It was a relatively busy year in Canadian courts for insurers. While all was relatively quiet on the Supreme Court of Canada front, with the exception of release of the much-anticipated decision in Progressive Homes v. Lombard, the Ontario Court of Appeal had a particularly busy year, with no less than six major insurance coverage decisions released. Without further adieu, here are my top 10 . . . in no particular order.
Progressive Homes v. Lombard Insurance Co. of Canada (Supreme Court of Canada, September, 2010)
Progressive, a developer, was accused of faulty construction when defects in one part of a condominium project built for it by subcontractors caused damage to other parts of the building. Progressive was insured under a CGL policy issued by Lombard. Lombard denied coverage, arguing that the policy excluded coverage for the insured’s faulty work. Lombard succeeded all the way to the B.C. Court of Appeal, but ultimately failed in the Supreme Court of Canada. The court held that CGL policies cover “property damage” caused by an “accident.” The plain and ordinary meaning of property damage included damage to any tangible property, including the work of the insured. The term accident means, simply, any event which is neither expected nor intended. The pleadings against Progressive alleged property damage, including leaking water and deterioration of building components. The pleadings also alleged an accident, as there was no reference to any intentional conduct by Progressive. The damage also resulted from “continuous or repeated exposure to conditions,” which squarely fit within the policy. Finally, the various policies’ exclusion clauses did not apply as there was coverage for damage to work completed by a subcontractor or resulting from work performed by a subcontractor, and possibly even for damage resulting from the particular part of Progressive’s work that was defective.
This decision substantially broadens the scope of coverage available to contractors under CGL policies for their own work.
Lewis v. Economical Insurance Group (Ontario Court of Appeal, July, 2010) – Unidentified Automobile Coverage
The plaintiff was injured when she struck her head on a steel pole protruding from a parked truck. Since the truck could not be identified, the plaintiff sued her own insurer under the OPCF 44R Family Protection Endorsement on the basis that she was “hit” or “struck” by the unidentified automobile. The Court of Appeal found in favour of coverage, holding that the words “struck by” or “hit by” must be interpreted in context of the dominant purpose of the OPCF 44R coverage, which is to compensate those injured in accidents involving unidentified automobiles. The words struck by or hit by generally connote simply “coming into contact with” the vehicle.
Poplawski v. McGrimmon (Ontario Court of Appeal, October, 2010) – Homeowner’s Liability Coverage
The insureds constructed a new home and lived in it for several years. Their homeowner’s insurance included third party liability coverage. The insureds sold the home, and the purchasers subsequently discovered numerous defects and deficiencies with the property and sued the insureds for misrepresentation/material concealment of those defects. The insureds sought a defence from their homeowner’s insurer. The insurer conceded that an “occurrence” took place during the “policy period”, but argued that the exclusion for “claims made against you arising from damage to property you own . . .” applied. Both the motion judge and the Ontario Court of Appeal found in favour of the insured. Based on its language, the exclusion applied only to property owned by the insured at the date of loss, as it was written in the present tense only. As the insureds no longer owned the home when the damage was suffered by the purchasers, the exclusion did not apply.
Insurers need to be very aware of this decision and may wish to make appropriate changes to their own policy language to negate its effect, as, in my view, the Court of Appeal found coverage for a risk that most insurers would never have intended to cover.
M. v. Meloche Monnex (Ontario Court of Appeal, June, 2010) – Homeowner’s Liability Coverage
David Skidmore sued B.M. following a physical altercation. While the claim alleged assault, M. argued in his statement of defence that he acted in self-defence and sought coverage from his homeowner’s insurer. The Court of Appeal refused coverage, holding that, on any reasonable reading of claim, the claim was strictly one for the intentional torts of assault and battery. As there was no possibility of indemnity, there was no duty to defend. The court reasoned that if Skidmore succeeded in the action, he would have shown it to be an assault, which was excluded. If the claim failed, there was nothing to indemnify M. for, and therefore no insured claim. The court specifically disagreed with Glassford v. TD Insurance and Hawkes v. TD Insurance, prior Ontario trial decisions in which judges had found in favour of coverage for similar allegations. This decision is good news for insurers. While both Glassford and Hawkes had caused insurers concern, the Ontario Court of Appeal has now refused the possibility of coverage for physical assaults, regardless of the defence plead.
