Edmonton (City) v. Protection Mutual Insurance Co., (1997) 197 A.R. 81 (QB)
Judge | Lee, J. |
Court | Court of Queen's Bench of Alberta (Canada) |
Case Date | February 14, 1997 |
Citations | (1997), 197 A.R. 81 (QB) |
Edmonton v. Protection Mutual (1997), 197 A.R. 81 (QB)
MLB headnote and full text
The City of Edmonton (plaintiff) v. Protection Mutual Insurance Company (defendant)
(Action No. 9303-18136)
Indexed As: Edmonton (City) v. Protection Mutual Insurance Co.
Alberta Court of Queen's Bench
Judicial District of Edmonton
Lee, J.
February 14, 1997.
Summary:
The City of Edmonton owned and operated the Clover Bar Generating Station, a thermal electricity-generating station. Two steam turbines commissioned respectively in 1970 (Unit 1) and 1973 (Unit 2) powered the electricity generators. The turbines were insured under a multi-peril insurance policy that provided different coverages for a number of locations owned by the City. More particularly, the policy provided Boiler and Machinery coverage for the turbines and fire coverage for a water treatment plant. Cracks were discovered in Unit 1's intermediate pressure rotor in 1991. Similar cracks were found on Unit 2 in 1992. Both rotors had to be replaced. The probable cause of the rotors' failure was "high cycle fatigue crack initiation and propagation under the influence of high mean stress and fretting caused by faulty design." The decision to replace Unit 1's intermediate pressure rotor was made on February 6, 1992. The decision respecting Unit 2 was made on April 23, 1992. The City claimed insurance proceeds from its insurer. The latter denied coverage. The City sued. The statement of claim was filed on September 7, 1993.
The Alberta Court of Queen's Bench dismissed the action because it was barred by the one year limitation period under Statutory Condition 14 respecting fire coverage and made applicable by incorporation to Boiler and Machinery coverage.
Courts - Topic 102
Stare decisis - Authority of judicial decisions - English, American and foreign authorities - English decisions - The Alberta Court of Queen's Bench stated that it was bound only by Alberta Court of Appeal and Supreme Court of Canada decisions - Decisions of the Judicial Committee of the Privy Council, the House of Lords and the Appellate Courts of the other eight Common Law Canadian Provinces tended to be strongly persuasive - Decisions of foreign courts with similar legal traditions had some persuasive value depending on their circumstances - See paragraph 161.
Courts - Topic 103
Stare decisis - Authority of judicial decisions - English, American and foreign authorities - American decisions - The Alberta Court of Queen's Bench stated: (1) there was a long Canadian jurisprudential tradition of accepting American authorities in insurance law and (2) American decisions respecting boiler and machinery insurance had precedential value "if they are factually somewhat on point and primarily because they involve insurance claims involving similarly worded insurance policies" - See paragraphs 146 to 189.
Courts - Topic 126.1
Stare decisis - Authority of judicial decisions - Courts of superior jurisdiction - Supreme Court of Canada - General - [See Courts - Topic 102 ].
Courts - Topic 130
Stare decisis - Authority of judicial decisions - Courts of superior jurisdiction - In other provinces - [See Courts - Topic 102 ].
Evidence - Topic 6605
Parol evidence rule - Interpretation of a legal act - General principles - Admissibility of parol evidence - The Alberta Court of Queen's Bench held: "As with any contract interpretation, parol evidence is generally not admissible. There are no circumstances here for the admission of parol evidence. It is not permissible to use a contracting party's opinion of the meaning or purpose of contractual provisions or a contracting party's statement of what it intended as any evidence in resolving the dispute over interpretation." - See paragraphs 272 to 279.
Insurance - Topic 1851
The insurance contract - Interpretation of contract - General - The Alberta Court of Queen's Bench discussed the principles of interpretation of insurance contracts including the contra proferentem rule - See paragraphs 119 to 123.
Insurance - Topic 1861
The insurance contract - Interpretation of contract - Contra proferentem rule - Ambiguity construed against insurer - [See Insurance - Topic 1851 and Insurance - Topic 3355 ].
Insurance - Topic 3003
Payment of insurance proceeds - General principles - Deductible clauses - Two steam turbine rotors had to be replaced because of cracks - The probable cause of their failure was "high cycle fatigue crack initiation and propagation under the influence of high mean stress and fretting caused by faulty design" - The insurance policy respecting the rotors provided coverage for loss from an "Accident" and applied a deductible "against the total loss or damage covered by this policy in any one occurrence" - The insured argued that only one deductible should be applied since what occurred here was a single occurrence - The Alberta Court of Queen's Bench disagreed and found that there were two "Accidents" hence two deductibles, notwithstanding that the accidents arose from the same cause - See paragraphs 350 to 358.
