Superior Court Provides Guidance On "Expected Or Intended Injury" Exclusion And When A Loss Will Become An "Occurrence"

• Published date: 07 September 2021
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Real Estate and Construction, Insurance Laws and Products, Trials & Appeals & Compensation, Personal Injury, Construction & Planning, Real Estate
• Law Firm: Theall Group LLP
• Author: Liam Thompson

In AIG Insurance Company v Lloyd's Underwriters,¹ the Superior Court provides guidance with respect to the exclusion for "expected or intended" injuries. The Court also provides some commentary on what constitutes an "occurrence".

Background

The Forget family bought land in Timmins and subsequently built a house on it, moving in during late 2013. Prior to construction, drainage issues were identified and discussed in a pre-construction soil report. Starting in 2016, the slope on the adjoining property began to fail. Progressive erosion eventually began to affect the Forgets' property, with the City of Timmins issuing an Order prohibiting occupancy of the home in 2019. The Forgets sued several parties for the damage to their property, including the City of Timmins.

Timmins was insured under two functionally identical policies for the years at issue, with AIG on risk for 2016 and 2017, and Lloyd's on risk for 2018 and 2019. AIG acknowledged its duty to defend, but Lloyds denied such a duty. AIG applied for equitable contribution for defence costs.

Lloyds based its denial on two arguments. First, Lloyd's argued that the damage was not caused by an "occurrence" as would be required to engage coverage. In the alternative, Lloyd's sought to deny coverage on the basis of an exclusion in the policy for "expected or intended" property damage.

The Level of Knowledge Required to Engage the Exclusion or Crystallize a Loss

Key to Lloyd's case was a geotechnical engineering report that was prepared in May 2017. The report investigated drainage and erosion issues in the vicinity of the Forgets' property and made certain recommendations as to how to address drainage issues.

Lloyd's argued that despite the fact that there was ongoing damage after publication, this report effectively crystallized the loss in May 2017. Therefore, any ongoing damage did not constitute an "occurrence" within the means of the Lloyd's policy, and was not "accidental" or "fortuitous" as is required to engage coverage under a policy.

Lloyd's also based their exclusion argument on the report. Lloyds said that after the report was issued, any damage after the commencement of the Lloyd's policy period in January 2018 was "expected", and therefore excluded from coverage.

The application judge, Justice Black, commented briefly on whether the Report was admissible at this stage of the proceeding. Lloyd's had argued that the fact that the Forgets referred to the report at several points in their claim...