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THE INSURANCE CONTRACT - Interpretation - Policy limits

Monday, April 12, 2021 @ 9:31 AM  


Lexis Advance® Quicklaw®
Appeal by the defendant insurers from a summary trial decision finding that no policy limit applied to the mitigation of loss coverage in a Professional Liability Policy and from a subsequent determination of the trial judge that the respondent was entitled to special costs. The respondent, a design-build contractor, agreed to provide the design, supply and installation of all the precast concrete components of a parkade. When cracks were discovered in the load‑bearing precast elements, the respondent undertook remedial work, incurring over $9.9 million in this effort. The respondent borrowed money to help finance this work and incurred financing charges as a result. It then sought reimbursement for the amounts it expended under the insurance policy issued by the appellants. The appellants argued the trial judge erred in interpreting the Policy because he focused on the mitigation of loss coverage language in the Policy without sufficient attention to the language of the Policy as a whole. They further argued that the trial judge failed to identify any commercial explanation for why the parties to the Policy would expect to receive an unlimited coverage grant in return for the payment of a fixed policy premium. The appellants argued that the policy only provided for one policy limit of $10 million in the aggregate. They argued a reasonable insured would understand that the limits of liability that pertained to the Damages Coverage would also pertain to the Mitigation of Loss Coverage.

HELD: Appeal dismissed. The trial judge properly identified the legal principles that were pertinent to the question before him and properly applied those principles to his interpretation of the Policy. He did not fail to consider a required element of a legal test or fail to consider a relevant factor when interpreting the policy. The trial judge’s analysis was coherent and comprehensive and established that the Limits of Liability Clause was not explicitly referenced in the Mitigation of Loss Coverage, though it was expressly referenced in each of the other forms of coverage provided for in the Policy, and the Limits of Liability Clause did not make any reference to the Mitigation of Loss Coverage, though it expressly did so in relation to each of the other forms of coverage provided for in the Policy. The language of the Policy, in failing to place any limit on the Mitigation of Loss Coverage, was unambiguous. The Policy, though awkward in some respects, did not give rise to two reasonable but differing interpretations. There was no basis to interfere with the award of special costs that the trial judge made. The trial judge expressly exempted the respondent’s costs reasonably attributable to the preparation of materials and argument of its position in relation to the applicability of the limit to the Mitigation of Loss Coverage, and in relation to two other issues that were concurrently argued by the parties. The special costs order was based on various forms of reprehensible conduct and individually, and particularly in combination, supported the discretionary order.

Surespan Structures Ltd. v. Lloyds Underwriters, [2021] B.C.J. No. 243, British Columbia Court of Appeal, P.M. Willcock, L.A. Fenlon and P.G. Voith JJ.A., February 12, 2021. Digest No. TLD-April122021002