09/19/2018 – Jurisdiction Alberta
Part 64 published on 12/01/2018
Damage to parking area not covered by corporation’s property insurance
The condominium corporation hired a contractor to provide “parking rehabilitation and maintenance work to the parking surface in the parkade area” of the complex. The work involved cutting into the membrane of the parkade surface. The contractor cut too deeply, causing damage to the structural integrity of the parkade. The question was whether or not that damage was covered by the corporation’s property insurance policy.
The insurance policy was an “all risks” policy that included an exclusion for faulty or improper workmanship. However, the exclusion said that the exclusion “does not apply to loss or damage caused directly by a resultant peril not otherwise excluded” in the policy.
The lower Court had held that the structural damage was not part of the contractor’s work (or in other words went beyond the contractor’s work) and accordingly was “resultant” damage covered by the policy. On appeal, the Court of Queen’s Bench found that none of the damage was covered by the policy, and reversed the lower Court decision. The Appeal Court said:
In the case before me, however, the exception to the exclusion is that the faulty workmanship exclusion does not apply to loss or damage caused by a resultant peril not otherwise excluded; that is to say, loss or damage caused by an otherwise insured peril. So, for example, if the faulty workmanship caused a fire, damages arising from faulty workmanship which caused the insured peril of fire would be covered by the policy by virtue of the exception to the exclusion. However, if no insured (ie not excluded) peril occurs, then the exception to the exclusion does not apply.
This is the plain reading of the policy wording. No ambiguity arises in either the exclusion or the exception to the exclusion.
No such resultant insured peril occurred in this instance. The Respondent argues that damage to the structural integrity of the building is itself a “resultant peril”, since it has not been specifically excluded from the “all risks” insuring agreement. However, damage is not a peril; it is a result. This argument by the Respondent must accordingly fail.
Editorial Comment: The Court seems to be saying that the damage in this case did not result from a new peril, but rather was part and parcel of the same risk, namely the risk of faulty work by a contractor. So in other words, the Court seems to be saying that the exception in the exclusion did not apply in this particular case.
Condominium Corporation No 9312374 v Aviva Insurance Company of Canada, 2018 ABQB 674