Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2009 BCCA 129

• Judge: Ryan, Huddart and Kirkpatrick, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: March 26, 2009
• Jurisdiction: British Columbia
• Citations: 2009 BCCA 129;(2009), 268 B.C.A.C. 235 (CA)

Progressive Homes v. Lombard General (2009), 268 B.C.A.C. 235 (CA);

    452 W.A.C. 235

MLB headnote and full text

Temp. Cite: [2009] B.C.A.C. TBEd. AP.010

Progressive Homes Ltd. (appellant/plaintiff) v. Lombard General Insurance Company of Canada and in French Compagnie Canadienne d'Assurances Generales Lombard (respondent/defendant)

(CA034997; 2009 BCCA 129)

Indexed As: Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada

British Columbia Court of Appeal

Ryan, Huddart and Kirkpatrick, JJ.A.

March 26, 2009.

Summary:

Four actions were brought against a general contractor (Progressive) who built four condominium projects. The actions alleged significant damage due to water penetration of the buildings' envelopes. Progressive sought to rely on commercial or comprehensive general liability insurance policies issued by Lombard. Lombard alleged that it was under no duty to defend because the claims in the actions were not covered under the insurance contracts. Progressive applied for an order declaring that Lombard had a duty to defend it in the actions.

The British Columbia Supreme Court, in a decision reported at [2007] B.C.T.C. Uned. C26, dismissed the application.

The British Columbia Court of Appeal, Huddart, J.A., dissenting, dismissed the appeal.

Insurance - Topic 1856

The insurance contract - Interpretation of the contract - Exclusions - An insurer of several commercial or comprehensive general liability insurance policies argued that the rules of interpretation required that in determining the extent of coverage in a particular case a court must look first at the insuring clauses, determine the scope of coverage, and only then examine the exclusions to see how that scope was narrowed - The insurer argued that this was just an application of the logical rule that an exclusion clause could not restore coverage where coverage did not first exist - Its reasoning also derived from the propositions that the insured bore the onus of proving coverage while the insurer had to prove an exclusion, and that coverage clauses should be read broadly, while exclusion clauses should be read narrowly - The British Columbia Court of Appeal stated that these principles and rules seemed to mandate that the two types of clauses be read in isolation, but the court did not read the case law as warranting that approach - A court began with the presumption that all sections of an agreement had meaning - Thus, the contract should be read as a whole to understand each of its parts - An exclusion clause by definition, referenced the grant of coverage - It took something away from it - Thus, insuring clauses and exclusionary clauses could not be read in isolation - They had to be understood as a whole, and to understand them as a whole the court had to read them together - See paragraphs 55 to 57.

Insurance - Topic 6870

Liability insurance - Business - Comprehensive policy - "Occurrence" - What constitutes - Four actions were brought against a general contractor (Progressive), who built four condominium projects, alleging significant damage due to water penetration of the buildings' envelopes - Progressive used subcontractors for most of the work - Progressive sought to rely on commercial or comprehensive general liability insurance policies issued by Lombard - Progressive alleged that it sustained losses when defects in one part of a condominium built by Progressive's subcontractors caused damage to other parts of the building (i.e., rot and deterioration) - Progressive sought to rely on a "subcontractors' exception" to clauses which otherwise excluded coverage for such damage - Lombard argued that the underlying actions amounted to claims that Progressive delivered wholly defective buildings - The alleged damages were the expected consequences of poor workmanship - Water damage, caused by a building's defective exterior envelope did not qualify as an accident or occurrence under the policies - Progressive argued that the definitions of "accident" and "occurrence" in the policies negated any element of suddenness and made it plain that coverage might extend to property damage which took place over a long period of time - The application judge found that the allegations in the underlying actions did not allege "property damage" (or an "occurrence" or "accident") as those terms were used in the policies - Therefore, coverage was not triggered and Lombard was under no duty to defend Progressive - The British Columbia Court of Appeal dismissed Progressive's appeal - The insurance policies did not cover losses to Progressive caused by poor workmanship - They did not contain the clear language necessary to overcome the implied assumption that insurance was designed to transfer fortuitous contingent risk - See paragraphs 59 to 89.

Insurance - Topic 6871

Liability insurance - Business - Comprehensive policy - "By accident" - Meaning of - [See Insurance - Topic 6870 ].

Insurance - Topic 6877

Liability insurance - Business - Comprehensive policy - Construction contracts - Extent of coverage - [See Insurance - Topic 6870 ].

Insurance - Topic 6913

Liability insurance - Business - Comprehensive policy - Exclusions - Faulty workmanship, material or design - [See Insurance - Topic 6870 ].

Cases Noticed:

Bridgewood Building Corp. (Riverfield) v. Lombard General Insurance Co. of Canada (2006), 211 O.A.C. 4; 266 D.L.R.(4th) 182; 79 O.R.(3d) 494 (C.A.), leave to appeal refused (2006), 361 N.R. 393; 227 O.A.C. 400 (S.C.C.), refd to. [paras. 23, 91].

