Court and Case Overview:
The case was heard in the Court of Appeal for British Columbia. Honeywell International Inc. (Appellant) challenged XL Insurance Company Ltd. (Respondent) over a wrap-up liability insurance policy. The issue stemmed from a dispute about whether Honeywell qualified as an "insured" and was entitled to indemnification for defense costs related to third-party claims.

Legal Arguments and Issues:
Honeywell argued that it was covered as an "insured subcontractor" under the policy since it manufactured desiccant used in defective insulated glass units (IGUs). The trial court previously ruled against Honeywell, stating it was a mere supplier and did not meet the definition of an insured under the policy. Honeywell contended this interpretation was overly restrictive and inconsistent with policy language. XL Insurance countered, claiming Honeywell's role was excluded as it performed no on-site work.

Judgment and Legal Reasoning:
The Court of Appeal allowed Honeywell's appeal, ruling that its manufacturing role brought it within the policy's definition of an insured subcontractor. The judgment emphasized that off-site manufacturers could qualify under the policy when performing functions beyond mere material supply.

Costs and Award:
The court remitted the case to the trial court for adjudication of XL’s additional defenses (e.g., warranty exclusions). The judgment awarded Honeywell indemnification for its defense costs, though the total amount of costs was not specified in the judgment.

Significance:
The ruling clarified insurance policy interpretation principles, emphasizing textual analysis over general assumptions about policy intent.