University of Saskatchewan v. Fireman's Fund Insurance Co. of Canada et al., (1997) 158 Sask.R. 223 (CA)

• Judge: Vancise, Sherstobitoff and Jackson, JJ.A.
• Court: Court of Appeal (Saskatchewan)
• Case Date: March 17, 1997
• Jurisdiction: Saskatchewan
• Citations: (1997), 158 Sask.R. 223 (CA);1997 CanLII 9789 (SK CA);[1998] 5 WWR 276;50 CCLI (2d) 272;[1997] SJ No 642 (QL);153 WAC 223;158 Sask R 223;76 ACWS (3d) 167

Sask. Univ. v. Fireman's Fund Ins. (1997), 158 Sask.R. 223 (CA);

    153 W.A.C. 223

MLB headnote and full text

Temp. Cite: [1997] Sask.R. TBEd. DE.048

University of Saskatchewan (plaintiff/respondent) v. Fireman's Fund Insurance Company of Canada, now known as Wellington Insurance Company, Gerling Global General Insurance Company, Continental Insurance Company and INA Insurance Company of Canada (defendants/appellants)

(No. 2172)

Indexed As: University of Saskatchewan v. Fireman's Fund Insurance Co. of Canada et al.

Saskatchewan Court of Appeal

Vancise, Sherstobitoff and Jackson, JJ.A.

October 10, 1997.

Summary:

Exterior stonework on a university build­ing started to fall off because of an error in the architect's design. The insurer denied cover­age. The university sued on the pol­icy.

The Saskatchewan Court of Queen's Bench, in a decision reported 132 Sask.R. 141, granted declaratory judgment for the university. At counsel's request, questions pertaining to costs of the action, prejudg­ment interest and expert witness fees were reserved for later argument and disposition.

The Saskatchewan Court of Queen's Bench, in a decision reported 140 Sask.R. 289, determined the remaining issues. The insurer appealed.

The Saskatchewan Court of Appeal allowed the appeal.

Insurance - Topic 2031

The risk - Extent of the risk - Fortuitous loss - An architect's design called for using galvanized steel pins to attach stone panels to concrete - The con­crete/stone slabs were then attached to a building's exterior - Moisture corroded the pins and the stone panels started to fall off - The insurer argued that the loss was not fortu­itous because it was a fore­seeable and probable consequence of air leakage and condensation problems that were apparent in the building from the outset - The trial judge held that "[a]n architect's error was the effective cause of the loss in this case. The loss would not have occurred but for the architect's error which was fortuitous in the sense that it was not an event ordinar­ily to be expected in the normal course of things" - The Saskatchewan Court of Appeal affirmed that the loss was fortu­itous - See para­graphs 6 to 11.

Insurance - Topic 2035

The risk - Extent of the risk - Accident - Time of - Whether accident occurred or originated in the policy period - Exterior stonework on a university build­ing started to fall off because of an arch­itect's design error - The university's insurer denied coverage, arguing, inter alia, that the dam­age occurred outside the coverage period - The trial judge granted judgment to the university stating that "... where there has been progressive and hidden damage occurring over an unknown period of time, the loss should date from the time the damage becomes apparent" (manifestation theory) - The Saskatchewan Court of Appeal held that the trial judge erred in applying the man­ifestation theory to deter­mine the date of loss when his findings of fact established that the loss and damage had in fact occurred before the effective date of the policy - See paragraphs 12 to 42.

Insurance - Topic 2490

Applicant's duty of disclosure - Default in duty to disclose - Misrepresentation - What constitutes - Exterior stonework on a university building started to fall off because of a design error - The insurer denied coverage, arguing, inter alia, that the university knew of the falling stones prior to applying for insurance, or that it misrepresented or fraudulently omitted certain other facts material to the risk - The trial judge held that the allegations were entirely without foundation - The Saskatchewan Court of Appeal affirmed this finding - See paragraph 57.

Insurance - Topic 2492

Applicant's duty of disclosure - Default in duty to disclose - Fraudulent omission - [See Insurance - Topic 2490 ].