Insurance - Topic 3355
Payment of insurance proceeds - Limitation of actions - General - A multi-peril policy provided Boiler and Machinery coverage for steam turbines and fire coverage for other property - The policy's first page contained an incorporation clause providing that the policy was "made and accepted subject to ... provisions and stipulations ... hereinafter stated including the statutory conditions of the Standard Fire Policy, which are hereby made a part of this policy" - The statutory conditions respecting fire coverage provided for a one year limitation period - The Alberta Court of Queen's Bench held that the incorporation clause made this one year limitation period also applicable to Boiler and Machinery coverage - The clause was unambiguous - Proceeding to the next step in the interpretation process, including the contra proferentem rule, was not necessary - See paragraphs 236 to 347.
Insurance - Topic 3366
Payment of insurance proceeds - Limitation of actions - Waiver by insurer of limitation period - [See Limitation of Actions - Topic 1701 ].
Insurance - Topic 6746
Boiler and machinery insurance - Extent of coverage - Accident - Loss from - Defined - A policy provided coverage for loss from an "Accident" - The policy defined "Accident" as a "sudden and accidental occurrence" - The Alberta Court of Queen's Bench discussed Canadian authorities on the meaning of "sudden and accidental occurrence" - The court held that notwithstanding quite correct jurisprudential criticism of cases that converted the word "sudden" into nothing more than a synonym for "accident", Canadian cases in the context of boiler and machinery policies tended to confirm that the phrase "sudden and accidental" meant "unexpected and unforeseen event" incorporating no temporal element to this phrase - See paragraphs 124 to 145.
Insurance - Topic 6746
Boiler and machinery insurance - Extent of coverage - Accident - Loss from - Defined - Cracks appeared in the intermediate pressure rotors of two steam turbines used in an electricity generating station - The cracks appeared when the rotors "had only approximately reached half of their normal life expectancy" of 30 to 50 years - The rotors had to be replaced - The probable cause of their failure was "high cycle fatigue crack initiation and propagation under the influence of high mean stress and fretting caused by faulty design" - The insurance policy respecting the rotors provided coverage for loss from an "Accident" - The policy defined "Accident" as a "sudden and accidental occurrence" - The Alberta Court of Queen's Bench held that the insured established coverage for the rotors - See paragraphs 103 to 118, 124 to 235.
Limitation of Actions - Topic 1701
Waiver - General - The insured sued the insurer for insurance coverage - The insurer invoked a one year limitation period provided by a statutory condition - The insured replied by invoking waiver resulting from settlement negotiations with the insurer - The Alberta Court of Queen's Bench found for the insurer: "... engaging in discussions of requesting or considering information before or after the one year limitation period expires are not unequivocal acts of waiver. There is nothing inconsistent about the insurer agreeing to limit liability or negotiating or investigating a claim and then relying on the provisions of the Statutory Condition. Even if there had been a waiver, there is no indication that the plaintiff was ever lulled into or accepted such a waiver." - See paragraphs 256 to 271.
Limitation of Actions - Topic 2324
Actions in contract - Insurance contracts - When time begins to run - Cracks were discovered in two steam turbine rotors in 1991 and 1992 respectively - The decision to replace the two rotors were made on February 6 and April 23, 1992 respectively - The insurer denied coverage - The insured sued the insurer - The statement of claim was filed on September 7, 1993 - The insurer invoked a one year limitation to bar the action - Did the limitation period begin from the date of the physical occurrence of the damage or loss, or the date that the insured had knowledge of the problem? - The Alberta Court of Queen's Bench would have adopted the "discoverability" rule, held that the limitation period began to run certainly by April 23, 1992, and dismissed the action as untimely - See paragraphs 312 to 347.
Cases Noticed:
Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; 32 N.R. 488; 112 D.L.R.(3d) 49, folld. [para. 105].
Trane Sales & Service Agency British Columbia v. Integrated Building Corp. (1987), 26 C.C.L.I. 36 (B.C.S.C.), consd. [para. 124].
Park Plaza Cleaners Ltd. v. Saskatchewan Government Insurance, [1983] I.L.R. 6157; 17 Sask.R. 1 (Q.B.), consd. [para. 129].
Regina Cold Storage Ltd. v. Gerling Global General Insurance Co. (1979), 4 Sask.R. 13; 102 D.L.R.(3d) 97 (C.A.), consd. [para. 135].
British Petroleum Canada Inc. v. Comco Service Station Construction & Maintenance Ltd. (1990), 73 O.R.(2d) 317 (H.C.), consd. [para. 136].
Federal Business Development Bank v. Continental Insurance Co. et al. (1991), 116 A.R. 26 (Q.B.), consd. [para. 150].
Partners Investments Ltd. v. Etobicoke (City) et al. (1981), 124 D.L.R.(3d) 125 (Ont. H.C.), consd. [para. 150].
United States of America and Washington Public Power Supply System v. Arkwright-Boston Manufacturers Mutual Insurance Co. and Mutual Boiler and Machinery Insurance Co. (1982), C-76-155 (Dist. Ct. Wash.), consd. [para. 152].