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. 25].

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. [paras. 26, 96].

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. [paras. 27, 96].

Canadian Indemity Co. v. Walkem Machinery & Equipment Ltd. - see Straits Towing Ltd. et al. v. Walkem Machinery & Equipment Ltd. and Canadian Indemnity Co.

Straits Towing Ltd. et al. v. Walkem Machinery & Equipment Ltd. and Canadian Indemnity Co., [1976] 1 S.C.R. 309; 3 N.R. 523; 53 D.L.R.(3d) 1, refd to. [para. 33].

American Family Mutual Insurance Co. v. American Girl Inc. (2004), 673 N.W.2d 65 (Wis. Sup. Ct.), refd to. [para. 35].

Winnipeg Condominium Corp. No. 36 v. Bird Construction Co. et al., [1995] 1 S.C.R. 85; 176 N.R. 321; 100 Man.R.(2d) 241; 91 W.A.C. 241; 121 D.L.R.(4th) 193, refd to. [para. 42].

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; 2001 SCC 24, refd to. [para. 46].

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. 51].

Georgia Construction Co. v. Pacific Great Eastern Railway Co., [1929] S.C.R. 630; [1929] 4 D.L.R. 161, refd to. [para. 51].

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; 99 D.L.R.(4th) 741, refd to. [para. 54].

Ramsay v. Voyageur Insurance Co. (1998), 108 B.C.A.C. 59; 176 W.A.C. 59; 51 B.C.L.R.(3d) 213 (C.A.), refd to. [para. 55].

Ellett Industries Ltd. v. Laurentian P & C Insurance Co. (1996), 73 B.C.A.C. 72; 120 W.A.C. 72; 17 B.C.L.R.(3d) 201, refd to. [para. 55].

RBC Travel Insurance Co. v. Aviva Canada Ltd. (2006), 215 O.A.C. 132; 82 O.R.(3d) 490; 274 D.L.R.(4th) 348 (C.A.), refd to. [para. 56].

Murphy v. Brentwood District Council, [1990] 2 All E.R. 908; 113 N.R. 81 (H.L.), refd to. [para. 59].

Bird Construction Co. v. Allstate Insurance Co. of Canada, [1996] 7 W.W.R. 609; 110 Man.R.(2d) 305; 118 W.A.C. 305 (C.A.), refd to. [para. 60].

Privest Properties Ltd. et al. v. Foundation Co. of Canada Ltd. et al., [1991] B.C.T.C. Uned. 783; 57 B.C.L.R.(2d) 88; 6 C.C.L.I.(2d) 23 (S.C.), refd to. [para. 61].

Hearn (F.W.)/Actes - A Joint Venture Ltd. v. Commonwealth Insurance Co. et al., [2000] B.C.T.C. 317; 75 B.C.L.R.(3d) 272; 2000 BCSC 764, refd to. [paras. 62, 96].

AXA Pacific Insurance Co. v. Guildford Marquis Towers Ltd., [2000] B.C.T.C. 37; 74 B.C.L.R.(3d) 194; 2000 BCSC 197, refd to. [para. 62].

Ohio Casualty Insurance Co. v. Bazzi Construction Co. (1987), 815 F.2d 1146 (7th Cir.), refd to. [para. 64].

Harbour Machine Ltd. v. Guardian Insurance Co. of Canada (1985), 60 B.C.L.R. 360; 10 C.C.L.I. 72 (C.A.), refd to. [paras. 76, 96].

Westridge Construction Ltd. v. Zurich Insurance Co. et al., [2006] 4 W.W.R. 437; 269 Sask.R. 1; 357 W.A.C. 1; 2005 SKCA 81, refd to. [para. 91].

Alie et al. v. Bertrand & Frère Construction Co. et al. (2002), 167 O.A.C. 20; 222 D.L.R.(4th) 687; 62 O.R.(3d) 345 (C.A.), refd to. [para. 100].

Authors and Works Noticed:

Audet, Maurice, Broad Form Completed Operations: An Extension of Coverage or a Trap, Canadian Underwriter (1984), generally [para. 91].

Boivin, Denis, Essentials of Canadian Law: Insurance Law (2004), p. 191 [para. 45].

Brown, Craig, and Menzes, Julio, Insurance Law in Canada (2nd Ed. 1991), pp. 125, 126 [para. 48].

Counsel:

G. Hilliker, Q.C., for the appellant;

W. Branch and C. Rhone, for the respondent.

This appeal was heard at Vancouver, British Columbia, on March 3 and 4, 2009, before Ryan, Huddart, and Kirkpatrick, JJ.A., of the British Columbia Court of Appeal.

On March 26, 2009, the judgment of the Court of Appeal was delivered and the following judgments were filed:

Ryan, J. (Kirkpatrick, J., concurring) - see paragraphs 1 to 89;

Huddart, J.A., dissenting - see paragraphs 90 to 104.