Commercial general liability insurance - Coverage - Interpretation of policy - Duty to defend - Exclusions - defective workmanship - General contractors - Own work / product exclusion
April 2007GCAN Insurance Co. v. Concord Pacific Group Inc.
[2007] B.C.J. No. 443
British Columbia Supreme Court
Garson J.
February 22, 2007
The Insurer applied for a declaration that it had no duty to defend the Respondents against a claim brought by two strata corporations for allegedly defective workmanship and resultant damage. The Court found that the decision in Swagger Construction Ltd v. ING Insurance Co. of Canada, 2005 BCSC 1269 applied only to general contractors, and refused to grant the declaration in respect of the owner/developer.
The Insurer, GCAN Insurance Company (“GCAN”), applied for a declaration that it had no duty to defend the Respondents. Two strata companies had brought an action against the Respondents alleging that, inter alia, the Respondents built a defective building envelope which allowed water ingress, which in turn caused damage to the interior and exterior of the building.
GCAN argued that the decision of the British Columbia Supreme Court in Swagger Construction Ltd. v. ING Insurance Co. of Canada, 2005 BCSC 1269, was determinative of the issue, and was binding. The Respondents argued that Swagger was (1) distinguishable; (2) a judicial aberration that ought not to be followed, or (3) applicable only to general contractors, but not to owners, developers, or general partners. The Court accepted the third argument of the Respondents, and found that the “own work” type coverage or exclusion from coverage did not apply to owners or developers, but was limited to general contractors. The Court stated:
Swagger stands for the principle that in the context of an insurance policy covering physical injury to tangible property, defective construction is not an “accident” (and therefore coverage is excluded) unless there is damage to the person or property of a third party. To deny coverage to the owner/developer when they took no part in the construction of the project is essentially akin to saying that the general contractor and the owner/developer are the same parties. While the precise roles of all the parties involved must be determined on the facts at trial, at this point it can at least be said that the “Named Insureds” contained within the Policies are not all the same party.
[…]
It would be unfair to allow the insurer to avoid defending an owner/developer for work performed by the general contractor in which the owner/developer took no part (paras. 95-97).
The Court therefore granted the declaration in respect of the general contractor, but found that GCAN was obligated to defend the other Respondents.
