The Pyrrhotite Case: What Should Be Considered When Assessing Risk

• Published date: 29 May 2020
• Author: Ms Catherine Tyndale and William Plante-Bischoff
• Subject Matter: Insurance, Insurance Laws and Products
• Law Firm: Clyde & Co

As part of our series on the Court of Appeal's recent ruling in Deguise v. Montminy, concerning the first wave of lawsuits related to crumbling concrete foundations due to the presence of pyrrhotite, Catherine Tyndale and William Plante-Bischoff examine the Court's examination of the insurance policies issued to the concrete suppliers and to the quarry from which the aggregates were extracted.

In an earlier article in the series, we reviewed the background to the pyrrhotite litigation, and addressed the Court of Appeal's conclusions regarding liability of the various parties involved.

Nullity ab initio

One of the principal arguments advanced by the insurers of the suppliers of concrete that were targeted in the pyrrhotite lawsuits was that the trial judge ought to have declared their policies void from the outset - ab initio. They reasoned that the suppliers, Construction Yvan Boisvert inc. and Béton Laurentides inc, and the company they jointly owned and administered, Carrière B&B inc., which operated the quarry from which the problematic aggregates had been sourced, had failed to disclose information relevant to their risk assessment.

The Court of Appeal dismissed the insurers' arguments. Under article 2408 of the Civil Code of Quebec, the insured must disclose any information or circumstances relevant to the insurer's risk assessment. The court held that for the policy to be declared void, the insurer must establish that it would not have covered the risk had it known the information or circumstances that the client failed to disclose, and must also establish that a reasonable insurer would not have covered that risk. What's more, the client is not bound to represent facts that the insurer knows or is presumed to know because of their notoriety.

The Court of Appeal agreed with the insurers that Béton Laurentides and B&B should have provided the insurers with a copy of the Bérubé Report issued in May 2002 when they applied for insurance. However, the insurer Northbridge had decided to renew the policy without adding any exclusion, even after Béton Laurentides and B&B reported claims arising from the presence of pyrrhotite in the concrete. By then, Northbridge had also received the Bérubé Report, and had concluded that it contained nothing of significance. Therefore, the Court found that Northbridge, due to its conduct, could not establish that it would not have covered the risk had it been aware of the Bérubé Report.

Previous Knowledge

The Court also...