Anderson and Middleton Lumber Co. v. Lumbermen's Mutual Casualty Co. (1959), 33 P.2d 938 (Wash. S.C.), refd to. [para. 167].
Cyclops Corp. v. Home Insurance Co. and Fischbach (V.) and Moore Inc. et al. (1973), 352 F.Supp. 931 (U.S. Dist. Ct.), refd to. [para. 168].
Metropolitan Waste Control Commission v. Protection Mutual Insurance Co., [1980] F.C.C.2d 1334 (Minn. D.C.), dist. [para. 169].
Central Louisiana Electric Co. v. Westinghouse Electric Corp. (1991), 579 So.2d 981 (L.A.S.C.), consd. [para. 183].
Leontowicz v. Seaboard Life Insurance Co. (1984), 58 A.R. 66 (C.A.), refd to. [para. 198].
Columbia Cellulose Co. v. Continental Casualty Co., [1964] I.L.R. 581 (S.C.C.), affing. [1963] I.L.R. 489 (B.C.C.A.), refd to. [para. 199].
Smith v. British Pacific Life Insurance Co., [1965] S.C.R. 434, refd to. [para. 199].
Bubric v. Confederation Life Insurance Co. (1995), 175 A.R. 127 (Q.B.), refd to. [para. 200].
Schiffshypothekenbank Zu Luebeck A.G. v. Compton (Norman Philip), [1988] 1 Lloyd's Rep. 311 (C.A.), consd. [para. 203].
Ship Alexion Hope, Re - see Schiffshypothekenbank Zu Luebeck A.G. v. Compton (Norman Philip).
Canadian Home Assurance Co. v. Genuine Auto Services Ltd. (1990), 2 C.C.L.I.(2d) 103 (Alta. C.A.), refd to. [para. 243].
Tri-Service Machine Ltd. et al. v. United States Fire Insurance Co. et al. (1994), 149 A.R. 379; 63 W.A.C. 379; 19 Alta. L.R.(3d) 163 (C.A.), refd to. [para. 243].
Andrews et al. v. General Accident Assurance Co. (1995), 165 A.R. 65; 89 W.A.C. 65 (C.A.), refd to. [para. 244].
Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50; 125 N.R. 294; 47 O.A.C. 333; [1991] I.L.R. 1284, refd to. [para. 269].
Gillis v. Bourgard (1983), 41 O.R.(2d) 107 (C.A.), consd. [para. 270].
Bank of British Columbia v. Turbo Resources Ltd. (1983), 46 A.R. 22; 148 D.L.R.(3d) 598 (C.A.), consd. [para. 273].
Northwestern Mechanical Installations Ltd. v. Yukon Construction Ltd. (1982), 37 A.R. 132; 20 Alta. L.R.(2d) 156 (C.A.), consd. [para. 274].
St. Lawrence Petroleum v. Bailey Selburn Oil & Gas Ltd. (1963), 41 W.W.R.(N.S.) 210 (Alta. C.A.), consd. [para. 275].
St. Lawrence Petroleum v. Bailey Selburn Oil & Gas Ltd., [1963] S.C.R. 482; 45 W.W.R.(N.S.) 26; 41 D.L.R.(2d) 316, consd. [para. 277].
Anderson and Anderson v. Chaba and Chaba (1977), 7 A.R. 469; 81 D.L.R.(3d) 449 (C.A.), consd. [para. 278].
Ogilvie v. Grant (1906), 41 N.S.R. 1 (C.A.), refd to. [para. 278].
Demeyere (George A.) Tobacco Farms Ltd. v. Continental Insurance Co. (1984), 7 C.C.L.I. 38 (Ont. H.C.), consd. [para. 294].
Freesman v. Royal Insurance Co. of Canada (1986), 55 O.R.(2d) 562 (H.C.), consd. [para. 296].
Royal Bank of Canada v. Red River Valley Mutual Insurance Co. (1986), 42 Man.R.(2d) 124; 18 C.C.L.I. 75 (C.A.), consd. [para. 298].
Dressew Supply Ltd. v. Laurentian Pacific Insurance Co. (1991), 57 B.C.L.R.(2d) 198 (C.A.), consd. [para. 302].
Sever v. Economical Mutual Insurance Co. (1989), 66 O.R.(2d) 799 (C.A.), consd. [para. 303].
Statutes Noticed:
Limitation of Actions Act, R.S.A. 1980, c. L-15, sect. 4(c)(i) [para. 247].
Authors and Works Noticed:
Corpus Juris Secundum, vol. 21, s. 165, p. 201 [para. 159].
Metals Handbook, p. 5 [para. 191].
Counsel:
E.F. Macklin, Q.C., J. Hope, Q.C., and S. McLeod (Duncan & Craig), for the plaintiff;
E.P. Groody (Code Hunter Wittmann), and D. Smith (Guild Yule & Co.), for the defendant.
This action was heard by Lee, J., of the Alberta Court of Queen's Bench.
Lee, J., delivered the following decision on February 14, 1997.
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