ING Insurance Co. of Canada v. A.M.L. Painting Ltd. et al., (2006) 246 N.S.R.(2d) 354 (SC)

• Judge: Warner, J.
• Court: Supreme Court of Nova Scotia (Canada)
• Case Date: June 08, 2006
• Jurisdiction: Nova Scotia
• Citations: (2006), 246 N.S.R.(2d) 354 (SC);2006 NSSC 203

ING Ins. v. AML Painting Ltd. (2006), 246 N.S.R.(2d) 354 (SC);

    780 A.P.R. 354

MLB headnote and full text

Temp. Cite: [2006] N.S.R.(2d) TBEd. JL.029

ING Insurance Company of Canada (applicant) v. A.M.L. Painting Ltd., Sable Offshore Energy Inc., as agent for and on behalf of the Working Interest Owners of the Sable Offshore Energy Project, Exxonmobile Canada Properties, Shell Canada Ltd., Imperial Oil Resources, Mosbacher Operating Ltd., Pengrowth Corporation, Exxonmobil Canada Properties as operator of the Sable Offshore Energy Project, Ameron International Corporation, Ameron (UK) Ltd., Ameron B.V., Allcolour Paint Ltd., Amercoat Canada, Rubyco Ltd., Danroh Inc., Serious Business Inc., Barrier Ltd., Parker Brothers Contracting Ltd., RKO Steel Ltd., Cherubini Metal Works Ltd., Comstock Canada Ltd., Adam Clark Co. Ltd., A.B. Mechanical Ltd., A & G Crane Rentals Ltd, carrying on business as A & G Crane Ltd., Argo Protective Coatings Inc., Allsteel Coating Ltd., Mills Painting & Sandblasting Ltd., AMEC E & C Services Ltd., successor to Agra Monenco Inc. in their own right, Kellogg Brown & Root, a division of Halliburton Group Canada Inc., and AMEC Black & McDonald Ltd., operating as BMS Offshore, successor to BMS Offshore Ltd., in their own right and/or collectively operating as BBA, a Joint Venture (respondents)

(S.H. 255658; 2006 NSSC 203)

Indexed As: ING Insurance Co. of Canada v. A.M.L. Painting Ltd. et al.

Nova Scotia Supreme Court

Warner, J.

June 27, 2006.

Summary:

ING Insurance Co. of Canada (ING) sought an order that it had no duty to defend A.M.L. Painting Ltd. (AML) in an action respecting the premature widespread failure of paint systems on a natural gas project that resulted in steel corrosion and potential structural integrity damage.

The Nova Scotia Supreme Court found that ING had a duty to defend AML in the action.

Insurance - Topic 725

Insurers - Duties - Duty to defend - ING Insurance Co. of Canada (ING) sought an order that it had no duty to defend A.M.L. Painting Ltd. (AML) in an action respecting the premature widespread failure of paint systems on a natural gas project that resulted in steel corrosion and potential structural integrity damage - ING had issued a commercial general liability policy (CGL) to AML - At issue was whether the action advanced a claim for property damage - ING submitted that the claim was for repair and replacement of AML's faulty work or defective product for which ING was released from its duty to defend by the CGL's exclusion clauses - The Nova Scotia Supreme Court found that ING had a duty to defend in the action - The alleged continuing corrosion was damage to tangible property of someone other than AML that was sufficient to trigger the duty - The pleadings reasonably included claims for more than simply the costs of replacing the alleged faulty work or defective product of AML - AML acknowledged that ING provided no coverage for the cost of restoring AML's work - However, the CGL, read as a whole, did not exclude the other claims - See paragraphs 38 to 63 and 74.

Insurance - Topic 725

Insurers - Duties - Duty to defend - ING Insurance Co. of Canada (ING) sought an order that it had no duty to defend A.M.L. Painting Ltd. (AML) in an action respecting the premature widespread failure of paint systems on a natural gas project that resulted in steel corrosion and potential structural integrity damage - ING had issued a commercial general liability policy (CGL) to AML - The policy period was April 1, 1998, to April 1, 1999 - At issue was whether the damage occurred within the policy period - ING submitted that while the paint was applied by AML in 1998 and 1999, reports of paint failures did not surface until mid-2000 - The Nova Scotia Supreme Court held that ING had a duty to defend AML in the action - It was reasonable, based on the pleadings, to infer that the paint work could have begun to fail, causing corrosion, immediately on application - Property damage could have, and most likely did, occur not only within the policy period but also subsequently - See paragraphs 64 to 70.

Insurance - Topic 725

Insurers - Duties - Duty to defend - On an application by ING Insurance Co. of Canada for an order that it had no duty to defend A.M.L. Painting Ltd. in an action respecting failure of paint systems, the Nova Scotia Supreme Court summarized the determination of the duty to defend - The analysis was based on the pleadings - If the pleadings alleged facts, which if true could require the insurer to indemnify the insured, the insurer was obligated to defend - In construing the claim, especially where it was not framed with sufficient precision, the widest latitude should be given to the allegations of fact in determining whether they raised a claim within the policy - If there was any reasonable doubt, it was decided in favour of the insured - The analysis excluded speculation as to possible claims and included only all possible claims based on a reasonable reading of the pleadings - The onus was on the insured to show that the claim included a claim within the policy - See paragraphs 72 to 74.

