Supreme Court of B.C. Decision in Swagger Construction Ltd. v. ING Insurance Company, Harper Grey Case Summary

Harper Grey partner Bruce Butler successfully represented our client before the B.C. Supreme in Swagger Construction Ltd. v. ING Insurance Company of Canada et al, 2005 B.C.S.C. 1269. Mr. Butler of our firm was counsel on behalf of ING, one of three insurers that opposed the Petitioner’s application for a declaration that the insurers were required to defend it in ongoing litigation involving construction deficiencies in a "leaky building".

ING provided the wrap-up coverage for the project. Zurich and American Home provided CGLs during the period following substantial completion to Swagger, the general contractor on the construction project. The claims against Swagger by the building owner (UBC) were advanced in UBC's Third Further Amended Counterclaim and included a long list of construction deficiencies including the alleged failure to design and/or install exterior flashing, the failure to design or install the air/vapour barrier membrane and other similar allegations. The Counterclaim included an allegation that "the construction deficiencies have caused damage to the exterior and interior building components (the "Resultant Damage")." It also alleged that the construction deficiencies and Resultant Damage posed a danger to visitors and made the building unfit for its intended purpose. The remedial work that was alleged to be required as a result of construction deficiencies included repairs of wall and roof leakage, repairs to curtain wall leakage and repairs relating to the failure of the building envelope.

Mr. Justice Smith dismissed the Petitioner’s application for a declaration that the insurers owed Swagger a duty to defend it in the Counterclaim. In doing so, he distinguished Axa Pacific Insurance Co. v. Guildford Marquis Towers Ltd., 2000 B.C.S.C. 197 and F.W. Hearn/Actes - A Joint Venture Ltd. v. Commonwealth Insurance Co., 2000 B.C.S.C. 764. Mr. Justice Smith found that in light of the definition of property damage within the policies it was likely that there was no property damage with the possible exception of minor damage to non-structural portions of the work such as carpeting and interior drywall. Without making a decision on that issue, he determined that, in any event, there was no "occurrence" and thus the claims did not fall within the insuring agreements.

The decision is a timely one for insurers in relation to leaky building and other construction claims. The decision is based to a large extent on the fact that the work of the general contractor is considered to encompass the  whole building. It will severely limit the coverage under CGL policies available to general contractors and, perhaps, developers. It should not, however, have an impact on the coverage available to sub-contractors.

If you would like further information regarding this decision please contact Bruce Butler at bbutler@harpergrey.com.