Insurance: “Multi-Peril” “All-Risk” Coverage & LedcorCondominium Corporation No. 9312374 v Aviva Insurance Company of Canada, 2020 ABCA 166 (CanLII)
Keywords: insurance; “all-risk” coverage; exclusion; Ledcor Construction Ltd v Northbridge Indemnity Insurance Co, 2016 SCC 37
The Appellant, Condominium Corporation No. 9312374 (“Condo Corp.”), enters a contract with Durwest Construction Systems Alberta Limited (“Durwest”) and Williams Engineering Canada Inc. (“Williams”) to provide parking rehabilitation and maintenance work. Durwest and Williams cut too deeply into the parkade slab, causing structural damage. Question: whether damage to the structural integrity of the parkade, resulting from faulty workmanship, is covered under its “multi-peril” Aviva insurance policy.
Master: yes. Chambers Judge: no. Court of Appeal: yes. S.C.C.?
The Policy in question was an “all-risk” policy providing broad coverage to the Condo Corp. against the risk of direct, physical loss or damage to the condominium. Significantly, this Policy contained an exclusion for the cost of making good faulty or improper material, workmanship or design. The application of the exclusion was limited by the following exception: “This exclusion does not apply to loss or damage caused directly by a resultant peril not otherwise excluded in Coverage A of Section I”. Coverage A of Section I says that “except as otherwise provided” all risks of direct physical loss of or damage to the insured property is covered. (See para. 6).
In the Court of Appeal, the Appellant and Respondent disputed the application of Ledcor Construction Ltd v Northbridge Indemnity Insurance Co, 2016 SCC 37 (I was counsel with Stacey Bootham for one Appellant, & Dennis Picco Q.C. and Marie-France for the other). Whereas the Appellant said Ledcor applies, the Respondent said Ledcor was distinguishable because the builders’ all-risk policy featured in that case is different from an all-risk property policy in the present case, and the language of the exclusion clauses is also different. (See para. 7).
The Court of Appeal found that the approach taken in Ledcor (i.e. that where exclusion language is ambiguous, the Court may find an interpretation consistent with the reasonable expecations of the parties and commercial reality) “need apply only if we find similar ambiguity in the express language of the exclusion and the exception to be interpreted here.” (See para. 13).
The Respondent insurer’s view was that its Policy language was unambiguous. Since the damage in question involved a “single peril of faulty workmanship”, the Respondent argued that the exception to the exclusion of coverage would only engage where that peril caused “a second, resultant peril which causes separate, distinct damage”. (See para. 16).
In this case, the Court of Appeal determined “…the exclusion clause and the exception to the exclusion, taken as a whole, are ambiguous” and, as such, it was necessary to apply “principles of insurance contract interpretation…to determine the correct interpretation”. (See para. 17). The Court of Appeal provides a detailed outline these principles at para. 17 of the decision.
Applying Ledcor, the Court of Appeal determined that, while the parties expected the cost of making good faulty or improper workmanship would be excluded, they reasonably expected the consequences of faulty workmanship would be covered. (See para. 45).
Counsel for the Appellant: David Cumming and Amanpreet Sran (McLeod Law LLP, Calgary)
Counsel for the Respondent: David Wedge (Parlee McLaws LLP, Edmonton)