Insurable Interest

SCC Grants Leave to Appeal Construction Deficiency Coverage Decision

Back in March we issued a bulletin regarding the BC Court of Appeal decision in Progressive Homes Ltd. v. Lombard General Insurance which addresses liability insurance coverage for construction defect claims. We noted that the law in British Columbia remains fundamentally different from Ontario and Saskatchewan where the Courts of Appeal in those provinces have come to opposite conclusions respecting the concepts of "occurrence", "property damage" and the application of the sub-contractor exception in the standard "work" exclusion.

Today, August 27, 2009, the Supreme Court of Canada granted leave to appeal the Progressive Homes case. It has generally been our opinion that, assuming Plaintiff's counsel properly pleaded "leaky condo" building deficiency claims (admittedly a big assumption), the insuring agreements in CGL policies should be triggered and whether coverage existed for contractors or developers would fall to be decided by the policy exclusions.

The different approaches to coverage for construction deficiency claims taken by the Courts of Appeal across the country was undoubtedly a major factor in the decision of the Supreme Court to grant leave for appeal. Hopefully the highest Court in the land will soon sweep away the confusion and provide clear analysis of the thorny coverage issues that have been the source for much conflict and debate between insurers and insureds for a long time.

Readers who would like a more detailed history of the law leading up to the "Progressive Appeal" can access a helpful paper on our website at http://www.cwilson.com/pubs/insurance/rgb5/.