The policies require
Justice Rothstein went on to declare that an insurer is required to defend a claim where the facts alleged in the pleadings, if proven to be true, would require the insurer to indemnify the insured to the claim. It is irrelevant whether the allegations in the pleadings can be proven in evidence. What is required is the mere possibility that the claim falls within the insurance policy. In examining the pleadings to determine whether the claim falls within the scope of coverage, the parties to the insurance contract should not be bound by the labels selected by the plaintiff but by the true nature or substance of the claim.
Justice Rothstein, for the Supreme Court of Canada, reiterated some significant principles of insurance policy interpretation, including that when the language of the policy in unambiguous, the court should give effect to the clear language and should read the contract as a whole. Where the language of the insurance policy is ambiguous, courts should prefer interpretations that are consistent with the reasonable expectations of the parties and courts should avoid interpretations that would give rise to an unrealistic result. Where these rules of construction failed to resolve an ambiguity, courts will construe the policy contra proferentem. Subsumed by the contra proferentem rule is that coverage provisions should be interpreted broadly and exclusion clauses narrowly.
Progressive Homes Ltd. v. Lombard General Insurance Company of Canada, 2010 S.C.C. 33.