Alie v. Bertrand & Fr, (2002) 167 O.A.C. 20 (CA)

• Judge: Doherty, Charron and Feldman, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: December 06, 2002
• Jurisdiction: Ontario
• Citations: (2002), 167 O.A.C. 20 (CA);2002 CanLII 31835 (NS CA);2002 CanLII 31835 (ON CA);62 OR (3d) 345;222 DLR (4th) 687;[2002] OJ No 4697 (QL);119 ACWS (3d) 129;167 OAC 20;[2003] ILR 1;26 CLR (3d) 5

Alie v. Bertrand & Frère Constr. Co. (2002), 167 O.A.C. 20 (CA)

MLB headnote and full text

Temp. Cite: [2002] O.A.C. TBEd. DE.021

Bernard Alie and Others (plaintiffs) v. Bertrand & Frère Construction Company Limited, LaFarge Canada Inc. and Others (defendants/Lafarge Canada Inc., appellant) and Boreal Insurance Inc., Kansa General International Insurance Company Ltd., Scottish & York Insurance Co. Limited, Chubb Insurance Company of Canada, American Home Insurance Company, Guardian Insurance Company of Canada, Cigna Insurance Company of Canada, National Union Fire Insurance Company of Pittsburgh, P.A., First State Insurance Company, Westchester Fire Insurance Company, Reliance Insurance Company, Hartford Casualty Insurance Company, Harbor Insurance Company, Pacific Employers Insurance Company, Federal Insurance Company, Royal Indemnity Company and California Union Insurance Company (third or subsequent parties/respondents)

(C34246; C34251; C34253; C34282; C34290; C34293; C34316; C34336; C35599)

Indexed As: Alie et al. v. Bertrand & Frère Construction Co. et al.

Ontario Court of Appeal

Doherty, Charron and Feldman, JJ.A.

December 6, 2002.

Summary:

Bertrand used "fly ash" supplied by Lafarge in the cement mix it used in 140 homes from 1986 to 1992. The "fly ash" resulted in a defective product, requiring replacement of all foundations. Bertrand (20%) and Lafarge (80%) were found negligent and liable in damages in an action commenced by 137 of the homeowners. That judgment was affirmed on appeal and leave to appeal to the Supreme Court of Canada was denied. Bertrand had third partied five of its insurers for indemnification. Lafarge had third partied 18 of its insurers. Bertrand's five insurers were liable to indemnify Bertrand for the damages it owed to the plaintiffs. The primary insurer was liable to its policy limits and the four excess insurers were liable for any balance owing. Five of Lafarge's insurers were found liable to indemnify Lafarge on a pro rata basis for damages it was obligated to pay. Additionally, those five insurers (plus three others) were liable for Lafarge's reasonable defence costs and most of the costs Lafarge was ordered to pay Bertrand and the plaintiffs in the main action. Nine appeals and three cross-appeals followed respecting the insurance coverage and costs issues. Particularly, the issues were "which, if any, of the insurers were obliged to indemnify Bertrand or Lafarge for damages suffered by the plaintiffs"; "which, if any, of the Lafarge insurers were obligated to contribute to Lafarge's defence costs, and in what proportion should they be required to contribute to those costs"; and "which, if any, of the Lafarge insurers were obligated to pay the costs of the plaintiffs or Bertrand for which Lafarge had been held liable in the main action and in what proportion should they be obliged to contribute to those costs".

The Ontario Court of Appeal affirmed the trial judge's decision with the exception of finding that one excess insurer (Guardian) was not liable to contribute to Lafarge's defence costs for the 1987 policy period.

Estoppel - Topic 386

Estoppel by record (res judicata) - Res judicata as a bar to subsequent proceedings - Issues decided in prior proceedings - The Ontario Court of Appeal stated that issue estoppel applied only where "(1) the same question has been decided; (2) the judicial decision that is said to create the estoppel is final; (3) the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies" - See paragraph 149.

Insurance - Topic 725

Insurers - Duties - Duty to defend - The Ontario Court of Appeal stated that "the duty to defend is a separate obligation from the duty to indemnify. A duty to indemnify does not automatically impose a duty to defend. Similarly, a duty to defend may exist where in the end there is no duty to indemnify. ... If the insurer is potentially liable to indemnify under the terms of the policy, the insurer will be obligated to defend. ... We see no reason ... to depart from the presumption in favour of a prospective determination of a duty to defend based on the nature of the claims made where it is an excess insurer that has undertaken that obligation. It is always open to the excess insurer to alter the nature of the duty to defend by including the appropriate express language in the policy." - See paragraphs 177 to 184.

