AXA Insurance (Canada) v. Ani-Wall Concrete Forming Inc. et al., 2008 ONCA 563

• Judge: Doherty, Moldaver and Cronk, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: May 15, 2008
• Jurisdiction: Ontario
• Citations: 2008 ONCA 563;(2008), 239 O.A.C. 79 (CA)

AXA Ins. v. Ani-Wall Concrete (2008), 239 O.A.C. 79 (CA)

MLB headnote and full text

Temp. Cite: [2008] O.A.C. TBEd. JL.045

Axa Insurance (Canada) (applicant/appellant) v. Ani-Wall Concrete Forming Inc., Lorne Park Concrete Forming Inc., N.T.I. Insurance Brokers Limited, Jacob Assif, Liliane Assif, Exclusiv Homes, Castleside Construction Inc., Yorkwood Homes (Greenborough) Limited, Yorkwood Homes Brookside Limited, Trimark Homes Ltd., Ivy Capital Corporation, K.J. Beamish Construction Co., St. Marys Cement Inc. (Canada), Oxbow Carbon and Minerals Inc., the Toledo-Edison Co., First Energy Corp., Bay Shore Power Company (respondents/respondents)

(C47926; 2008 ONCA 563)

Indexed As: AXA Insurance (Canada) v. Ani-Wall Concrete Forming Inc. et al.

Ontario Court of Appeal

Doherty, Moldaver and Cronk, JJ.A.

July 18, 2008.

Summary:

A contractor contracted with several home builders to supply the concrete and construct the footings and foundation walls for a number of homes under construction. The contractor retained Dominion Concrete Group Limited to supply the concrete it needed to fulfill its contractual obligations. The concrete supplied by Dominion was defective. The builders had to repair, and in some cases remove and replace, the footings and foundation walls. The builders were also required to repair any further damage caused by or resulting from the corrective measures. The builders sued the contractor in contract and negligence, seeking damages for the consequential losses that they had sustained. The contractor's insurer acknowledged that the damage to the houses constituted "property damage" within the meaning of the policy, but asserted that the scope of its duty to indemnify the contractor was limited by three exclusionary provisions in the policy: the "Your Product" exclusion, the "Your Work" exclusion and a "Rip and Tear" exclusion. The insurer applied for a declaration defining and limiting the scope of its duty to indemnify the contractor.

The Ontario Superior Court, in a decision reported at [2007] O.T.C. Uned. L91, dismissed the application, finding that none of the three exclusions to the admitted coverage applied. The insurer appealed, relying on the "Your Work" exclusion to relieve it from having to indemnify the contractor for the costs of repairing, removing or replacing the defective footings and foundation walls. Failing that, the insurer relied on a portion of the "Rip and Tear" exclusion to relieve it from having to indemnify the contractor for the cost of removing defective footings and foundation walls, but not from the cost of repairing or replacing them. The insurer no longer relied on the "Your Product" exclusion or the "restoration expenses" segment of the "Rip and Tear" exclusion.

The Ontario Court of Appeal dismissed the appeal.

Courts - Topic 103

Stare decisis - Authority of judicial decisions - English, American and foreign authorities - American decisions - [See first Insurance - Topic 1856 ].

Insurance - Topic 1856

The insurance contract - Interpretation of contract - Exclusions - A contractor contracted with builders to supply the concrete and construct the footings and foundation walls for a number of homes under construction - The contractor retained Dominion Concrete Group to supply the concrete - Dominion supplied defective concrete - The builders sued the contractor - The contractor's insurer acknowledged that the damage to the houses constituted "property damage" under the policy, but asserted that the "Your Work" exclusion relieved it from having to indemnify the contractor for the costs of repairing, removing or replacing the defective footings and foundation walls - The exclusion did not apply if Dominion was a "subcontractor" - The insurer asserted that Dominion was a supplier, not a subcontractor - Dominion referred to the three criteria for a subcontractor set out in three American cases - The Ontario Court of Appeal refused to transpose the three criteria into the law where it was reluctant to carve them into stone - The court preferred to retain a degree of flexibility in the realm of insurance coverage, especially where coverage was acknowledged but the insurer sought to rely on exclusionary provisions to limit its scope - If the insurers wished to lay down hard and fast criteria, they could do so by defining "subcontractor" to their choosing - The insurer had chosen not to define the word - Unless and until it did so, the word was to be construed broadly and any ambiguity was to be resolved in the contractor's favour - While the case was close to the line, it could reasonably be said that the contractor subcontracted to Dominion its contractual obligation to supply concrete to the builders - In doing so, it triggered the "subcontractor" exception to the exclusion - Alternatively, if the American criteria were applied, the conclusion would be the same - See paragraphs 9 to 25.

