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PROPERTY INSURANCE - Contractor's or builder's policies

Monday, April 01, 2019 @ 1:00 PM  

Lexis Advance® Quicklaw®
Appeal by the insurer from a ruling on a question of law finding that an insurance policy covered damage to pre-existing property at a construction site. The four respondents were the general contractor and subcontractors involved in renovations at a hospital complex. As the project neared completion, water escaped from a sprinkler system worked on by a plumbing subcontractor, causing flooding. The water damaged the newly constructed property and related building materials. The parties agreed that the policy covered this damage. In addition, the flooding caused damage to other areas of the hospital complex unrelated to the renovation project. At issue was whether the policy covered damage to this pre-existing property. The application judge held that the term "property insured" in the Builders' Risk policy included the pre-existing property. The insurer appealed.

HELD: Appeal allowed. The appellant's policy used clarity and precision to define "property insured" as property actually constructed, installed, or repaired as part of a construction project, including property to be incorporated into the project and property required for project completion. Any property unrelated to the project was not within this definition and was therefore not insured. Contrary to the application judge's findings, the absence of a specific exclusion clause relating to pre-existing property did not create ambiguity or result in that property being insured under the policy. The fact that "property insured" was not defined through reference to delineated areas within the hospital complex did not create an ambiguity. In the absence of any ambiguity, the pre-existing property at the hospital complex, unrelated to the construction project, was not "property insured" under the appellant's policy. Had an ambiguity been established, the general rules of contract construction would have produced the same result based on the parties' reasonable expectations that the policy would not result in underinsurance, the commercial context in which the policy was created, including general liability insurance that covered the pre-existing property, and judicial interpretations of other similar policies.

Team Mechanical Construction Ltd. v. Viking Fire Protection Inc., [2019] N.J. No. 73, Newfoundland and Labrador Court of Appeal, J.D. Green C.J.N.L., B.G. Welsh and F.P. O'Brien JJ.A., March 6, 2019. Digest No. TLD-April12019001