Mitigation of loss coverage fell outside the scope of professional liability policy limits.
Insurance law – Liability insurance – Errors and omissions policy – Coverage – Limit on liability – Interpretation of policy – Practice – Summary judgments
Surespan Structures Ltd. v. Lloyds Underwriters,  B.C.J. No. 33, 2020 BCSC 27, British Columbia Supreme Court, January 10, 2020, W.K. Branch J.
A professional liability policy insuring a construction project provided mitigation of loss coverage. Under this coverage, an insured would be indemnified for “the costs of remedying defects in the WORKS in order to fulfil contracts undertaken for others where such costs are necessarily incurred prior to substantial completion”. This was providing that such a defect “arose from an error, omission, or negligent act in the performance of PROFESSIONAL SERVICES” by the insured, its employees, or sub-contractors.
The insured plaintiff sought reimbursement for such remedial work in the amount of $9.9 million and brought a summary trial application. The policy had an aggregate claim limit of $10 million. The core issue at summary trial was whether any limit existed on the amount payable under the mitigation of loss coverage.
The policy held four coverages – damage coverage, mitigation of loss coverage, defence costs coverage, and supplementary payments coverage. Of these four types of coverage, only the mitigation of loss coverage language was missing limits language.
Branch J. found this to be of significance. According to the principles of statutory interpretation, this was a “failure to follow a pattern of express reference”. There was no grammatical or textual reason why the mitigation of loss coverage would not also require an express reference to the limit. The limits of liability clause was of no assistance as it specifically referred to “CLAIMS made against the INSURED”. Mitigation of liability coverage, however, does not require a “CLAIM” to be made against the insured. Accordingly, the “mitigation of loss” coverage fell outside the scope of any stated limit in the policy. Thus, the policy limits did not apply.
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