Insurance - Topic 1856

The insurance contract - Interpretation of contract - Exclusions - A contractor contracted with builders to supply the concrete and construct the footings and foundation walls for a number of homes under construction - The contractor retained Dominion Concrete Group to supply the concrete - Dominion supplied defective concrete - The builders sued the contractor - The contractor's insurer acknowledged that the damage to the houses constituted "property damage" under the policy, but relied on a portion of the "Rip and Tear" exclusion to relieve it from having to indemnify the contractor for the cost of removing defective footings and foundation walls - The contractor asserted that when the definitions of "Property Damage" and "Ripping Tearing expenses" were inserted in the exclusion, the clause became incomprehensible - The insurer acknowledged that the clause was badly drafted and that when read literally, it was difficult to comprehend - However, the insurer asserted that when the clause was read purposefully, its meaning was plain and obvious: the insurer would not indemnify the contractor for the cost of tearing down and removing the footings and walls - The Ontario Court of Appeal stated that the insurer's proposed interpretation was not illogical - However, the insurer could not get out from under the wording it used, at least not without having the court rewrite the clause - That was not the court's function - The clause was incomprehensible and could not be relied upon by the insurer to limit coverage - See paragraphs 26 to 32.

Insurance - Topic 1861

The insurance contract - Interpretation of contract - Contra proferentem rule - Ambiguity construed against insurer - [See first Insurance - Topic 1856 ].

Insurance - Topic 1870

The insurance contract - Interpretation of contract - Broad construction in favour of coverage - [See first Insurance - Topic 1856 ].

Insurance - Topic 6877

Liability insurance - Business - Comprehensive policy - Construction contracts - Extent of coverage - [See both Insurance - Topic 1856 ].

Insurance - Topic 6901

Liability insurance - Business - Comprehensive policy - Exclusions - General - [See both Insurance - Topic 1856 ].

Insurance - Topic 6913

Liability insurance - Business - Comprehensive policy - Exclusions - Faulty workmanship, material or design - [See first Insurance - Topic 1856 ].

Words and Phrases

Subcontractor - The Ontario Court of Appeal considered what constituted a "subcontractor" as used in an commercial general liability insurance policy - See paragraphs 9 to 25.

Cases Noticed:

MacEvoy Co. v. United States (ex rel. Tomkins Co.) (1944), 322 U.S. 102, refd to. [para. 12].

Rich (F.D.) Co. v. United States (ex rel. Industrial Lumber Co.) (1974), 417 U.S. 116, refd to. [para. 12].

Wanzek Construction Inc. v. Employers Insurance of Wausau (2004), 679 N.W.2d 322 (Minn. Sup. Ct.), not appld. [para. 13].

Limbach Company LLC v. Zurich American Insurance Co. (2005), 396 F.3d 358 (4th Cir.), not appld. [para. 13].

National Union Fire Insurance Co. v. Structural Systems Technology Inc. (1992), 964 F.2d 759 (8th Cir.), affing. (1991), 756 F. Supp. 1232 (E.D. Mo.), not appld. [para. 13].

Bridgewood Building Corp. (Riverfield) v. Lombard General Insurance Co. of Canada (2006), 211 O.A.C. 4; 79 O.R.(3d) 494 (C.A.), leave to appeal refused (2006), 361 N.R. 393; 227 O.A.C. 400 (S.C.C.), consd. [para. 15].

Counsel:

Geoffrey D.E. Adair, Q.C. and Robert M. Ben, for the appellant;

Bruce A. Thomas, Q.C. and Thomas J. Donnelly, for the respondent Ani-Wall Concrete Forming Inc.;

Morris A. Chochla, for the respondent N.T.I. Insurance Brokers Limited;

Derek R. Freeman, for the respondents Jacob Assif, Exclusiv Homes, Yorkwood Homes (Greenborough) Limited, and Yorkwood Homes Brookside Limited;

Catherine P. Clark, for the respondents Castleside Construction Inc. and Trimark Homes Ltd.;

Glenn A. Smith, for the respondent St. Marys Cement Inc. (Canada);

Anna Casemore, for the respondent Oxbow Carbon and Minerals Inc.;

D.J.T. Mungovan, for the respondents Bay Shore Power Company and The Toledo-Edison Co.;

No one appearing for the respondents Liliane Assif and First Energy Corp.

This appeal was heard on May 15, 2008, by Doherty, Moldaver and Cronk, JJ.A., of the Ontario Court of Appeal. Moldaver, J.A., released the following judgment for the court on July 18, 2008.