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Effect of exclusion clauses and burden of proof

 
This book was written by Michael Dew, a Vancouver lawyer who practices civil litigation, including representing persons who have been denied coverage under property insurance policies, or liability insurance policies. If you have been denied insurance coverage and require assistance with making a claim against your insurer call Michael at 604 895 3160.
 
 
As noted above, exclusion clauses reduce the scope of coverage by removing from coverage certain risks that were within the coverage specified by the coverage provisions:
 
Even if the claims fall within the initial grant of coverage… then coverage may still be excluded if the insurance company shows that an exclusion clause applies.
(Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33 at para. 12).
 
As explained above when discussing that the order of interpretation of insurance contracts (i.e. coverage provisions, exclusions, exceptions), exclusions do not create coverage. However, because contracts should be considered as a whole and provisions should read harmoniously where possible, exclusion clauses can inform the meaning of coverage provisions: 
 
Exclusions do not create coverage - they preclude coverage when the claim otherwise falls within the initial grant of coverage.  Exclusions, should, however, be read in light of the initial grant of coverage.
Lombard argues that the exclusion clauses do not create coverage.  This is true.  But reading the insurance policy as a whole is not the same as conjuring up coverage when there was none in the first place.  Consistency with the exclusion clauses is a further indicator that the plain meaning of “property damage” is the definition intended by the parties.
 
(Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33 at para. 27 and 37).
 
Once an insured establishes that the claim is within the scope of the coverage provision it then is up to the insurer to prove that an exclusion applies:
 
Having found that the claims in the pleadings fall within the initial grant of coverage, the onus now shifts to Lombard to show that coverage is precluded by an exclusion clause.  Because the threshold for the duty to defend is only the possibility of coverage, Lombard must show that an exclusion clearly and unambiguously excludes coverage.
(Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33 at para. 51).