Kingsway General Insurance Co. v. Lougheed Enterprises Ltd. et al., (2004) 202 B.C.A.C. 220 (CA)

• Judge: Newbury, Mackenzie and Oppal, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: May 31, 2004
• Jurisdiction: British Columbia
• Citations: (2004), 202 B.C.A.C. 220 (CA);2004 BCCA 421

Kingsway General v. Lougheed Ent. (2004), 202 B.C.A.C. 220 (CA);

    331 W.A.C. 220

MLB headnote and full text

Temp. Cite: [2004] B.C.A.C. TBEd. AU.006

Kingsway General Insurance Company (respondent/petitioner) v. Lougheed Enterprises Ltd. and Vine Enterprises Ltd. (appellants/respondents) and Dawson & Dawson Consultants Ltd. (respondent/intervenor)

(CA031146; 2004 BCCA 421)

Indexed As: Kingsway General Insurance Co. v. Lougheed Enterprises Ltd. et al.

British Columbia Court of Appeal

Newbury, Mackenzie and Oppal, JJ.A.

August 4, 2004.

Summary:

Vine Enterprises (Vine) and two other corporations formed a partnership to acquire, develop, construct and operate a real estate development which included an apartment building. While the apartment building was still under construction, Vine sold its assets, including its interest in the partnership, to Lougheed Enterprises (Lougheed). The building was subsequently damaged by fire. The owners sued the partnership, Vine, Lougheed and others, alleging negligence in the development, design, construction, in­spection and approval of the building. Loug­heed and Vine notified their liability insurer. The insurer took the position that it was not required to defend and petitioned the court for a declaration that the pleadings did not allege matters which fell within the coverage afforded by the policy. The insurer relied on the policy's definition of "insured" which excluded any person or organization with respect to conduct of any current or past partnership that was not shown as a named insured in the declarations.

The British Columbia Supreme Court, in a decision reported at [2003] B.C.T.C. 1161, granted the petition and declared that the insurer was not required to defend Lougheed or Vine. The order was silent as to any duty to defend the partnership. Lougheed and Vine appealed.

The British Columbia Court of Appeal dismissed the appeal.

Insurance - Topic 725

Insurers - Duties - Duty to defend - Loug­heed acquired Vine's partnership interest in a development which included a building which was under construction - After com­pletion, the building was damaged by fire - The owners sued the partnership, Vine, Lougheed and others, alleging negli­gence in the building's development, de­sign, con­struction, inspection and appro­val - Loug­heed and Vine's liability insurer took the position that it was not required to defend, relying on a clause in the policy's defini­tion of "insured" which excluded any per­son or organization with respect to conduct of any current or past partnership that was not shown as a named insured in the dec­larations - The British Columbia Court of Appeal stated that the plaintiffs' allegations were with respect to the part­nership's conduct within the meaning of the clause and applied to the claims against Lougheed and Vine - The allegations did not distin­guish between Lougheed's and Vine's re­spective corporate capacities or purport to describe them in any capacity other than qua partners - While reluctant to give effect to what was really an exclusion clause that was misplaced in the policy's definitions section, the principles of con­struction required that effect be given to all words used, if at all possible, and that the plain meaning be given effect where the result was not commercially unreason­able or absurd - See paragraphs 14 to 29.

Insurance - Topic 1851

The insurance contract - Interpretation of contract - General - An insurer took the position that it was not required to defend an action against two insured and peti­tioned the court for declaratory relief - The British Columbia Court of Appeal set out the applicable principles of interpretation as follows: "... in terms of contractual interpretation, the same principles of con­struction applicable to other commercial contracts apply to insurance contracts ...; that the 'court must search for an interpre­tation from the whole of the contract which promotes the true intent of the par­ties at the time they entered into the con­tract' ...; that the plain meaning of the words used should be given effect unless it would bring about an unrealistic or com­mercially unreasonable result ...; that evi­dence of the factual background or setting of the contract known to the parties at or prior to the date of the contract may be considered even in the absence of an ambi­guity ...; that at the same time, the words of the contract 'must not be overwhelmed by a contextual analysis' ...; and that in cases of true ambiguity or doubt as to the meaning of the words used, the contra pro­ferentem rule of interpretation may be ap­plied ..." - See paragraph 10.

Insurance - Topic 1856

The insurance contract - Interpretation of contract - Exclusions - [See Insurance - Topic 725 ].

Insurance - Topic 1859

The insurance contract - Interpretation of contract - Construction - Sensible commer­cial result - [See Insurance - Topic 725 ].

