Case information

Insurance — Insurer’s duty to defend — Customers of a cold warehouse storage business suing business after their products thawed and were damaged — Business seeking to have insurer defend the actions — Courts below deciding that insurer has duty to defend — What principles apply to duty to defend decisions? — Whether the reasonable expectations of commercial actors are based on the explicit language of their agreement or on commercial reality — Whether an insurer’s duty to defend under a provision in a commercial general liability form should be applicable to the insurance policy as a whole.

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The respondent, Clauson Cold & Cooler Ltd. (“Clauson”), operates a cold warehouse storage business. Its customer store frozen products in its warehouse. As a result of occurrences in 2015 and 2016, the products of two of its customers thawed and were damaged. Those customers sued Clauson, alleging, in essence, that due to Clauson’s breach of contract and negligent performance of contract, they suffered loss of products under refrigeration (the “underlying actions”). The applicant, Intact Insurance Company (“Intact”), was Clauson’s insurer. Clauson brought an application seeking a declaration that Intact had a duty to defend it in the underlying actions. The Master allowed Clauson’s application. The decision was upheld on appeal to a judge of the Court of Queen’s Bench and to the Court of Appeal of Alberta. While the duty to defend language appeared in the commercial general liability form, the courts were of the view that the language of that provision pertained to the whole of the policy.