After a bridge collapsed in rural Ontario more than a half century after its construction, the ensuing litigation extended beyond questions of engineering and design. In His Majesty the King in Right of Ontario v Royal & Sun Alliance Insurance Company of Canada,1 the Ontario Superior Court of Justice ("ONSC") adjudicated an issue relevant for insurers and policyholders alike: Did the insurers owe a duty to defend claims arising from damage spanning decades?
The decision provides insight into how courts will interpret pleadings and insurance policies, in determining whether insurers owe a duty to defend.
Background
In 1964, the Province of Ontario ("Ontario") completed construction of a bridge spanning Catfish Creek in Elgin County (the "Bridge"). For the next three decades, Ontario had jurisdiction and responsibility for the Bridge. During that time, Aviva Insurance Company of Canada ("Aviva") and Royal & Sun Alliance Insurance Company of Canada ("RSA") issued Comprehensive General Liability policies to Ontario. RSA provided coverage between April 7, 1975 and March 31, 1981 whereas Aviva provided coverage between March 31, 1981 and March 31, 1984 (the "Policies"). In March 1997, Ontario transferred jurisdiction and responsibility for the Bridge to the Corporation of the County of Elgin ("Elgin").
On February 23, 2018, the Bridge collapsed. The collapse destroyed a dump truck owned and operated by Ron Mervin Jones and Ron Jones Construction Ltd. (collectively "Jones"). After the collapse, Ontario was sued by Elgin. Ontario was also named as a third-party defendant in a lawsuit commenced against Elgin by Jones (the "Claims").
The Application
Ontario applied to the ONSC for an order requiring Aviva and RSA to contribute towards funding the defences of the Claims. Both Aviva and RSA resisted the application, arguing that the property damage occurred long after the expiration of the Policies, so they owed no duty to defend.
Citing established precedents, the ONSC reaffirmed that insurers owe a duty to defend whenever the pleadings disclose a mere possibility of coverage. The duty to defend is broad, so any doubt as to defence coverage will be resolved in favour of the insured. However, policy exclusions must be interpreted narrowly, so they will only negate the duty to defend if coverage is unambiguously and clearly excluded.
As such, in considering whether Aviva and RSA owed a duty to defend, the ONSC considered the following questions:
- What is the true nature of the Claims?
- Do the Policies cover at least some of the damages claimed?
- Do the Policies contain exclusions negating the duty to defend?
- If there is a duty to defend, what is the appropriate allocation of defence costs?
True Nature of the Claims
The Claims alleged that the Bridge collapsed due to structural defects, namely corrosion and fatigue damage to the anchor rods. Ontario was said to be liable for negligent design, construction, inspection, maintenance and repair. Ontario argued that the true nature of the Claims was its negligence between completion of construction in 1964 and transfer of responsibility over the bridge to a third party in 1997. RSA countered that the true nature of the claim was to recover for damage occurring in February 2018.
The ONSC held that the Claims alleged progressive property damage caused by corrosion spanning the entire lifespan of the Bridge (1964 to 2018). The Court reasoned that even though the Claims did not specify the timing of the damage2, the allegations raised plausible claims that at least some property damage occurred during the policy periods. The ONSC held that this plausibility was sufficient to trigger a duty to defend.
Policy Coverage
Finding that the Policies were virtually identical, the Court held that both included the following:
"Property damage means injury to or destruction of tangible property which occurs during the Policy period, including loss of use thereof at any time resulting therefrom"
The ONSC rejected the insurers' argument that the policy was intended to provide coverage for loss of use during the policy periods. Instead, the Court found that the provision covered loss of use occurring at any time. Even though the Bridge collapsed three decades after the expiration of the Policies, the loss of use could still fall within coverage if a court found that the cause was corrosion occurring during the Policies' terms. Because this was a possible finding, the insurers owed a duty to defend, subject to any unambiguous policy exclusions.
Exclusion Clauses
The insurers relied on two exclusions clauses. The first excluded coverage for property "owned, occupied by, or in the care, custody or control" of the insured and the second excluded coverage for "work performed by or on behalf of" the insured. The ONSC rejected the first exclusion as the corrosion was alleged to have occurred during the lifespan of the bridge, including time periods where ownership was uncertain. As such, this exclusion did not clearly and unambiguously exclude coverage. With respect to the second exclusion, the Court found that the Claims sought damages for consequential loss, which extend beyond Ontario's work. As any ambiguities were to be resolved in the insured's favour, the Court held that there were no applicable exclusions, and the insurers owed a duty to defend.
Defence Cost Allocation
Ontario asked for equal sharing of costs among the insurers, subject to reallocation after the litigation had concluded, arguing that there was currently no principled or practical way to allocate defence costs. The insurers countered that the defence costs must be allocated on a "time-on-risk" allocation.
The Court held that generally, coverage under the Policies was limited to their policy periods. As such, the insurer's contribution should reflect the proportion of time they were on risk. Since Aviva insured Ontario for three years and RSA for six years of the bridge's 54-year life span, the insurers were ordered to pay 5.5% and 11.1% respectively.
Conclusion
This decision serves as a reminder for policyholders and insurers alike that the duty to defend is triggered not by the certainty of coverage but by the potential for coverage. The courts will consider both the pleadings as well as the policy language in determining whether insurers have a duty to defend. This duty remains broad where ambiguities favour the insured. Even where a loss occurs over thirty years after policy expiration, insurers may owe a duty to defend policyholders based on contractual language. When historical coverage intersects with modern litigation, decades-old policies can be applicable.
Footnotes
1. 2025 ONSC 5670 ("Royal")
2. The Court also acknowledged that because the Claims were at the early stages of litigation, it was unlikely that there would be sufficient expert evidence to adduce the timing of the damage. The Court disregarded the absence of evidence, finding that the duty to defend analysis required an assessment of the nature of the claims as opposed the nature of the evidence.
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