Economic losses arising from an insured's defective or poor workmanship may not entitle the insured to coverage under a CGL.
The Court held that ING did not owe a duty to defend Roadway Construction Ltd. ("Roadway") with respect to defects and deficiencies in a man-made lake as the underlying action related solely to a claim for economic loss for Roadway's own defective work. Because the claim related solely to economic loss there was no triggering event such as an accident or occurrence that would bring the loss within the CGL policy.
Roadway Construction Ltd. v. Ing Western Union Insurance Co.
[2008] A.J. No. 664, Alberta Court of Queen's Bench, E.C. Wilson J., June 16, 2008
Roadway was involved in the construction of a man-made ornamental lake that was part of a residential development. When the lake began to leak and failed to hold water, the developers sued Roadway, alleging that it was negligent in the performance of its work and such negligence caused the ornamental lake to leak water. The developers sought damages including the costs associated with the faulty construction and rectification of the construction deficiencies.
The Court noted that the starting point for a determination whether a claim triggered an insurer's duty to defend was the "pleadings rule". Under this principle, if the pleadings allege facts which, if true, would require the insurer to indemnify the insured for the claim, then the insurer is obliged to provide a defence. The widest latitude should be given to the allegations in the pleadings in determining whether they raise a claim within the policy and the mere possibiilty that a claim within the policy may succeed is sufficient.
In this case, the Court agreed with ING's submission that the true nature of the claim was one for pure economic loss based on a complaint against Roadway for defective work. The Court noted that there was no allegation against Roadway of an accident, occurrence or any other type of triggering event. The complaint of defective or poor workmanship did not qualify as an accident or an occurrence: Celestica Inc. v. ACE INA Insurance 2003 CarswellOnt 2693 (O.C.A.). In the result, the Court was satisfied that the language of the pleadings did not fall within the "four corners" of the policy and, therefore, ING had no duty to defend Roadway. The Court did not accept Roadway's argument that ING was estopped from asserting that there was no coverage, given that it had initially agreed that there was some coverage. The Court indicated that there was no evidence before it on the submission and the Court did not agree that it could review extrinsic evidence in making a decision on coverage.
This case was originally summarized by jmeadows@harpergrey.com and originally edited by dpilley@harpergrey.com
