Background
Condominium Corporation No 9312374 v Aviva Insurance Company of Canada pertains to an interpretation of a multi-peril policy of insurance issued by the respondent, Aviva Insurance Company of Canada (Aviva). The issue in the case was whether the policy covered damages to the structural integrity of the parkade that resulted from faulty workmanship. Condominium Corporation NO. 9312374 (the Condo Corp) appealed a chambers judge decision that overturned the Master’s decision that the damage to the structural integrity of the parkade was covered by the policy.
The policy was an “all-risk” policy. It provided broad coverage against risks for direct physical loss or damage. However, the policy contained an exclusion clause, for “the cost of making good faulty or improper material, workmanship or design”[1]. Additionally, this exclusion was limited by an exception, being that the exclusion did not apply if damage was caused directly by a “resultant peril”.
Analysis
The Court of Appeal (the Court) looked at whether the analytical framework which was provided in the Supreme Court of Canada decision Ledcor Construction Ltd v Northbridge Indemnity Insurance Co, 2016 SCC 37 (Ledcor) applied to the case at hand. Whereas the Condo Corp emphasized that Ledcor is the “governing framework”, Aviva argued that Ledcor decision applied to a builders’ all-risk policy and distinguished the case at hand, which was pertaining to an all-risk property policy. Additionally, Aviva noted the language of their exclusion clause differed from the one in Ledcor.
The Court of Appeal looks at its 2018 decision in Cardinal v Alberta Motor Association Insurance Company, and emphasizes that if there “is no ambiguity, there is no need to resort to interpretation rules”. [2] The Court of Appeal notes that “in the absence of a factual matrix, the Supreme Court of Canada in Ledcor turned to the purpose behind builders’ risk policies to determine the reasonable expectation of the parties. The Court finds that even though Ledcor and other jurisprudence assist in interpreting the words “cost of making good faulty workmanship”, the term “resultant peril” is not defined, therefore making the whole clause ambiguous. The Court looks at the purpose of the policy in order to determine what the expectations of the parties are. The Court determines that the purpose of “all-risk” policies, similar to the “builders’ risk” policy in Ledcor, is to provide “broad coverage for fortuitous loss or damage”.[3]
The Court also looked at the exception of the exclusion clause, which included the words “resultant peril” not defined in the Policy. The Court determined that “resultant peril” in this case was the risk of structural collapse, and noted that the exception should not be given a broad reading. Therefore, the Court of Appeal determines that the “analytical framework to resolve insurance contract ambiguity as outlined in Ledcor” is also appropriate in this decision.[4] The Court notes that this interpretation creates a realistic result, as the loss of the structural integrity of the parkade is a loss that is covered by the terms of the policy.
Take away
The Court of Appeal provides that the framework in Ledcor, which was for a builders’ all-risk policy, also applies to an all-risk property policy. This indicates that the Ledcor framework will likely apply across different commercial contexts and provides uniformity to the use of the framework for “all-risk” policies.
[1] Condominium Corporation No 9312374 v Aviva Insurance Company of Canada, 2020 ABCA 166 at para 6.
[2] Cardinal v Alberta Motor Association Insurance Company, 2018 ABCA 69 at para 20.
[3] Supra note 1 at para 19.
[4] Ibid at para 45.
