Construction Deficiencies & the CGL Policy:
Supreme Court Refuses Ontario Appeals

The Supreme Court of Canada (the "SCC") has just refused to hear appeals in two Ontario cases where a CGL insurer was found liable to indemnify general contractors for construction deficiency repair costs. The refusal leaves us without a Canada-wide and final decision on the contentious issue of whether the insuring agreement, particularly an "occurrence", covers faulty design, workmanship or materials, leaving coverage to be ultimately determined by the policy exclusions and exceptions.

In an April, 2006 Insurable Interest E-Bulletin, we reviewed a number of recent cases for and against the conclusion that construction deficiencies fell within the coverage provided by the insuring agreement. That E-Bulletin can be found here.

The case law "scorecard" was as follows:

• ARG Construction Corp. v. Allstate Insurance Co. of Canada (Ontario High Court of Justice - November, 2004): no occurrence
  
• Westridge Construction Ltd. v. Zurich Insurance (Saskatchewan Court of Appeal - June, 2005): occurrence
  
• Swagger Construction Ltd. v. ING Insurance (British Columbia Supreme Court - September, 2005):
  no occurrence
  
• Bridgewood Building Corp. v. Lombard General Insurance (Ontario Court of Appeal - April, 2006): occurrence
  
• Beige Valley Developments v Lombard General Insurance (Ontario Court of Appeal - April, 2006): occurrence
  

Judgments from one province are not binding in the others although they are considered. A SCC judgment on this issue would have created some welcome nation-wide certainty. Lombard provided that opportunity by challenging the Bridgewood Building and Beige Valley decisions but the SCC refused to hear the appeals.

The SCC may refuse to hear an appeal because the case does not raise questions of public importance or because the judgment appealed from appears to be sound. The SCC does not give reasons for its refusals and so we do not know why it declined to hear the Bridgewood Building and Beige Valley appeals. Even so, the refusal arguably does more for those seeking coverage than those resisting it. Ontario Court of Appeal decisions are persuasive across the country and the SCC refusal leaves these pro-coverage judgments intact.

It remains to be seen whether the courts in the other provinces ultimately follow the Ontario and Saskatchewan Courts of Appeal. If the others follow different paths, the SCC may again be asked to consider this issue.

Readers with questions about any of the decisions cited above, or CGL insurer liability generally are invited to contact Glen Boswall by phone (604-643-3125) or by e-mail (rgb@cwilson.com).