Insurance - Topic 6603

Multi-peril property insurance - Exclu­sions - Exception for "resulting damage" - An architect's design called for the use of galvanized steel pins to attach stone panels to concrete - This was an error - After the concrete/stone slabs were attached to a building's exterior, moisture corroded the pins and the stone panels shattered and started to fall off - The Saskatchewan Court of Appeal held that the damage was excluded from coverage under the insur­ance policy in issue because caused by, inter alia, inherent vice and latent defect - The court held that the exception to the exclusion for "damage resulting therefrom" did not apply - The exception was not meant to apply to damage to the building itself, but only damage to other property or persons - Otherwise, there would be no point to the exclusion clause - See para­graphs 55 to 56.

Insurance - Topic 6606.1

Multi-peril property insurance - Exclu­sions - Dampness of atmosphere - [See Insurance - Topic 6610 ].

Insurance - Topic 6606.2

Multi-peril property insurance - Exclu­sions - Extremes of temperature - [See Insurance - Topic 6610 ].

Insurance - Topic 6609

Multi-peril property insurance - Exclu­sions - Latent defect - [See Insurance - Topic 6610 ].

Insurance - Topic 6610

Multi-peril property insurance - Exclu­sions - Inherent vice - An architect's design called for the use of galvanized steel pins to attach stone panels to con­crete - This was an error - After the con­crete/stone slabs were attached to a build­ing's exterior, moisture corroded the pins and the stone panels shattered and started to fall off - The Saskatchewan Court of Appeal held that the damage was excluded from coverage under the insur­ance policy in issue - Exposure to rain and dampness caused or contributed to the corrosion of the pins and freezing, thawing and extremes of temperature caused or contrib­uted to the shattering of the wet stone - Further, there was an inherent vice and latent defect where the building could not withstand normal Saskatchewan weather because of the design error which led to the use of galvanized steel pins - See paragraphs 43 to 56.

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. 5].

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; 32 N.R. 488, refd to. [para. 5].

British and Foreign Marine Insurance Co. v. Gaunt, [1921] All E.R. 447 (H.L.), refd to. [para. 8].

C.C.R. Fishing Ltd. and Bank of Montreal v. British Reserve Insurance Co. et al., [1990] 1 S.C.R. 814; 109 N.R. 1, refd to. [para. 10].

Hutchins Brothers v. Royal Exchange Assurance Association, [1911] 2 K.B. 398 (C.A.), refd to. [para. 27].

Oceanic Steamship Co. v. Faber, 11 Com. Cas. 179, refd to. [para. 27].

Scindia Steamships (London) Ltd. v. Lon­don Assurance, [1937] 1 K.B. 639 (K.B.), refd to. [para. 27].

Board of Education of Eastend School Division No. 8 v. Commonwealth In­sur­ance Co. et al. (1990), 86 Sask.R. 317 (C.A.), refd to. [para. 28].

Portland Masonry Ltd. v. Casualty Co. of Canada and I.N.A. Insurance Co. (1984), 66 N.S.R.(2d) 10; 152 A.P.R. 10 (T.D.), refd to. [para. 29].

Archibald (Lester) Drilling & Blasting Ltd. and Fireman's Fund Insurance Co. v. Commercial Union Assurance Co. (1987), 80 N.S.R.(2d) 186; 200 A.P.R. 186; 25 C.C.L.I. 145 (T.D.), refd to. [para. 29].

Cansulex Ltd. v. Reed Stenhouse Ltd. (1986), 18 C.C.L.I. 24 (B.C.S.C.), refd to. [para. 29].

Modern Livestock Ltd. and Lane v. Kansa General Insurance Co. (1993), 143 A.R. 46 (Q.B.), affd. (1994), 157 A.R. 167; 77 W.A.C. 167; 24 Alta. L.R.(3d) 21 (C.A.), refd to. [para. 29].

Maclab Enterprises Ltd. and Campus Cor­ner Building Ltd. v. Commonwealth Insurance Co. and Halifax Insurance Co. (1983), 51 A.R. 154; 2 C.C.L.I. 267 (Q.B.), refd to. [para. 29].

