In Ville de Québec v. Genitech Entrepreneur Général Inc., the Superior Court had to determine whether a builder’s risk policy covered repairs to damages sustained by an existing structure. In this case, Plaintiff had instituted an action against the general contractor it mandated to undertake work pertaining to the transformation of a theater into a concert hall by incorporating ancillary rooms. Plaintiff required that the general contractor obtain a builder’s risk policy. During the demolition work, a fire broke out in the attic of a portion of the building and caused significant damage to the existing roof. Furthermore, smoke and water sprayed onto the building damaged part of the premises located near the place where the work was carried out.
The defendants presented a motion to dismiss the action on the basis that in accordance with the builder’s risk policy, Plaintiff, at the time of the loss, was a co- insured not only under the provisions pertaining to “Direct Damages” of the policy but also those pertaining to “Civil Liability”. Therefore, the defendants argued that Plaintiff, as a co-insured, was precluded of suing another co-insured in the case of a loss. Furthermore, the defendants argued that the builder’s risk policy did not only cover the damages to the building where the work was being carried out, but also to all of the damages resulting from this work. In support of their allegations, the defendants relied on a case from the Alberta Court Queen’s Bench in Medicine Hat College v. Starks Plumbing & Heating Ltd., which, according to them, would have resolved the issue.
Plaintiff, for its part, maintained that the damages claimed were not part of the lot where the work was being carried out and therefore these direct damages were excluded from the builder’s risk policy.
The issue in dispute was therefore to determine if the builder’s risk policy covered the repair of damages to an existing structure. Firstly, the Superior Court mentioned that in insurance, decisions rendered in other Canadian provinces can serve as precedents. Secondly, to determine if the builder’s risk policy covered the damages to the building other than those covered by the new construction, the Court reiterated that the goal of this policy was to rapidly indemnify for damages that occurred during the execution of the work.
The insurance policy in dispute stated that:
The insurance policy takes effect on the insured property up to the limits set at in the “Summary of Protections”.
- Insured property
- On the Project Site
Property intended for use in the course of construction, installation, reconstruction or repair work carried at by the Insured pursuant to the contracts or activities described in the “Summary of Protections”. (Our translation)
This clause of the policy was identical to the one in the Medecine Hat case, where the Court underligned that the parties involved on the project had an insurable interest not only in the new construction, but also in the existing structure itself, and to hold otherwise would be to defeat the reasonable expectations of the parties and would require clear language of exclusion, which is absent in the case at hand.
In light of this decision, the Superior Court concluded that the whole structure of the building was covered by the builder’s risk policy. Therefore, all of the damages claimed by Plaintiff were covered by this policy, which named as co-insureds both Plaintiff and the defendants, and as such precluded one insured from suing the other in the case of a loss.
This decision was appealed by Plaintiff. It will be interesting to see how the Court of Appeal will decide of this matter.