Monenco Ltd. et al. v. Commonwealth Insurance Co. et al., (2001) 155 B.C.A.C. 161 (SCC)

• Judge: McLachlin, C.J.C., Gonthier, Iacobucci, Bastarache, Binnie, Arbour and LeBel, JJ.
• Court: Supreme Court of Canada
• Case Date: Tuesday March 13, 2001
• Jurisdiction: Canada (Federal)
• Citations: (2001), 155 B.C.A.C. 161 (SCC);2001 SCC 49;[2000] OJ No 3828 (QL);EYB 2001-256455;[2001] ACS no 50;32 CCLI (3d) 165;[2001] ILR 1;[2001] 2 SCR 699;[2002] 2 WWR 438;155 BCAC 161;[2001] SCJ No 50 (QL);204 DLR (4th) 14;JE 2001-1712;[2001] CarswellBC 1871;108 ACWS (3d) 159;274 NR 84;254 WAC 161;97 BCLR (3d) 191

Monenco v. Commonwealth Ins. (2001), 155 B.C.A.C. 161 (SCC);

    254 W.A.C. 161

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2001] B.C.A.C. TBEd. SE.021

Monenco Limited and 67669 Alberta Inc. (appellants) v. Commonwealth Insurance Company (respondent)

(27258; 2001 SCC 49)

Indexed As: Monenco Ltd. et al. v. Commonwealth Insurance Co. et al.

Supreme Court of Canada

McLachlin, C.J.C., Gonthier, Iacobucci, Bastarache, Binnie, Arbour and LeBel, JJ.

September 13, 2001.

Summary:

Monenco Ltd., through its subsidiary, 67669 Alberta Inc., participated in an ex­pansion project of a tar sands plant owned by Suncor Inc. Following a fire at the plant, Suncor brought an action against Monenco, 67669 and others. Monenco and 67669 were covered under a comprehensive general liability policy issued by Commonwealth Insurance Company. Commonwealth claimed that it was exonerated from its duty to defend the Suncor action because of a "turn­key exclusion" and/or "professional services exclusion" in the policy. Monenco and 67669 also had a professional liability policy with another insurer, which paid the full settle­ment and defence costs of the Suncor action in excess of the $1,000,000 deduct­ible. Monenco and 67669 applied for an order under British Columbia Supreme Court Rule 18A that Commonwealth pay their costs of defending the Suncor action in the amount of $1,000,000.

The British Columbia Supreme Court, in a decision reported at [1997] B.C.T.C. Uned. E66, dismissed the application, holding that the turnkey exclusion operated to relieve Commonwealth of the duty to defend Mon­enco and 67669 in the Suncor action. Mon­enco and 67669 appealed.

The British Columbia Court of Appeal, in a decision reported at 121 B.C.A.C. 99; 198 W.A.C. 99, dismissed the appeal. Monenco and 67669 appealed.

The Supreme Court of Canada dismissed the appeal.

Insurance - Topic 725

Insurers - Duties - Duty to defend - The Supreme Court of Canada reviewed the legal principles governing an insurer's duty to defend - The court stated that the proper basis for determining whether a duty to defend existed required an assess­ment of the pleadings to ascertain the "substance" and "true nature" of the claims - The fac­tual allegations set out therein had to be considered in their entirety to determine whether they could possibly support the plaintiff's legal claims - Also, extrinsic evidence that had been explicitly referred to within the pleadings could be considered to determine the substance and true nature of the allegations, and thus, to appreciate the nature and scope of an insurer's duty to defend - However, the court stated that on an application to de­termine whether an insurer had a duty to defend, the court could not look to "pre­mature" evidence, being evidence which, if con­sidered, would require findings to be made before trial that would affect the underly­ing litigation -See paragraphs 28 to 37.

