A contractor who created a foundation with faulty concrete was covered by a CGL policy.
A contractor - AniWall created a foundation using faulty concrete. The Ontario Supreme Court determined that the contractor was entitled to coverage under a CGL Policy. The insurance company, AXA, appealed. AXA sought to limit its liability by relying on two separate Exclusionary clauses within a Commercial General Liability insurance policy.
The Court of Appeal rejected the "Your Work" exclusion in the policy holding that the concrete supplier was an insured "Sub-Contractor" of the Respondent contractor Ani-Wall, and rejected the "Rip and Tear" exclusion as being incomprehensible.
The Daily Commercial News and Construction Record provides a summary of this decision, as does the Canadian Underwriter.
AXA Insurance (Canada) v. Ani-Wall Concrete Forming Inc. [2008] O.J. No. 2843 Ontario Court of Appeal D.H. Doherty, M.J. Moldaver and E.A. Cronk, JJ.A. July 18, 2008
The Appellant, AXA Insurance, issued a Commercial General Liability insurance policy to Ani-Wall Concrete. Ani-Wall was constructing concrete footings and foundations for homes in Toronto. Ani-Wall contracted Dominion Concrete to supply the concrete for the footings and foundations. That concrete turned out to be defective, and the builders looked to Ani-Wall for damages.
AXA believed it was under no obligation to indemnify Ani-Wall for damages for the cost of repairing, removing or replacing the defective footings and foundation. AXA applied to the Superior Court of Justice for a Declatory Order defining and limiting the scope of its duty to indemnify. It relied on three Exclusionary clauses in its policy: "Your Work" exclusion, "Your Product" exclusion, and "Rip and Tear" exclusion. On Appeal AXA abandoned the "Your Product" exclusion.
The Your Work exclusion applied to work performed on Ani-Wall's behalf by a Sub-Contractor. AXA submitted that Dominion failed to meet the requirements of a Sub-Contractor, and was instead a simple supplier to Ani-Wall, and would not be captured in the exception to the Your Work exclusion. Sub-contractor was not a defined term of the contract. The Court of Appeal supported the lower court's ruling and rejected the submission by AXA that the court should rely on the American authorities with respect to defining a Sub-Contractor. It held that the insurer should define the term Sub-Contractor in its contract should it wish to rely on exclusionary provisions to limit its scope of liability. Since AXA chose not to define the word the court felt the word should be construed broadly, and that any ambiguity in meaning must be resolved in favour of Ani-Wall.
The Court of Appeal rejected AXA's alternative argument with respect to the Rip and Tear exclusion, finding the Rip and Tear clause was poorly drafted, and that when read literally was difficult to comprehend. The interpretation that AXA proposed was illogical, and as a result was fatal to its application. In the result, the Court dismissed the appeal.
This case was originally summarized by nmacdonald@harpergrey.com and originally edited by dpilley@harpergrey.com