Insurance - Topic 725.1

Insurers - Duties - Costs of defence and other expenses - The insured third partied 18 of its insurers - All denied coverage and refused to defend the plaintiffs' claims against the insured - The insured sought to recover its defence costs - The trial judge apportioned defence costs between two primary insurers and six excess insurers (who provided coverage up to the limit of $10,000,000) - Excess insurers who provided coverage beyond the $10,000,000 limit were not required to contribute - The Ontario Court of Appeal affirmed the decision, except for finding that one excess insurer (Guardian) had no duty to contribute to defence costs for the 1987 policy period - The excess insurers had a duty to defend where there was a reasonable perception that the claims would reach the level of insurance provided by them - The trial judge did not err in determining the insurers' respective obligations to fund the insured's defence and in proportioning defence costs between them, including liability for and apportionment of the insured's third party costs - See paragraphs 162 to 264.

Insurance - Topic 2442

Applicant's duty of disclosure - Materiality - Facts known to applicant - Two comprehensive general liability insurers submitted that the policies were void because of the nondisclosure by the insured of facts material to the risk - The trial judge ruled that a reasonable person in the insured's position would not have disclosed the facts to prospective insurers - The Ontario Court of Appeal held that the trial judge did not misapprehend the evidence and did not err in his conclusion - See paragraphs 83 to 90.

Insurance - Topic 6864

Liability insurance - Business - Comprehensive policy - Damage to property - What constitutes - Concrete foundations in 137 homes required replacement because the ready mix concrete supplied by Bertrand, using the "fly ash" supplied by Lafarge resulted in deterioration - Bertrand and Lafarge were negligent and liable to the homeowners - Bertrand and Lafarge each had multiple comprehensive general liability policies that covered "property damage" to third parties, but excluded the cost of repairing or replacing the insureds' own defective work - The trial judge held that the damage was "property damage", and not excluded as damage solely to Bertrand's product itself - The Ontario Court of Appeal affirmed coverage - The damage to the foundations and structural integrity of the homes, resulting from the incorporation of Bertrand's concrete, constituted "property damage" - The court rejected the submission that this major structural defect was but a threat of future harm and not "physical injury" or "injury" to the homeowner's properties - See paragraphs 23 to 46.

Insurance - Topic 6865

Liability insurance - Business - Comprehensive policy - Extent of coverage - Time of loss or damage - Comprehensive general liability policies were triggered by an occurrence resulting in property damages suffered during the policy period - Homeowners suffered property damage as a result of the introduction of a defective substance into the cement mix used in their foundations from 1986 (first foundation poured) until 1992 (testing established with certainty that foundations needed replaced) - At issue was when the damage occurred - The trial judge rejected the exposure and manifestation theories, choosing to apply a combination of the injury in fact and triple trigger theories where the property damage was continuous and progressive over the 1986-1992 period - The Ontario Court of Appeal agreed - Property damage was continuous and progressive, caused by exposure to a defective substance which manifested itself while damage was progressing - Damage "occurred" from the first exposure to the date the extent of the damage could reasonably have been discovered - Accordingly, property damage was apportioned on a pro rata basis over the 1986-1992 policy periods and all insurers providing coverage during that period were called to respond to the homeowners' claims - See paragraphs 91 to 143.

Insurance - Topic 6870

Liability insurance - Business - Comprehensive policy - "Occurrence" - What constitutes - Concrete foundations in 137 homes required replacement because the ready mix concrete supplied by Bertrand, using the "fly ash" supplied by Lafarge resulted in deterioration - Bertrand and Lafarge were negligent and liable to the homeowners - Bertrand and Lafarge each had multiple comprehensive general liability policies that covered "property damage" to third parties - A condition precedent to coverage was an "occurrence", defined under the policies as "an accident including continuous or repeated exposures to conditions neither expected nor intended by the insured" - The Ontario Court of Appeal stated that "having correctly found ... that the loss to the [homeowners] went beyond a simple failure of [Bertrand's] product, and that the damage to their property was caused by the defective product, the trial judge was correct in finding that the loss resulted from an occurrence" - See paragraphs 58 to 63.

