Précis: The Ontario Superior Court held that a liability insurer had no duty to defend its insured when the policy contains no such contractual obligation and no duty to indemnify when the insured was driving the vessel under the influence of alcohol and therefore illegally.
Facts:The insured crashed his motor boat into a dock killing himself and injuring a passenger. At the time, the insured had a blood/alcohol level of more than 3 times the legal limit. The injured passenger sued the insured’s estate and the estate sought defence and indemnity coverage from the insurer. The insurer refused on the grounds that the policy contained no “duty to defend” clause and that there was no coverage for illegal operation of the vessel. The estate then brought this application for a declaration the insurer had a duty to both defend and indemnify.
Decision: Application dismissed.
Held: The policy in issue does not contain a duty to defend clause and, in the absence of such a clause, there is no duty on the part of an insurer to defend. A duty to defend cannot be implied from a duty to indemnify. The clause in the policy relied upon by the estate provides that the insurer “will settle or defend, as we consider appropriate, any claim or suit asking for these damages”. This wording does not oblige the insurer to defend every action but merely gives the insurer the discretion to defend where it determines, acting reasonably, that it is appropriate to do so.
With respect to the duty to indemnify, the policy provides the insurer is not liable if the vessel is operated illegally. It is an offence under the Criminal Coe to operate a vessel with a blood/alcohol level of more than 0.08. The insured’s blood/alcohol level was well above that limit and no insured would reasonably believe that there would be insurance coverage in the circumstances. There is probably no better example of illegal operation of a vessel.