All-risk insurer liable for damage to structural integrity of parkade due to faulty workmanship

Insurance law – Property insurance – All-risk policy – Exclusions – Defective workmanship – Interpretation of policy – Practice – Leave to appeal

Condominium Corp. No. 9312374 v. Aviva Insurance Co. of Canada, [2020] A.J. No. 493, 2020 ABCA 166, Alberta Court of Appeal, April 28, 2020, F.L. Schutz, R. Khullar and D. Pentelechuk JJ.A.

The insured appealed a decision of a chambers judge who held that damage to the structural integrity of its parkade resulting from faulty workmanship was not covered under an all-risk policy issued by the insurer.

The policy provided broad coverage to the insured against all risks of physical loss or damage to the insured’s condominium complex.  There was an exclusion for the cost of making good faulty or improper material, workmanship or design, but the exclusion does not apply if the loss or damage was caused directly by a resultant peril not otherwise excluded.

The Court of Appeal held that the exclusion clause was ambiguous and therefore followed the Supreme Court of Canada’s approach to resolving the ambiguity set out in Ledcor Construction Ltd v. Northbridge Indemnity Insurance Co., 2016 SCC 37.  On that basis, the Court of Appeal held that the parties reasonably expected that the cost of making good the faulty or improper workmanship (determined by the scope of work contracted for) would be excluded, but that the consequences of that faulty workmanship would be covered.

This case was digested by Cameron B. Elder, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Cameron B. Elder at celder@harpergrey.com.

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