The appeal by the Insurer, Lombard Canada, of a decision compelling the Insurer to defend a claim against its Insured, Hamel Construction, was unsuccessful where the Court of Appeal held that the Court could take judicial notice of relevant statutes to ascertain the true nature of the claim against the Insured in determining the Insurer’s duty to defend

20. April 2005 0

Hamel Construction Inc. v. Lombard Canada Ltd., [2005] N.S.J. No. 151, Nova Scotia Court of Appeal

The Insured made a contract with the Bedford Waterfront Corporation in which the Insured agreed to deliver concrete caissons from a dismantled wharf to Bedford by floating them with sufficient stability that they could be moved across a waterway. Bedford retained a third party to do the towing. One of the caissons was defective and sank. The third party reclaimed the sunken caisson but only after expending a considerable sum of money. The third party sued the Insured on the grounds that the Insured represented that the caisson was safely afloat. The Insured claimed coverage under its policy with the Insurer, who maintained that the loss fell squarely within the policy’s business risk exclusion. In its Statement of Defence, the Insured maintained that Bedford had instructed the third party to refloat the caisson on the insistence of municipal and federal authorities who considered it a threat to navigation in the area. The chambers judge allowed the application and held that the Insurer had a duty to defend. This decision was based on the Statement of Defence which indicated that the claim was based on actual physical damage to tangible third party property, the Port Authority’s waterway. The damage was the caisson’s obstruction of the waterway. The Insurer appealed this decision.

On appeal, the Court found that the chambers judge erred in having regards to the Insured’s Statement of Defence in determining the nature of the claim made against the Insured. In determining the duty to defend, “pleadings” referred to pleadings directed against the Insured. However, the duty to defend could be triggered by the Statement of Claim in this case. The third party’s claim was not for the cost of replacing the caisson as a result of its sinking but for the cost of raising the caisson. The true nature of the claim was that the caisson was an obstruction to navigation and could not remain where it was. The Court held that it was able to take judicial notice of the Navigable Waters Protection Act and Canada Ports Corporation Operating By-law and, as a result, it was possible to infer that Bedford and the third party were not permitted to leave the caisson lying where it sank and were subject to being ordered to remove it. The Court held that there were sufficient facts alleged which, if proved, established a claim against the Insured arising out of property damage.

In the result, the Insurer was obligated to defend the Insured.

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