A Plug Nickel's Worth Of Coverage For Intentional Acts: Urbanmine Inc. v St Paul Fire And Marine Insurance Co. 2017 MBCA 42

As so many of the coverage opinions I write concern construction defects and building deficiencies, it can be refreshing to review decisions that consider unusual or 'nefarious' allegations against an insured. Add the intentional act exclusion into the mix, and we've got an interesting read... One such decision arises most recently from the Manitoba Court of Appeal in Urbanmine Inc. v. St Paul Fire and Marine Insurance Co., 2017 MBCA 42, which concerned the insurers' duty to defend claims relating the alleged theft of a half-million pounds of nickel from a Vale Canada Ltd. ("Vale") mine in Thompson, Manitoba.

In the underlying action, Vale sued one of its subcontractors, alleging the theft and misappropriation of 494,050 pounds of nickel. According to Vale's Statement of Claim, the subcontractor then sold the stolen nickel (at a very deep discount) to Urbanmine Inc. ("Urbanmine"), who, in turn, resold the stolen nickel to someone else (again, for "less than fair market value"). Suffice it to say, everyone involved in the alleged conspiracy got sued.

Vale's pleadings against Urbanmine are fascinating. To paraphrase, Vale alleged that Urbanmine had the skill, experience and industry knowledge to determine the nickel was actually owned by Vale. As such, Urbanmine knew or ought to have known that the nickel was stolen or obtained by the subcontractor through an unlawful or fraudulent scheme. Vale's pleading further alleged that Urbanmine was a knowing and willing participant in the scheme and, intending to cause loss to Vale, wrongfully converted the nickel for its own use and profit. Upon receipt of the claim, Urbanmine sought coverage from its liability insurers, who, of course, denied coverage.

Interestingly, the Manitoba Court of Appeal didn't describe or categorize the liability policy at issue and only a few of its terms are reproduced in the decision. To summarize the policy's insuring agreement, Urbanmine was entitled to be defended and indemnified from claims for "property damage" arising Urbanmine's "work, products or completed work." The property damage must have been caused by an "event", which the policy later more narrowly defined as "an accident ..." The policy contained a typical intentional act exclusion, withdrawing coverage for "damage that is intended or expected from the standpoint of the [insured]."

In the Queen's Bench, the learned Chambers Justice found a duty to defend, applying a "reasonable expectations" analysis that...