Day v. Wood, [2008] O.J. No. 3296 is an interesting insurance coverage decision from the Superior Court. The insured was an owner of a property which was rented to a third party. The third party moved out after a month and complained of health problems due to the exposure to mould and yeast, as well as property damage due to a flood in the premises. The third party sued the insured for these damages. The insured sought coverage under a rental dwelling policy from his insurer, but the insurer denied coverage on the basis of a mould exclusion. The insured brought an application against the insurer and argued that since 3 out of the 4 theories of liability against him were covered under the policy, a duty to defend was owed. The mould exclusion specifically excluded claims arising from any losses or claims arising out of fungus “regardless of whether other causes acted concurrently or in any sequence with the fungus”.  Thus, since mould was a concurrent or contributing factor, under the wording of the policy, if another cause acted concurrently with the mould, there was no coverage. However, the motions judge rejected the insurer’s argument, and found that a duty to defend was indeed owed.

Key to the judge’s decision was the fact that it was possible that the damages arose solely from non-mould related circumstances (e.g. excessive moisture levels from flooding). Thus, though it may be that mould was a contributing factor, it was also possible that it was a non-factor. The continuing lesson from this line of cases is that the duty to defend will be interpreted more broadly than the duty to indemnify. Further, claimants would be wise to advance multiple theories of liability in order to negate the application of the mould exclusion. Insurers, in defending these insurance applications, may want to consider the availability of extrinsic evidence in determining the true nature of the allegations in the claim.

Jim Davidson