Rougoor v. Co-Operators (Ontario Court of Appeal, January, 2010) – Accident Benefits
The insured was covered under a standard Ontario OAP 1 for his off-road dirt bike. He was injured in Florida while riding an uninsured dirt bike of the same make and model as the insured bike and claimed accident benefits. The insurer denied the claim, taking the position that the dirt bike was not an “automobile” as defined in the policy. While the application judge agreed with The Co-Operator’s arguments, the Court of Appeal disagreed. Since the insured’s own virtually identical dirt bike was considered an automobile in Ontario, the policy must be interpreted consistently to hold that the American dirt bike qualified as an automobile, and coverage was available for any other automobile driven by the insured in Canada or the U.S.
Buchanan v. Wawanesa Mutual Insurance Co. (British Columbia Court of Appeal, June, 2010) – Homeowner’s Property Insurance
The insureds noticed large cracks in their retaining wall, concrete planter and driveway resulting from a leaking city water valve under the property. The insureds sought coverage for the damage under their homeowners’ policy. The insurer denied, relying on the policy’s exclusion for damage resulting from “settling, cracking and moving.” The Court of Appeal found in favour of the insured, as it felt that a prospective insured reading the policy would reasonably have assumed that there was coverage for any damage resulting from the escape of water from a public water main.
Whether on the basis of policy language itself, or the notion that the proximate cause of the loss, “escape of water . . . from a public water main” was covered, the court’s decision is sound, as the intent of the policy would seem to have been to exclude cracking and settling caused by natural forces only.
Concord Pacific Group Inc. v. Temple Insurance Co. (British Columbia Court of Appeal, June, 2010) – Builder’s Risk
Temple issued builder’s risk coverage to Concord Pacific for a condominium development. The coverage included construction delays. The expiry date of the coverage was listed as Apr. 15, 2002, but, due to clerical error, the policy failed to specify a scheduled date of completion. The project was delayed in construction, and the insured claimed under the policy. The insurer argued that there was no delay as the scheduled date of completion was Apr. 15, 2002, and sought rectification of the policy. The insured argued the completion date was Nov. 15, 2001. The court initially held in favour of the insured, though the judge accepted the evidenc
e of the insured’s broker that it agreed that the date of completion was supposed to be Apr. 15, 2002. The Court of Appeal overturned the decision, finding that the trial judge erred in considering the intention of the insured as he had already concluded that the broker intended coverage to end on Apr. 15, 2002, and the contract was made between the broker and the insurer.
This decision emphasizes that the broker is the insured’s representative in obtaining coverage, and that the broker’s representations/intentions are those that matter. If the broker errs in placing the coverage, the issue is between the insured and its broker – not between the insured and the insurer.
Engle Estate v. Aviva Insurance Co. of Canada (Alberta Court of Appeal, January, 2010) – All Risks Property
The insured had all risk coverage which excluded loss or damage caused directly or indirectly by settling, expansion, contraction, moving, shifting or cracking. When cracks developed in the floors, walls and ceilings of the insured building caused by construction next door, the insured sought coverage. The insurer denied. The court held in favour of the insured, holding that the exclusion applied only to settlement-type damages caused by natural forces.
Minox Equities v. Sovereign General Insurance (Manitoba Court of Appeal, June, 2010) – All Risks Property
Minox owned a condominium complex insured by Sovereign. For more than 20 years, units experienced humidity problems and mould. Minox filed two proofs of loss in 2002 relating to damage by mould, and the costs of repairing it. Sovereign denied on the basis of the policy’s exclusions for seepage, rain or dampness. The Court of Appeal upheld the denial as the policy excluded any losses resulting “directly or indirectly” from seepage, rain or dampness. The insurer was not required to prove that such events would always cause loss or damage – only that those events caused or contributed to the loss.
Beaverdam Pools v. Wawanesa Mutual Insurance Co. (New Brunswick Court of Appeal, January, 2010) – Commercial General Liability
The plaintiff alleged that a pool installed by Beaverdam contained defects, including cracked concrete pads, and further, that the pool damaged his adjacent deck. Beaverdam sought a defence and indemnity from Wawanesa. Wawanesa denied coverage on the grounds that the pool was the insured’s “work” or “product” and therefore excluded. Wawanesa argued that the mere fact that the insured’s deck needed to be replaced did not mean that it had suffered “property damage” caused by an “occurrence.” Wawanesa’s arguments were rejected. The deck, which was not constructed by Beaverdam, qualified as third party property damage, and the duty to defend was engaged.
This decision is well reasoned. One must also question whether the damage to the pool itself is covered on the basis of Progressive Homes.
Christopher Dunn is a partner with Dutton Brock, LLP and his practice involves representing and providing insurance coverage advice to those in the insurance industry.