Hollinger Inc. v. American Home Assurance Co.

Reasons for Decision

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The Third and Fourth Excess Insurers provided coverage to the Insured Company under policies that are part of what is known as a "ladder" scheme. The Primary Policy and the First and Second Excess policies were exhausted as a result of the settlement of an action initiated in the State of Delaware against the Insured Company. The Third and Fourth Excess insurance policies provided coverage of the kind generally known as "follow form". In other words, the Insurers agree to provide insurance coverage excess of the underlying policies "in accordance with and subject to the same warranties, terms, conditions, exclusions and limitations as are contained in or as may be added to the Primary Policy. The Third and Fourth Excess Insurers took the position that there was either no coverage available to the Insured Company, or there were exclusions applicable with respect to the claims for which the Insured Company sought indemnification by virtue of the terms of the policies of insurance.

The coverage provided by the policies included "Organization Insurance" for loss of any Organization insured pursuant to the policies arising from a) a Securities Claim; b) an Oppressive Conduct Claim; or c) a Canadian pollution claim made against such Organization for any Wrongful Act. It was not disputed that the Insured Company came within the definition of the word "Organization". The Court considered the relevant definitions in the policies, including "Securities Claim", "Oppressive Conduct Claim" and "Wrongful Act", and accepted the Insurers' submission that there had been no finding of oppressive conduct on the part of the Insured Company for which indemnity under the policies would be available. Accordingly, the Court found that "sufficient doubt" had been raised that defence costs should not be required to be paid by the Insurers, at least at the time of the hearing of this application.

The Court further held that even if the coverage issue were certain, it was unclear whether defence costs would be payable since the policies in issue did not contain a duty to defend clause and only spoke to indemnity. The Court accepted the proposition that Canadian law is clear that the duty to defend is entirely contractual; i.e. there is no duty to defend unless the policy provides that there is one. However, this matter was left open since there was "at least the potential for a different conclusion if oppression was ever established."

The Court also declined to grant the relief sought on the basis that the claim for defence costs was premature.

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Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, Civil Remedies Updates, General Business Updates, Insurance Updates

Reference Info:Decision | State, D.C. Circuit, D.C. | United States

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Pamela Pengelley, Cozen O'Connor | Attorney Advertising

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