Although the insurer was found to owe a duty to defend to its insureds, because most of the claims would not be covered the court ordered an apportionment of defence costs.

[2012] O.J. No. 2821

2012 ONCA 429

Ontario Court of Appeal

S.E. Lang, G.J. Epstein and A. Hoy JJ.A.

June 22, 2012

The insurer appealed a decision of an application judge that it had a duty to defend the insured in an action alleging that he made negligent misrepresentations on a seller's property information statement which was completed in connection with the sale of his home. In that action the plaintiff purchaser of the home pleaded that, as a result of the insured's negligent misrepresentations, she incurred and would continue to incur repair costs, had suffered anxiety, sleep disturbances, fatigue, stress, headaches and symptoms of depression.

At the time of the alleged negligent misrepresentations the insured held a homeowner's insurance policy issued by the insurer which provided coverage for damages the insured was obligated to pay because of "bodily injury" or "property damage". The application judge concluded that the plaintiff's claims were covered by these terms and therefore a duty to defend arose with respect to the entire action. It was agreed that the policy would not cover the repair costs.

The Court of Appeal upheld the application judge's finding that the duty to defend arose but concluded that on the facts of the case the insurer should not be responsible for 100% of the defence costs given that the majority of the plaintiff's damages claim relates to repair costs, which were not covered. The Court did not make a specific order with respect to the allocation of the defence costs.