How do courts interpret exclusion clauses when an insurer denies coverage in Ontario?

Ontario courts generally interpret insurance policies in two steps: first, whether your loss falls within the broad grant of coverage the policy provides, which you have the burden of showing; and second, whether an exclusion clause the insurer relies on actually applies to take that loss back out of coverage, which is the insurer's burden to prove. Because the insurer wrote the policy, courts interpret ambiguous exclusion wording narrowly and against the insurer - a principle often summarized as reading unclear terms in favour of the insured rather than the party who drafted them.

This doesn't mean exclusion clauses are ignored - a clearly worded exclusion that plainly covers the situation will generally be enforced as written. But where the wording is genuinely capable of more than one reasonable meaning, or where the insurer is trying to stretch an exclusion beyond its natural reading to avoid an otherwise-covered loss, courts tend to favour the interpretation that provides coverage. Understanding this framework matters practically: a denial based on an exclusion isn't automatically the final word, especially if the exclusion's wording is less clear-cut than the denial letter suggests.