No Faulty Workmanship In Court Of Appeal's Interpretation Of Common Exclusion Clause

Published date13 May 2020
AuthorMr Christiaan A. Jordaan
Subject MatterInsurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Trials & Appeals & Compensation
Law FirmTheall Group LLP

The Alberta Court of Appeal recently addressed a recurring coverage issue: the conflict between the broad protection intended by an "all perils" property insurance policy and an exclusion for the costs of making good faulty workmanship. Based in part on the general purpose of such insurance, the decision in Condo Corp No 9312374 v Aviva Insurance Co of Canada held that property damage directly caused by the faulty workmanship of a contractor was covered, as long as it was outside the scope of work for which the contractor was hired.1

The dispute involved structural damage to a residential building that resulted when a contractor hired to repair the surface of the building's parkade cut too deep into a concrete slab. Aviva denied coverage on the basis of the exclusion for "the cost of making good... faulty or improper workmanship". However, that exclusion also contained the very common exception that "this exclusion does not apply to loss or damage caused directly by a resultant peril not otherwise excluded".

In construing the policy language (which was found to be ambiguous given the lack of any definition of "resultant peril"), the court identified a number of general considerations:

  • The purpose behind multi-peril or all-risk policies is to provide broad coverage for fortuitous loss or damage, affording the insured certainty, stability and peace of mind.
  • The intent of faulty workmanship exclusions is to discourage contractors (or those hiring them) from cutting corners and being careless in order to save money and then relying on the insurer to pay the cost of correcting their mistakes.
  • The case law has reconciled those two principles by having the excluded cost of making good faulty or improper workmanship informed by the scope of work contracted for.

Applying these considerations, the court held that because the...

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