To be entitled to coverage under a CGL, the triggering event must occur within the policy period

The Court issued a declaration that the Insurer was not under a duty to defend the Insured in a third party action brought by the City of Barrie where the “property damage” at issue in the underlying action occurred outside of the policy period.

1214528 Ontario Ltd. v. Continental Insurance Co. of Canada, [2005] O.J. No. 6376, Ontario Superior Court of Justice, P.M. Perell J., June 17, 2005

The Insured, a developer, entered into a subdivision agreement with the City of Barrie.  In 1992, a subcontractor hired by the Insured reported on the soil conditions of 27 Moon Drive, one of the properties in the subdivision.  Based in part on this report, the City of Barrie issued a building permit, and a house was built on the 27 Moon Drive property.  The property was ultimately purchased by the Seabrookes.  In June 1997, the Seabrookes experienced flooding and water problems and sued the former owners, the builders and the City of Barrie for damages resulting from continuing water and moisture problems.  In their action, the Seabrookes pleaded property damage to their home and to their personal property.  In a third party action, the City of Barrie sued the Insured seeking contribution and indemnity for the damages claimed by the Seabrookes.

The Insured had coverage under a commercial general liability policy with the Insurer which was in effect from December 1, 1986 to December 1, 1993.  The Insured sought coverage under the policy, arguing that the actions which ultimately caused the damage at issue in the underlying action occurred during the policy period.  The Insured denied coverage, arguing that for the purposes of triggering coverage, the relevant date was the date the property damage physically occurred or manifested itself and not when the acts causing the damage took place.

The Court reviewed the terms of the policy, noting that preconditions must be satisfied prior to there being coverage.  First, the “property damage” must be caused by an “occurrence”.  Second, the “property damage” must take place during the policy period.  The Court was satisfied that the damage was caused by an occurrence which was defined as including “continuous or repeated exposure to substantially the same harmful conditions”.  The Court agreed with the Insurer’s argument that under “occurrence” policies, coverage is to be determined as of the date the damage occurs and not as of the date of the wrongful act which causes the damage.  The Court found support for its conclusion of no coverage in the decision of Rainu v. The Wawanesa Mutual Insurance Co., [1994] I.L.R. 1-3014, where a homeowner sustained damages to his house as a result of a fire in the chimney and sued the prior owner for negligence in maintaining the chimney and fireplace.  In that case, the Court differentiated between the fire, which occurred outside of the policy period, and the cause of the fire, the negligence in failing to maintain the chimney, which occurred during the policy period.  The Court found that the relevant date was the date of the fire.

In the result, the Court issued a declaration that the Insurer was not under a duty to defend its Insured, as the damage at issue occurred outside of the policy period.

This case was originally summarized by Jonathan D. Meadows and originally edited by David W. Pilley.

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