The Insured was not entitled to recover against the Insurer or the Brokers for losses arising out of three instances of defective workmanship on reconditioned farm equipment since the CGL policy provided by the Insurer excluded losses of that nature. The Broker was not the agent of the Insurer and did not negligently misrepresent the nature of the policy to the Insured.

Moody’s Equipment Ltd. v. Royal and Sun Alliance Insurance Co. of Canada, [2004] S.J. No. 113, Saskatchewan Court of Queen’s Bench

The Insured held a CGL policy with the Defendant Insurer. Part of the Insured’s business was to take ownership of second hand farm equipment through trade-ins, refurbish the equipment and then re-sell it. The Insured suffered losses arising out of three instances of defective workmanship to reconditioned farm equipment. After the claims were denied by the Insurer, the Insured sought recovery against the Insurer and the Brokers on the basis of representations to the effect that it had coverage for defective workmanship such as would be applicable to cover the losses.

The Court held that the losses were clearly excluded from the policy as it did not apply to property damage to the “named insured’s product” which included any goods or products manufactured, sold, handled, distributed or disposed of by the Insured. The losses were also excluded since the repairs were akin to compensatory damages that the Insured was required to pay by reason of the assumption of liability in a contract or agreement.

The Court also held that the Brokers were not the agents, actual or ostensible, of the Insurer since their authority did not extend to a position of being able to conclude the coverage without the consent of the Insurer. The acceptance of premiums was their sole authority. In any event, the Court held that the Brokers did not misrepresent to the Insured that the losses which occurred would be covered under the policy.

The Insured’s action against all of the Defendants was therefore dismissed.

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