When is a claim a “Claim” within an insurance policy? The answer is, predictably, “it depends”. In this case, the insured had brought proceedings against a third party, and the third party’s Response asserted a set-off against the amount claimed by the insured. In issue was whether the Response constituted a “Claim” for the purposes of the policy.
The Court held that it didn’t. First, as the Response did not claim damages or compensation (and so did not meet the definition of “Loss”), it could not constitute a “Claim”. Second, the Response was not “brought against” the insured. Third, the insuring clause covered “Defence Costs and Expenses”, defined as the reasonable legal costs and expenses incurred in connection with the investigation, defence or settlement of a “Claim”. As the Response was not a “Claim”, the Defence Costs and Expenses were not covered by the insuring clause.
This case is a useful reminder that it is the insuring clause that is critical, and that policy definitions must be interpreted in the light of that clause. You can claim your copy of the decision here.