Cases Noticed:

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; 32 N.R. 488, refd to. [para. 8].

Eli Lilly & Co. et al. v. Novopharm Ltd. et al., [1998] 2 S.C.R. 129; 227 N.R. 201, refd to. [para. 8].

Prenn v. Simmonds, [1971] 3 All E.R. 237 (H.L.), refd to. [para. 8].

Métropolitaine (La), compagnie d'assu­rance-vie v. Frenette, Hôpital Jean-Talon et un autre, [1992] 1 S.C.R. 647; 134 N.R. 169; 46 Q.A.C. 161, refd to. [para. 10].

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

Canadian Imperial Bank of Commerce v. Insurance Corp. of Ireland Ltd. (1990), 51 B.C.L.R.(2d) 341 (C.A.), refd to. [para. 10].

ACLI Ltd. v. Cominco Ltd. (1985), 61 B.C.L.R. 177 (C.A.), refd to. [para. 10].

Ahluwalia et al. v. Richmond Cabs Ltd. (1995), 63 B.C.A.C. 278; 104 W.A.C. 278; 13 B.C.L.R.(3d) 93 (C.A.), refd to. [para. 10].

Black Swan Gold Mines Ltd. v. Goldbelt Resources Ltd. (1996), 78 B.C.A.C. 193; 128 W.A.C. 193; 25 B.C.L.R.(3d) 285 (C.A.), refd to. [para. 10].

J.K. Expressions Jewellery Inc. v. Gerling Global General Insurance Co. et al. (2002), 164 B.C.A.C. 135; 268 W.A.C. 135; 2002 BCCA 86, refd to. [para. 10].

Monenco Ltd. et al. v. Commonwealth Insurance Co. et al., [2001] 2 S.C.R. 699; 274 N.R. 84; 155 B.C.A.C. 161; 254 W.A.C. 161, refd to. [para. 10].

Bacon v. McBride (1984), 5 C.C.L.I. 146 (B.C.S.C.), refd to. [para. 12].

Nichols v. American Home Assurance Co. et al., [1990] 1 S.C.R. 801; 107 N.R. 321; 39 O.A.C. 63; 68 D.L.R.(4th) 321, refd to. [para. 12].

Lloyd's of London v. Scalera, [2000] 1 S.C.R. 551; 253 N.R. 1; 135 B.C.A.C. 161; 221 W.A.C. 161, refd to. [para. 12].

Maryland Casualty Co. v. Reeder et al. (1990), 270 Cal. Rptr. 719 (Cal. Ct. App.), refd to. [para. 19].

Associated Metals and Minerals Corp. v. Hartford Accident and Indemnity Co. (1977), Fire & Casualty Cas. 907 (D.C.N.Y.), refd to. [para. 24].

Keller (Austin P.) Construction Co. v. Commercial Union Insurance Co. (1986), 379 N.W.2d 533 (Minn. S.C.), refd to. [para. 24].

Fireman's Fund Insurance Co. v. Burman (E.W.) Inc. (1978), 391 A.2d 99 (R.I.S.C.), refd to. [para. 24].

Palmer (Geoffrey H.) v. Truck Insurance Exchange (1998), 78 Cal. Rptr.2d 389 (Cal. Ct. App.), refd to. para. 24].

Home Insurance Co. v. Waycrosse Inc. (1996), 990 F. Supp. 720 (U.S. Dist. Ct.), affd. (1997), 131 F.3d 143 (Cal. Ct. App.), dist. [para. 25].

Scottsdale Insurance Co. v. Essex Insur­ance Co. (2002), 98 Cal. App.(4th) 86 (Cal. Ct. App.), not folld. [para. 27].

Forbes v. Git, [1922] 1 A.C. 256 (P.C.), refd to. [para. 28].

Authors and Works Noticed:

Hilliker, G., Liability Insurance Law in Canada (3rd Ed. 2001), p. 29 [para. 16].

Lindley and Banks on Partnership (1990), pp. 13, 14 [para. 18].

Counsel:

W.B. McAllister, Q.C., for the appellants;

E.A. Dolden and S. Brearley, for the respondent, Kingsway General Insurance Co.;

M.M. Skorah and J.K. Lamb, for the respondent, Dawson & Dawson Consul­tants Ltd.

This appeal was heard at Vancouver, British Columbia, on May 31, 2004, by New­bury, Mackenzie and Oppal, JJ.A., of the British Columbia Court of Appeal. New­bury, J.A., delivered the following judgment for the court on August 4, 2004.