{"id":30691,"date":"2025-07-23T13:50:56","date_gmt":"2025-07-23T17:50:56","guid":{"rendered":"https:\/\/www.rsslex.com\/?p=30691"},"modified":"2025-07-24T16:37:52","modified_gmt":"2025-07-24T20:37:52","slug":"if-it-is-excluded-no-obligation-to-defend-rules-the-appeal-court","status":"publish","type":"post","link":"https:\/\/www.rsslex.com\/en\/bulletins-en\/if-it-is-excluded-no-obligation-to-defend-rules-the-appeal-court\/","title":{"rendered":"If it is Excluded, No Obligation to Defend Rules the Court of Appeal"},"content":{"rendered":"

The Qu\u00e9bec Court of Appeal has just issued an important decision for the insurance industry: Intact Insurance Company v. Hydromec Inc., 2025 QCCA 803<\/em><\/strong><\/a>, overturning a Wellington-type order that had been granted at first instance.<\/p>\n

A quick reminder: a Wellington motion allows an insured to compel their insurer to take up their defense as soon as there is a mere possibility of coverage under the insurance policy. In practice, it is rare for such a motion to be denied, since the threshold is minimal \u2014 essentially, prima facie<\/em> evidence that the policy could apply.<\/p>\n

In this case, Hydromec sold a forestry forwarder to 9351-9817 Qu\u00e9bec Inc. The equipment caught fire while in operation. AIG indemnified its insured (9351-9817 Qu\u00e9bec Inc.) and pursued Hydromec in subrogation, relying on the legal warranty of quality (art. 1726 C.c.Q.). Hydromec asked Intact to assume its defense, but Intact refused, invoking a clear exclusion in the policy for damages to the Insured\u2019s product arising from a defect existing at the time of a sale.<\/p>\n

In December 2024, the Superior Court ruled in favor of Hydromec, finding that at this preliminary stage, a possibility of coverage (not certainty) was sufficient. Since the precise cause of the loss was still unknown, the court held that itcould not conclusively find that the damage was caused by a defect existing at the time of sale and thus could not confirm the applicability of the exclusion. The court therefore found there to be an obligation to defend. However, it denied Hydromec the right to select its own counsel, affirming that this choice belongs to the insurer.<\/p>\n

Following a hearing on June 20, 2025, the Court of Appeal ultimately sided with Intact, confirming that the fact the motions judge could not rule on the cause of the loss should not have prevented her from addressing the key issue: whether an indemnity could be payable under the policy, considering the nature of the claim. Here, the lawsuit relied solely on the legal warranty of quality and on the existence of a defect at the time of sale \u2014 which is expressly excluded under clause 2.9 of the policy. Even though the exact cause of the fire remains unknown, the analysis of the claim\u2019s allegations revealed no other potential basis of covered liability. The result: no duty to defend for Intact.<\/p>\n

This decision serves as an important reminder that the duty to defend is not absolute. Yes, the allegations must be read broadly, but not fancifully to force coverage. It is only where there is genuine ambiguity or doubt that the duty to defend should be interpreted in favor of the insured. If the claim clearly falls within an exclusion, there is simply no possibility of coverage and no duty to defend the insured.<\/p>\n

If you would like a personalized analysis of how this decision may impact your policies or current files, our team is at your disposal!<\/p>\n","protected":false},"excerpt":{"rendered":"

The Qu\u00e9bec Court of Appeal has just issued an important decision for the insurance industry: Intact Insurance Company v. Hydromec Inc., 2025 QCCA 803, overturning a Wellington-type order that had been granted at first instance. A quick reminder: a Wellington motion allows an insured to compel their insurer to take up their defense as soon […]<\/p>\n","protected":false},"author":18,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[242,50],"tags":[],"class_list":["post-30691","post","type-post","status-publish","format-standard","hentry","category-insurance-law-en","category-bulletins-en"],"acf":[],"yoast_head":"\nIf it is Excluded, No Obligation to Defend Rules the Court of Appeal - RSS - Robinson Sheppard Shapiro<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.rsslex.com\/en\/bulletins-en\/if-it-is-excluded-no-obligation-to-defend-rules-the-appeal-court\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"If it is Excluded, No Obligation to Defend Rules the Court of Appeal - RSS - Robinson Sheppard Shapiro\" \/>\n<meta property=\"og:description\" content=\"The Qu\u00e9bec Court of Appeal has just issued an important decision for the insurance industry: Intact Insurance Company v. 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