Bulldog Bag Ltd. v. AXA Pacific Insurance Co., 2011 BCCA 178

• Judge: Ryan, Newbury and D. Smith, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: March 18, 2011
• Jurisdiction: British Columbia
• Citations: 2011 BCCA 178;(2011), 303 B.C.A.C. 220 (CA)

Bulldog Bag Ltd. v. AXA Pacific Ins. (2011), 303 B.C.A.C. 220 (CA);

    512 W.A.C. 220

MLB headnote and full text

Temp. Cite: [2011] B.C.A.C. TBEd. AP.044

Bulldog Bag Ltd. (appellant/plaintiff/respondent on cross-appeal) v. AXA Pacific Insurance Company (respondent/defendant/appellant on cross-appeal)

(CA038054; 2011 BCCA 178)

Indexed As: Bulldog Bag Ltd. v. AXA Pacific Insurance Co.

British Columbia Court of Appeal

Ryan, Newbury and D. Smith, JJ.A.

April 12, 2011.

Summary:

The insured, Bulldog Bag Ltd., manufactured plastic and paper packaging. One of its customers was Sure-Gro Inc. For the 2008 season, because of defective packaging, Sure-Gro could not sell its packaged manure and soil products to Canadian Tire, or to consumers or to buyers in the discount market. Bulldog manufactured new packaging for Sure-Gro in time for Sure-Gro to meet its contractual commitments to Canadian Tire. Bulldog settled and paid Sure-Gro's claim and reported the loss to its insurer, AXA Pacific Insurance Co., under Bulldog's commercial and general liability policy. AXA denied the claim. Bulldog sued AXA for the sum of $732,420.60.

The British Columbia Supreme Court, in a decision reported at [2010] B.C.T.C. Uned. 419, dismissed Bulldog's claim. The plastic packaging had not been incorporated into Sure-Gro's product. The "own work/products" exclusion clause (clause 6(a)) applied to exclude coverage for property damage to the plastic packaging. Except for the 10% of product that was unsalvageable, Bulldog was not entitled to indemnification for the costs of replacing its defective bags. Bulldog appealed. AXA cross-appealed.

The British Columbia Court of Appeal allowed the appeal and dismissed the cross-appeal. AXA was required to indemnify Bulldog for the sum of $732,420.60.

Insurance - Topic 6864

Liability insurance - Business - Comprehensive policy - Damage to property - What constitutes - [See Insurance - Topic 6912 ].

Insurance - Topic 6912

Liability insurance - Business - Comprehensive policy - Exclusions - Withdrawal, inspection, repair, replacement or loss of use of product or work - Sure-Gro Inc. claimed against the insured, Bulldog Bag Ltd., for its loss resulting from the supply to Sure-Gro of defective packaging - About 10% of the material contained in the packaging was lost through the salvaging process - Bulldog settled the claim and reported the loss to its insurer (AXA) under Bulldog's commercial and general liability policy - AXA denied the claim - The trial judge found that the plastic packaging had not been incorporated into Sure-Gro's product - The "own work/products" exclusion clause (clause 6(a)) applied to exclude coverage for property damage to the plastic packaging - In the result, except for the 10% of product that was unsalvageable, Bulldog was not entitled to indemnification for the costs of replacing its defective bags - The British Columbia Court of Appeal allowed Bulldog's appeal and dismissed AXA's cross-appeal - Clause 6(a) did not operate to bar Bulldog's recovery of its claim - "Bearing in mind that exclusion clauses are to be read narrowly and in a manner consistent with the parties' reasonable expectations, I find that the clause operates to exclude claims for damage to Bulldog's bags, including loss of use thereof, but cannot be extended to compensation for Sure-Gro's costs separating those bags from its products, repackaging in different bags, and salvaging the 'old' product some months later. To deny coverage would ... be a 'perversion' of Progressive Homes [v. Lombard General Insurance Co. of Canada (2010) (SCC)]" - See paragraph 33.

Cases Noticed:

Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada (2009), 268 B.C.A.C. 235; 452 W.A.C. 235 (C.A.), revd. [2010] 2 S.C.R. 245; 406 N.R. 182; 293 B.C.A.C. 1; 496 W.A.C. 1; 2010 SCC 33, consd. [paras. 1, 11, 19 et seq.].

Non-Marine Underwriters, Lloyd's of London v. Scalera - see Scalera v. Lloyd's of London.

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; 2000 SCC 24, refd to. [para. 1].

Privest Properties Ltd. v. Foundation Co. of Canada Ltd., [1991] B.C.T.C. Uned. 783; 57 B.C.L.R.(2d) 88 (S.C.), refd to. [para. 11].

Swagger Construction Ltd. v. ING Insurance Co. of Canada et al., [2005] B.C.T.C. 1269; 47 B.C.L.R.(4th) 75; 2005 BCSC 1269, refd to. [para. 11].

GCAN Insurance Co. v. Concord Pacific Group Inc. et al., [2007] B.C.T.C. Uned. B61; 47 C.C.L.I.(4th) 106; 2007 BCSC 241, refd to. [para. 11].

Hamilton Die Cast Inc. v. United States Fidelity and Guaranty Co. (1975), 508 F.2d 417 (7th Cir.), refd to. [para. 12].

Ontario v. Fatehi, [1984] 2 S.C.R. 536; 56 N.R. 62; 6 O.A.C. 270, consd. [para. 13].

Nielsen v. Kamloops (City) and Hughes, [1984] 2 S.C.R. 2; 54 N.R. 1, refd to. [para. 13].

Bundy Tubing Co. v. Royal Indemnity Co. (1962), 298 F.2d 151 (6th Cir.), consd. [para. 13].

Carwald Concrete and Gravel Co. v. General Security Insurance Co. of Canada et al. (1985), 70 A.R. 340; 24 D.L.R.(4th) 58 (C.A.), consd. [para. 13].

Gulf Plastics Ltd. v. Cornhill Insurance Co., [1990] B.C.T.C. Uned. 711; 47 B.C.L.R.(2d) 379 (S.C.), affd. (1991), 61 B.C.L.R.(2d) 64 (C.A.), consd. [para. 13].

Hironaka v. Co-Operators General Insurance Co. (2005), 390 A.R. 285; 2005 ABQB 705, refd to. [para. 13].

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. 20].

March Elevator v. Canadian General Insurance, [1995] O.J. No. 1900 (Gen. Div.), refd to. [para. 28].

Authors and Works Noticed:

Windt, Allan D., Insurance Claims and Disputes (5th Ed. 2010), pp. 11-199, 11-201, 11-202 [para. 29].

Counsel:

R.G. Ward, Q.C., and E.L. Bosma, for the appellant;

B. De Vita and H. Bromley, for the respondent.

This appeal and cross-appeal were heard in Vancouver, British Columbia, on March 18, 2011, before Ryan, Newbury and D. Smith, JJ.A., of the British Columbia Court of Appeal. In reasons written by Newbury, J.A., the Court of Appeal delivered the following judgment, dated April 12, 2011.