Practice - Topic 7109.1

Costs - Party and party costs - Special orders - Increased costs (based on solicitor and client or special costs) - ING Insurance Co. of Canada (ING) unsuccessfully sought an order that it had no duty to defend A.M.L. Painting Ltd. (AML) in an action respecting the premature widespread failure of paint systems on a natural gas project - AML claimed solicitor and client costs - The Nova Scotia Supreme Court held that it was appropriate for AML to receive most, but not all, of its actual costs - The matter was complex and conducted by senior, talented counsel in a thorough manner - The quantum of potential liability was likely to be very significant - ING had been found obligated to defend AML but not to indemnify AML for all possible claims - The conduct of both counsel was above reproach - Tariff C of the party and party tariff provided for counsel fees of $2,000 for a full day chambers hearing - For the reasons stated, costs were awarded in the amount of $4,000 plus all of AML's actual disbursements - See paragraphs 75 to 80.

Cases Noticed:

Nichols v. American Home Assurance Co. et al., [1990] 1 S.C.R. 801; 107 N.R. 321; 39 O.A.C. 63, appld. [para. 20].

Privest Properties Ltd. v. Foundation Co. of Canada Ltd., 1991 CarswellBC 142 (S.C.), consd. [para. 21].

Monenco Ltd. et al. v. Commonwealth Insurance Co. et al. (2001), 274 N.R. 84; 155 B.C.A.C. 161; 254 W.A.C. 161; 2001 SCC 49, appld. [para. 22].

Hamel Construction Inc. v. Lombard Canada Ltd. (2005), 232 N.S.R.(2d) 138; 737 A.P.R. 138; 2005 NSCA 69, refd to. [para. 25].

Amherst (Town) et al. v. Coronation Insurance Co. et al. (1995), 138 N.S.R.(2d) 68; 394 A.P.R. 68; 1995 CarswellNS 32 (C.A.), refd to. [para. 26].

Lunenburg Industrial Foundry and Engineering Ltd. et al. v. Commercial Union Assurance Co. of Canada et al. (2005), 230 N.S.R.(2d) 249; 729 A.P.R. 249; 2005 NSSC 23, refd to. [para. 27].

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; 32 N.R. 488, refd to. [para. 28].

Brissette v. Westbury Life Insurance Co., [1992] 3 S.C.R. 87; 142 N.R. 104; 58 O.A.C. 10, refd to. [para. 28].

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. 28].

Alie et al. v. Bertrand & Frère Construction Co. et al. (2002), 167 O.A.C. 20; 2002 CarswellOnt 4255 (C.A.), consd. [para. 34].

Carlton Iron Works Ltd. v. Ellis Don Construction Ltd. et al. (1996), 8 O.T.C. 287 (Gen. Div.), refd to. [para. 34].

Bird Construction Co. v. Allstate Insurance Co. of Canada (1996), 110 Man.R.(2d) 305; 118 W.A.C. 305 (C.A.), refd to. [para. 35].

Tsubaki of Canada Ltd. v. Standard Tube Canada, [1993] O.J. No. 1855 (Gen. Div.), refd to. [para. 35].

Carwald Concrete & Gravel Co. v. General Security Insurance Co. of Canada et al. (1985), 70 A.R. 340; 24 D.L.R.(4th) 58 (C.A.), refd to. [para. 35].

Gulf Plastics Ltd. v. Cornhill Insurance Co. (1991), 61 B.C.L.R.(2d) 64 (S.C.), refd to. [para. 35].

Greenan v. Maber (R.J.) Construction Co. et al. (1992), 127 N.B.R.(2d) 124; 319 A.P.R. 124 (C.A.), refd to. [para. 35].

Bridgewood Building Corp. (Riverfield) v. Lombard General Insurance Co. of Canada (2006), 211 O.A.C. 4; 2006 CarswellOnt 2017 (C.A.), refd to. [para. 36].

Westridge Construction Ltd. v. Zurich Insurance Co. et al. (2005), 269 Sask.R. 1; 357 W.A.C. 1; 25 C.C.L.I.(4th) 182 (C.A.), refd to. [para. 36].

Authors and Works Noticed:

Krempulec, Richard, Property Damage Claims Under Commercial Insurance Policies (Looseleaf), c. 1:30 [para. 12]; 3 [para. 29].

Sanderson, Heather A., Emblem, Robert D.G., and Woodley, J. Lyle, Commercial General Liability Insurance (2000), pp. 5, 6, 7 [para. 12]; 19 [para. 41]; 21 to 28 [para. 29].

Snowden, Marcus, and Lichty, Mark, Annotated Commercial General Liability Policy (Looseleaf), c. 1:20.3 [para. 12]; 2 [para. 29]; 6:10 [para. 41]; 12:20.3(2) [para. 21].

Counsel:

Geoffrey D.E. Adair, Q.C., for the applicant, ING Insurance Co. of Canada;

Hillel David, for the respondent, A.M.L. Painting Ltd.

This application was heard on June 8, 2006, in Halifax, Nova Scotia, by Warner, J., of the Nova Scotia Supreme Court, who delivered the following judgment on June 27, 2006.