Metropolitaine (La), compagnie d'assur­ance-vie v. Frenette, Hôpital Jea-Talon et un autre, [1992] 1 S.C.R. 647; 134 N.R. 169; 46 Q.A.C. 161, refd to. [para. 34].

Trinity Industries Ltd. v. Insurance Co. of North America (1990), 916 F.2d 267 (5th Circuit), refd to. [para. 35].

Surrey (District) v. General Accident Assurance Co. of Canada, [1994] 7 W.W.R. 226 (B.C.S.C.), affd. [1996] 7 W.W.R. 48; 77 B.C.A.C. 269; 126 W.A.C. 269 (C.A.), refd to. [para. 40].

St. Paul Fire & Marine Insurance Co. et al. v. Durabla Canada Ltd. (1994), 19 O.R.(3d) 631 (Gen. Div.), revd. (1996), 92 O.A.C. 157; 29 O.R.(3d) 737 (C.A.), refd to. [para. 40].

Triple Five Corp. et al. v. Simcoe & Erie Group et al., [1997] 5 W.W.R 1; 196 A.R. 29; 141 W.A.C. 29 (C.A.), refd to. [para. 47].

Ford Motor Co. of Canada v. Prudential Assurance Co., [1959] S.C.R. 539, refd to. [para. 49].

Sterling Crane v. Penner Brothers Util­ities Ltd. (1985), 12 C.C.L.I. 97 (B.C.S.C.), refd to. [para. 56].

Golden Eagle Co. v. American Home Assurance Co., [1978] C.S. 699 (S.C.), refd to. [para. 56].

Simcoe & Erie General Insurance Co. v. Royal Insurance of Canada et al. (1982), 36 A.R. 353 (Q.B.), leave to appeal refused (1983), 51 N.R. 158; 49 A.R. 38 (S.C.C.), refd to. [para. 56].

Bird Construction Co. v. United States Fire Insurance Co. (1985), 45 Sask.R. 96; 18 C.C.L.I. 92 (C.A.), refd to. [para. 56].

Authors and Works Noticed:

Andrea, Developments in the Law, Toxic Tort Litigation (1986), 99 Harvard L. Rev. 1458, generally [para. 42].

Colinvaux, Law of Insurance (5th Ed. 1984), para. 4-30 [para. 22].

Couch's Cyclopedia of Insurance Law (2nd Ed. 1985), vol. 9, para. 39:203 [para. 22].

Exposure, Manifestation of Loss, Injury in Fact, Continuous Trigger: The Insur­ance Coverage Quagmire (1994), 21 Pepperdine L. Rev. 813, generally [para. 42].

Ivamy, E.R.H., General Principles of Insurance Law (6th Ed. 1993), pp. 402, 403 [paras. 22, 26].

Jess, The Insurance of Commercial Risks, Law and Practice (1986), p. 288 [para. 36].

MacGillivray and Parkington, Insurance Law (8th Ed. 1988), paras. 994 [para. 22]; 995 [paras. 22, 26]; 996 [para. 26, 28]; 997 [para. 26].

Ogburn, The Progression of Trigger Liti­gation in Maryland - Determining the Appropriate Trigger of Coverage, its Limitations, and Ramifications (1994), 53 Maryland L. Rev., generally [para. 42].

Yin, Tung, Nailing Jello to a Wall: A Uniform Approach for Adjudicating Insurance Coverage Disputes in Pro­ducts Liability Cases with Delayed Manifesta­tion and Damages (1995), 83 Cal. L. Rev. 1243, generally [para. 42].

Counsel:

Peter Foley, Q.C., and G. Zabos, for the appellants;

R.H. McKercher, Q.C., Michelle Ouel­lette and J. Denis Pelletier, Q.C., for the respondent.

This appeal was heard on March 17, 1997, by Vancise, Sherstobitoff and Jack­son, JJ.A., of the Saskatchewan Court of Appeal. On October 10, 1997, Sherstobi­toff, J.A., delivered the following decision for the Court of Appeal.