Insurance - Topic 6910

Liability insurance - Business - Comprehensive policy - Exclusions - Property damage to product arising out of product - [See Insurance - Topic 6864 ].

Cases Noticed:

Bertrand & Frère Construction Co. et al. v. Ontario New Home Warranty Program, [2001] O.A.C. Uned. 137; 30 C.C.L.I.(3d) 159 (C.A.), refd to. [para. 18].

Winnipeg Condominium Corp. No. 36 v. Bird Construction Co. et al., [1995] 1 S.C.R. 85; 176 N.R. 321; 100 Man.R.(2d) 241; 91 W.A.C. 241, refd to. [para. 26].

Privest Properties Ltd. v. Foundation Co. of Canada Ltd. (1992), 57 B.C.L.R.(2d) 88 (S.C.), refd to. [para. 27].

Bird Construction Co. v. Allstate Insurance Co. of Canada (1996), 110 Man.R.(2d) 305; 118 W.A.C. 305; 36 C.C.L.I.(2d) 29 (C.A.), refd to. [para. 33].

Carleton Iron Works Ltd. v. Ellis Don Construction Ltd., [1996] 1 I.L.R. I-3373 (Ont. Gen. Div.), refd to. [para. 33].

Ontario v. Fatehi, [1984] 2 S.C.R. 536; 56 N.R. 62; 6 O.A.C. 270, refd to. [para. 33].

Gulf Plastics Ltd. v. Cornhill Insurance Co., [1990] I.L.R. 1-2644 (B.C.S.C.), affd. (1991), 3 C.C.L.I.(2d) 203 (B.C.C.A.), refd to. [para. 33].

Carwald Concrete and Gravel Co. v. General Security Insurance Co. of Canada et al. (1985), 70 A.R. 340; 17 C.C.L.I.(2d) 241 (C.A.), refd to. [para. 33].

Fellowes, McNeil v. Kansa General International Insurance Co. et al. (2000), 138 O.A.C. 28; 22 C.C.L.I.(3d) 1 (C.A.), refd to. [para. 84].

Housen v. Nikolaisen et al. (2002), 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1 (S.C.C.), refd to. [para. 84].

Prudential-LMI Commercial Insurance v. Superior Court of San Diego County (1990), 274 Cal. Rptr. 387, refd to. [para. 102].

Montrose Chemical Corp. of California v. Admiral Insurance Co., 42 Cal. Rptr.2d 324, refd to. [para. 102].

University of Saskatchewan v. Fireman's Fund Insurance Co. of Canada et al., [1998] 5 W.W.R. 276; 158 Sask.R. 223; 153 W.A.C. 223 (C.A.), refd to. [para. 103].

Zurich Insurance Co. v. Trans-America Insurance Co. (1994), 34 Cal. Rptr.2d 913 (Cal. App. 4th Dist.), refd to. [para. 124].

Young Women's Christian Association of the National Capital Area Inc. v. Allstate Insurance Co. et al. (2002), 275 F.3d 1145 (C.A.D.C.), refd to. [para. 126].

Home Insurance Co. v. Landmark Co. (1988), 293 Cal. Rptr. 277 (Cal. App. 4th Dist.), refd to. [para. 127].

Allstate du Canada Cie d'Assurance v. Assurance Royale du Canada, [1994] R.J.Q. 2045 (C.S.), affd. [1999] R.J.Q. 2827 (C.A.), refd to. [para. 132].

United States Fidelity and Guarantee Co. v. American Insurance Co. (1976), 345 N.E.2d 267 (Ind. App. 2nd Dist.), refd to. [para. 134].

Danyluk v. Ainsworth Technologies Inc. et al., [2001] 2 S.C.R. 460; 272 N.R. 1; 149 O.A.C. 1, refd to. [para. 148].

McIntosh v. Parent, [1924] 4 D.L.R. 420 (Ont. C.A.), refd to. [para. 148].

Angle v. Minister of National Revenue, [1975] 2 S.C.R. 248; 2 N.R. 397, refd to. [para. 149].

Broadhurst & Ball v. American Home Assurance Co. (1990), 42 O.A.C. 161; 1 O.R.(3d) 235 (C.A.), refd to. [para. 169].

Foundation Co. of Canada v. Canadian Indemnity Co. and Simcoe & Erie General Insurance Co. (1979), 33 N.S.R.(2d) 310; 57 A.P.R. 310; 103 D.L.R.(3d) 485 (C.A.), refd to. [para. 174].

