before the third party claims had been commenced, and (

b) liability flowed directly from that conclusion. She mentioned

Part IX, s. 5(c), when discussing the parties’ position, but she did not address its meaning or effect. [ 82 ] Even if Temple had notice as of a time prior to the commencement of the third party claims, it was still necessary to proceed to answer this second question. In my respectful view, the Chambers judge erred in law by not addressing it. However, in fairness to the Chambers judge, I must acknowledge that Temple’s position appears to be more developed in this Court than it was in the Court of Queen’s Bench. [ 83 ] On the face of

Part IX, s. 5(c), there are no words that limit its application to whether the insurer has received effective notice. It is a direct statement to the insured that if it makes voluntary payments, they will not be covered. The underlined portion of

Part IX, s. 5(

c) above, known in the industry as a voluntary payments clause, limits an insurer’s obligation to pay defence costs. As Temple indicates, in a document such as the Wrap-Up Policy, where there are no limits on defence costs, a voluntary payments clause provides the insurer with some control over the duty to defend and the right to control the defence. Further, the duty to defend is tied to the duty to indemnify.

An insurer retains the right to control the defence because they will ultimately be called upon to indemnify the insured for any finding of liability that falls within coverage to the limits of the policy. [ 84 ] The question then becomes whether it is relevant that the Respondents did not know they were additional insureds under the Wrap-Up Policy. The Respondents assert that this is highly relevant.

Temple asserts the contrary, and, as authority for its position, it relies on Blue Mountain . [ 85 ] Like the Respondents, the insured in Blue Mountain “did not immediately recognize” that the lawsuit against it triggered coverage under a policy (at para 6). As a result, the insured did not contact the insurer until several months after a claim had been made against it and significant legal fees had been paid. As in this case, late notice was not a bar to defence coverage, but the issue was responsibility for legal fees incurred by the insured under a voluntary payments clause like

Part IX, s. 5(

c) before notice has been given to the insurer. [ 86 ] The British Columbia Court of Appeal in Blue Mountain held that an insurer’s obligation to defend cannot arise until the insured gives the insurer notice of the claim. It followed from this holding that the insurer was not liable for pre-tender legal expenses. The court then went on to hold that there could be no relief from forfeiture in the form of reimbursement of defence costs. [ 87 ] Here, the Chambers judge impressed Temple with effective notice of the Respondents’ claims as of January 14, 2015. However, in my view, the ratio of Blue Mountain , as it pertains to the responsibility for legal fees, is not confined to when the insured

receives notice. It speaks also to the question of responsibility for defence costs generally. In both types of cases, the insured incurs costswithout knowing they have coverage and without the insurer’s consent. The operative point is that the insured has voluntarily paid legalfees in either case, without the insurer’s involvement. [88] In short, an insurer cannot be in any worse position because it has notice, than if it does not. Either way, the insurer is beingasked to pay defence costs over which it has no control.

If it were otherwise, as soon as the insurer under a wrap-up liability policy hadknowledge that an owner of a project, no matter how large, was being sued, it would be required to seek out all of the potential insuredreminding them of coverage and mentioning the voluntary payments clause. It is also relevant to note that there is no evidence thatTemple knew the Respondents did not know they had potential coverage before it contacted them. [89] In Blue Mountain, having reviewed the policy language and numerous U.S. authorities, the court adopted the suggestion fromMarcus B. Snowden and Mark G.

Lichty, loose-leaf (2013 Rel 19) vol 2, Annotated Commercial General Liability Policy (Aurora, Ont:Canada Law Book, 1997), and held that “equity ought not interfere in a contractual provision which serves to protect one of the partiesfrom the other’s improvident or careless acts” (at §37:60.2).

In my view, these words apply equally to the situation where notice has beengiven and one where it has not. [90] Further support may be found in Brockton (Municipality) v Frank Cowan Company Limited (2002), (ONCA), 154 OAC 125 (CA) [Brockton], and Colliers McClocklin Real Estate Corp. v Lloyd’s Underwriters, 2004 SKCA 66 at para 29,[2004] 11 WWR 393 [Colliers], both cited by Temple. [91] In Brockton, the insured brought an application for a declaration that it had the right to appoint independent counsel and toconfirm the scope of the insurer’s obligation to reimburse it for costs incurred in both the civil and regulatory proceedings.

The OntarioCourt of Appeal did not grant the application. It referred to the language of the policy, which reads as follows: “5. To reimburse theInsured for all reasonable expenses, other than loss of earnings, incurred at the Insurer’s request” (quoted at para 27). [92] In considering this language, the Ontario Court of Appeal decided that the insurer was not liable for costs incurred by theinsured that were neither authorized by an order nor incurred at its request.

In doing so, the court wrote as follows: [54] In my view, the resolution of this issue turns simply on the provision in the contract of insurance which obliges the insurer toreimburse the insured only for those reasonable expenses (other than loss of earnings) which were incurred at the insurer’s request. [55] I do not find it necessary to address which of the services performed by Miller Thomson could be said to fall within the scope of theduty to defend.

Had those services been performed by counsel appointed by the insurer it may well be that all would fall within that duty.However, Miller Thomson was retained and proceeded without the respondents’ consent. Absent some subsequent authorization aboutwhich we were not advised, there is no obligation on the respondents to reimburse the appellant for those services. None of those expenseswere incurred at the insurer’s request. (Emphasis added) [93] Useful reference may also be made to Colliers.

In Colliers, the insured sought coverage from Lloyd’s Underwriters [Lloyd’s]for a claim advanced by a condominium corporation to which it provided management services. Before Lloyd’s was notified of the claim,the insured had admitted liability and agreed to compensate the corporation for its loss. Lloyd’s denied coverage as the insured hadbreached the equivalent of

Part IX, s. 5(c), which denial was upheld by this Court. Justice Lane wrote, “It is trite in the law of insurance tostate the contract of insurance comes into effect when coverage for the peril is bound. The contract of insurance provides the insurer withrights to defend and to indemnify provided the conditions in the policy are met” (at para 29). [94] Brockton and Blue Mountain were followed in HMQ v AIG Insurance, 2019 ONSC 2964 [HMQ].

In HMQ, the court held that“a liability insurer only covers approved expenses, so any pre-tender defence costs incurred voluntarily or before such notice is given arepayable by the insured or in the case of a shared obligation, another earlier responding insurer” (at para 20, citing Brockton at paras 53–55and Blue Mountain at paras 38, 55 and 61). [95] The authorities provided by the Respondents have no application to this appeal. Both Carneiro and Markham address thesituation where notice had been given and pleadings had been filed. It was determined that the duty to defend was engaged.

The issue ofprior defence costs was not before the Court in either decision.

Part IX, s. 5(

c) extends to legal costs. The wording is broad. It extends toany obligation or any expense. It cannot be read as the Respondents assert as excluding the payment of fees to defend an action. [96] Having regard for all the circumstances, Temple was entitled to rely upon the voluntary payments clause, namely

Part IX,s. 5(c). VIII. Conclusion [97] The appeal is allowed with costs in this Court and in the Court of Queen’s Bench. The cross-appeal is dismissed with costs. “Jackson J.A.” Jackson J.A.I concur. “Schwann J.A.” Schwann J.A.I concur. “Tholl J.A.” Tholl J.A.