Condominium Corporation No 9312374 v Aviva Insurance Company Of Canada

INSURANCE ISSUES

The Supreme Court's decision in the Ledcor case (which held that "resultant damage" arising from faulty workmanship is not excluded by the faulty workmanship exclusion in a builders' risk policy) was held not to allow for coverage for "resultant damage" arising from faulty workmanship under an allrisks property policy.

Condominium Corporation No 9312374 v Aviva Insurance Company of Canada, 2018 ABQB 674

FACTS AND ISSUES:

The condominium corporation argued that this exclusion clause did not apply to the damage to the parkade. The issue was whether the property damage, as defined in the Statement of Claim, was covered under the policy. The applicable provisions of the insurance policy were worded as follows:

Master Prowse found that the cost of "making good" the property damage was covered under the policy. The insurer appealed.

HELD: For the Defendant/Applicant; appeal allowed and the decision of the Master is reversed. The Appellant is entitled to costs of the Action.

Justice Hall distinguished the landmark Supreme Court of Canada decision on faulty workmanship exclusions in Ledcor Construction Ltd v Northbridge Indemnity Insurance Co., 2016 SCC 37 ("Ledcor") on the basis that the Supreme Court was dealing with a builder's risk policy whereas the Aviva policy in the case at bar was an all risks property policy:

[25] In Ledcor, the Supreme Court of Canada determined that the cost of removing and replacing the windows damaged by faulty workmanship was "resulting damage" as defined in the policy at issue. In reaching that conclusion, the Court focused on the reasonable expectations of the parties to the policy, that such a loss would be covered by a builder's risk policy. Justice Wagner, speaking for the majority said (para 66):

Therefore, in my view, the purpose behind builders' risk policies is crucial in determining the parties' reasonable expectations as to the meaning of the Exclusion Clause. In a nutshell, the purpose of these policies is to provide broad coverage for construction projects, which are singularly susceptible to accidents and errors. This broad coverage - in exchange for relatively high premiums - provides certainty, stability, and peace of mind. It ensures construction projects do not grind to a halt because of disputes and potential litigation about liability for replacement or repair amongst the various contractors involved. In my view, the purpose of broad coverage in the construction context is...