Extrinsic Evidence And The Duty To Defend

• Published date: 05 February 2021
• Subject Matter: Insurance, Insurance Laws and Products
• Law Firm: Strigberger Brown Armstrong LLP
• Author: Mr Mikel Pearce

In a recent decision, an Ontario court found that an insurer has a duty to defend a "software developer" in a U.S. action alleging copyright infringement. In the U.S. action, the insured was alleged to be the head of a group of hackers which sold subscriptions for unauthorized and derivative versions of several online computer games, including the popular game "Pokemon Go".

The insurer denied that it had a duty to defend, based on facts and evidence outside of, or extrinsic to, the pleadings in the U.S. action and the Policy in question.

The court took a dim view of the use of "extrinsic" evidence in determining the duty to defend, likening it to a rule 21 motion in which the allegations in the statement of claim are assumed to be true in determining whether or not the statement of claim discloses a cause of action. In the insurance context, the court found that only extrinsic evidence which is specifically referred to in the pleadings can be used in determining whether or not the insurer has a duty to defend the insured.

The court enumerated the principles to be applied in a duty to defend application, as set out by Mr. Justice Perell in his decision in The Corporation of the Town of Lincoln v. A.I.G. Insurance...