Insurance - Topic 725

Insurers - Duties - Duty to defend - Mon­enco Ltd., through its subsidiary, 67669 Alberta Inc., participated in an expansion of a tar sands plant owned by Suncor Inc. - 67669's involvement oc­curred through a joint venture involving 67669, Bechtel Canada Ltd. and Associ­ated Engineers Services Ltd. (collectively the "ABM Engineers") - A fire occurred at the plant - Suncor alleged that a signifi­cant factor in the extensiveness of the destruc­tion was the way in which the fire travelled along polyvinyl chloride jacketed cables (PVC cables), which had been specified and installed by the ABM engi­neers - Suncor sued Monenco, 67669 and others, alleging breach of contract, breach of the duty of care and breach of the duty to warn of undisclosed dangers (the dan­gerous nature of the PVC cables) - Mon­enco and 67669 were covered under a comprehensive gen­eral liability policy - The policy contained a "turnkey exclusion" which applied to claims arising out of a project for which the insured performed professional archi­tectural and/or engineer­ing services, as well as the actual con­struction or manufac­turing services - The Supreme Court of Canada held that Sun­cor's claims against Monenco and 67669 fell within the turnkey exclusion and the insurer was not obliged to defend the action or pay defence costs.

Insurance - Topic 725

Insurers - Duties - Duty to defend - Mon­enco Ltd., through its subsidiary, 67669 Alberta Inc., participated in an expansion of a tar sands plant owned by Suncor Inc. - 67669's involvement oc­curred through a joint venture involving 67669, Bechtel Canada Ltd. and Associ­ated Engineers Services Ltd. (collectively the "ABM Engineers") - Following a fire at the plant, Suncor sued Monenco, 67669 and others, alleging breach of contract, breach of the duty of care and breach of the duty to warn of undisclosed dangers (the danger­ous nature of polyvinyl chloride jacketed cables which had been specified and installed by the ABM engineers) - Monen­co and 67669 were covered under a com­prehensive general liability policy - The Supreme Court of Canada held that Sun­cor's claims against Monenco and 67669 fell within the "turnkey exclusion" in the policy and the insurer was not obliged to defend the action - In making that deter­mination, the court held that the contract between Suncor and the joint venture, having been referred to in Sun­cor's amended statement of claim, could be reviewed to determine the substance and true nature of Suncor's claims - Also, because Suncor had pleaded that the joint venture had carried on business under the name "ABM-1978", this enabled the court to review the joint venture agreement as well - See paragraph 38.

Insurance - Topic 725.1

Insurers - Duties - Duty to defend - Costs of defence - [See second Insurance - Topic 725].

Insurance - Topic 6878

Liability insurance - Business - Compre­hensive policy - Duty to defend - [See second and third Insurance - Topic 725].

Insurance - Topic 6919.1

Liability insurance - Business - Compre­hensive policy - Exclusions - Turnkey exclusion - [See second Insurance - Topic 725].

Cases Noticed:

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. 11].

Rivtow Marine v. Washington Iron Works and Walkem Machinery and Equipment Ltd., [1974] S.C.R. 1189, refd to. [para. 24].

Bacon v. McBride (1984), 5 C.C.L.I. 146 (B.C.S.C.), refd to. [para. 28].

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. 29].

Opron Maritimes Construction Ltd. v. Canadian Indemnity Co. (1986), 73 N.B.R.(2d) 389; 184 A.P.R. 389; 19 C.C.L.I. 168 (C.A.), leave to appeal refused, [1987] 1 S.C.R. xii; 76 N.R. 399; 76 N.B.R.(2d) 360; 192 A.P.R. 360, refd to. [para. 29].

Association des hôpitaux du Québec v. Fondation pour le cancer de la prostate, Centre hospitalier de l'Université Laval, [2000] R.R.A. 78 (Que. C.A.), refd to. [para. 30].

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. 33].

Colorado Farm Bureau Mutual Insurance Co. v. Snowbarger (1997), 934 P.2d 909 (Col. C.A.), refd to. [para. 33].

Authors and Works Noticed:

Andal, R.V., and Donnelly, T., Liability Insurance, in Brown, C., Insurance Law in Canada (1999 Looseleaf), vol. 2, p. 13 [para. 32].

Hilliker, G., Liability Insurance Law in Canada (3rd Ed. 2001), p. 72 [para. 32].

Counsel:

John R. Singleton, Q.C., and Catherine L. McLean, for the appellants;

D. Barry Kirkham, Q.C., for the respon­dent.

Solicitors of Record:

Singleton Urquhart, Vancouver, British Columbia, for the appellants;

Owen Bird, Vancouver, British Columbia, for the respondent.

This appeal was heard on March 13, 2001, before McLachlin, C.J.C., Gonthier, Iaco­bucci, Bastarache, Binnie, Arbour and LeBel, JJ., of the Supreme Court of Canada. The following judgment of the Supreme Court of Canada was delivered by Iacobucci, J., in both official languages, on September 13, 2001.