In the decision rendered on June 23, 2009 in the case Les Constructions L.P.G Inc. vs. Compagnie d’assurance Temple, the Court of Appeal concluded that a subcontractor had the right to claim for the value of its property damaged as a result of a fire and this, in virtue of a Builder’s Risk Policy.

In this case, the general contractor had obtained a Builder’s Risk Policy from Temple covering the construction of a condominium project. On January 17, 2004, a fire broke out between the 5th and 6th floors of the condominium during the course of construction, destroying certain equipment and materials used by sub-contractor L.P.G. for its work. L.P.G. made a claim for the value of the materials and equipment totalling $184,193.38 to Temple and the latter refused the claim.

The Superior Court concluded that the value of the material and equipment was not included in the limits of insurance adding that the equipment damaged was covered in virtue of a separate policy obtained by L.P.G.

The Court also retained the testimony of a representative of Temple who stated that Temple generally does not issue insurance policies covering tools and equipment used on a job site.

The Court of Appeal analyzed the Builder’s Risk Policy issued by Temple and first underlined that it was not contested that L.P.G. was an insured in virtue of the policy given that the policy covered “all contractors, sub-contractors, architects and engineers”. The court then reiterated the principles well established by the Supreme Court of Canada in Commonwealth Construction Company Limited vs. Imperial Oil Limited which held that the purpose of a Builder’s Risk Policy is to protect all those who take part in a construction project and, in case of loss, to ensure that the project continues as soon as possible and is completed as quickly as possible.

The Court of Appeal then stated that Temple’s policy was primary and, as such, the Superior Court should not have taken into account the policy obtained by L.P.G. The Court then stated that while certain materials and equipment were specifically excluded in virtue of clause 8b, it did however cover the equipment and property described in clause (1) b which covered “Constructions, scaffolds, supports, fences and temporary footings as long as the value is included in the limits of the guarantee” The Court noted that the meaning to be given to “as long as the value is included in the limits of guarantee” included in paragraphs (1) a and (1) b was different than the meaning to be given to “as long as the value is included in the estimate of the declared values of the project” utilized in paragraphs (1) d and (1) e. As well, the expression “limits of guarantee” is defined at clause 2 of the policy as being that which is indicated in clause 7 of the declarations which specifically states that the limits of guarantee are $9,000,000 whereas the expression “estimate of values” is defined at clause 6 of the policy which refers to clause 9 of the Declarations.

Consequently, the use of different terms envisages different situations: the property described in clauses (1) a and (1) b are covered if their value is included in the limits of guarantee defined at clause 2 that is, $9,000,000. The Court of Appeal added that if we were dealing with property included in clauses (1) d and (1) e, one would have to refer to the definition of “estimates of values”, clause 6 of the policy, which refers to clause 9 of the Declarations.

Furthermore, the court added that the property excluded in the policy was specifically identified in clause 8 and more particularly, certain property excluded was specifically listed and it was clearly stated that the property which fell within the scope of clause (1) b was not excluded by the policy. The Court of Appeal thus maintained that the property of L.P.G. was covered in virtue of Temple’s policy.