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August 1, 2012

Extrinsic Evidence in Duty to Defend Applications

The primary issue in this duty to defend application was the admissibility of extrinsic evidence regarding a lease. The applicant was the owner of a plaza. It was sued after a worker was electrocuted while installing a sign. The deceased had been hired to install the sign on behalf of a tenant of the plaza, Design Depot. Under the lease between 1540039 and Design Depot, the landlord was added as an additional insured. 1540039 brought an application seeking to be defended by Design Depot's insurer. It sought to introduce evidence that the deceased was hired by Design Depot.

The application judge refused to admit the evidence and the Court of Appeal dismissed the appeal.  It cited the Supreme Court decision of Monenco that held that extrinsic evidence will rarely be allowed in duty to defend applications. In addition, the evidence did not assist in any event as the allegations against 1540039 related to its ownership of the plaza and the lease agreement did not extend coverage in the circumstances.

The door is still open to allow extrinsic evidence in certain cases, but in general the primary focus on duty to defend applications will be on the policy itself.

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