Nichols v. American Home Assurance Co. et al., [1990] 1 S.C.R. 801; 107 N.R. 321; 39 O.A.C. 63, refd to. [para. 177].

Scalera v. Lloyd's of London, [2000] 1 S.C.R. 551; 253 N.R. 1; 135 B.C.A.C. 161; 221 W.A.C. 161, refd to. [para. 180].

Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252; 147 N.R. 44; 83 Man.R.(2d) 81; 36 W.A.C. 81, refd to. [para. 184].

Derkson et al. v. 539938 Ontario Ltd. et al. (2000), 277 N.R. 82; 153 O.A.C. 310; 205 D.L.R.(4th) 1 (S.C.C.), refd to. [para. 184].

Trenton Cold Storage Ltd. v. St. Paul Fire & Marine Insurance Co. (2001), 146 O.A.C. 348 (C.A.), refd to. [para. 184].

Wisebrod and Mandel v. American Home Assurance Co. (1997), 104 O.A.C. 229; 35 O.R.(3d) 733 (C.A.), refd to. [para. 184].

Azco Hennes Sanco Ltd. v. Wisconsin Insurance Security Fund (1993), 502 N.W.2d 667 (Wis. App.), refd to. [para. 196].

Pacific Indemnity Co. v. Firemen's Fund Insurance Co. (1989), 223 Cal. Rptr. 30 (Cal. App. 2nd Dist.), refd to. [para. 218].

Interstate Fire & Casualty Co. v. Stuntman Inc. (1988), 861 F.2d 203 (9th Cir.), refd to. [para. 218].

Chilton v. Co-operators General Insurance Co. (1997), 97 O.A.C. 369; 143 D.L.R.(4th) 647 (C.A.), refd to. [para. 219].

Darling v. Kay (1993), 15 O.R.(3d) 299 (Gen. Div.), refd to. [para. 267].

S & A Strasser Ltd. v. Richmond Hill (Town) et al. (1990), 45 O.A.C. 334; 1 O.R.(3d) 243 (C.A.), refd to. [para. 273].

Hock v. Hospital for Sick Children et al. (1998), 110 O.A.C. 268; 79 A.C.W.S.(3d) 464 (C.A.), refd to. [para. 276].

Mortimer et al. v. Cameron et al. (1994), 68 O.A.C. 332; 17 O.R.(3d) 1 (C.A.), refd to. [para. 276].

Authors and Works Noticed:

Fridman, G.H.L., The Law of Contract in Canada (4th Ed. 1999), pp. 514 to 516 [para. 219].

Hilliker, G., Liability Insurance Law in Canada (2nd Ed. 1996), p. 155 [para. 140].

Counsel:

Glenn A. Smith and Eleni Maroudas, for Lafarge Canada Inc. and Cigna Ins. Co.;

John S. McNeil, Q.C., for Boreal Ins. Co.;

Don H. Rogers, Q.C., and Allyn Abbott, for Kansa General Int'l. Ins. Co.;

Geoffrey D.E. Adair, Q.C., for Scottish & York Ins., American Home Ins. and Guardian Ins. Co.

Jamieson Halfnight, for Chubb Ins. Co.;

Robert J. Clayton, for National Union Fire Ins.;

Richard D. McLean and D.G. Martin, Q.C., for First State Ins. Co. and Hartford Ins. Co.;

Ruth Henneberry, for Westchester Fire Ins. Co.;

Crawford MacIntyre, Q.C., for Reliance Ins. Co.;

Graeme Mew, for Royal Indemnity;

Crystal O'Donnell, for Pacific Employers Ins. Co. and California Union Ins. Co.;

Marina Stefanovic, for Harbor Ins. Co.;

P. Donald Rasmussen, for Bertrand & Frère Construction Co. Ltd.;

Garth MacDonald, for Chubb Ins. Co. of Canada;

Vernol I. Rogers and Thomas J. Donnelly, for Guardian Ins. Co.;

Wayne B. Spooner and Melanie L. Griffin, for Canadian General Ins. Co.;

Brian Elkin, for General Accident Assurance Co.;

Keith N. Batten and Donald L. MacDonald, Q.C., for Royal Insurance Co.

These appeals and cross-appeals were heard on June 24-27, 2002, before Doherty, Charron and Feldman, JJ.A., of the Ontario Court of Appeal.

The judgment of the Court of Appeal was delivered by the Court and released on December 6, 2002.