| On April 6, the Court of Appeal of Québec rendered its decision in SNC-Lavalin inc. (Terratech inc. et SNC-Lavalin Environnement inc.) c. Deguise, 2020 QCCA 495.
Considering the importance of this decision for both the construction and insurance industries, RSS offers a series of newsletters discussing the main issues at stake. This is one segment of the complete series found here. |
In the matter of SNC-Lavalin Inc. (Terratech Inc. et SNC-Lavalin Environnement Inc.) c. Deguise, the excess insurers Northbridge and AIG argued that the non-cumulation of liability clause in the insurance policy was applicable to the facts at issue. The Court of Appeal dismissed the argument and thus accepted the trial judge’s analysis. It should be noted that only the provisions of AIG’s policy were analysed since Northbridge’s policy was a follow form type policy and must therefore follow the provisions of AIG’s policy.
The clause in question read as follows:
| 1. PRIOR INSURANCE AND NON-CUMULATION OF LIABILITY
It is agreed, that if any loss is also covered in whole or in part under any other excess policy issued to the Insured prior to the inception date hereof, the Company’s limit of liability as stated in Item I of the Declarations shall be reduced by any amounts due [to] the Insured on account of any such loss under such prior insurance. [par 830] |
The Court of Appeal pointed out that the purpose of this clause is to limit the amount payable for damages caused by a single event, even if the damages occur over several insurable periods, provided that the damages are attributable to the same loss arising from the same event. Thus, the amount payable and available under subsequent policies is reduced by the amount paid under previous policies.
To support the application of the non-cumulation clause in this case, the insurers argued that there was only one “event” causing a single loss. However, the term “event” included “continuous or repeated exposure to conditions, which results in Personal Injury or Property Damage neither expected nor intended from the standpoint of the Insured.” [par 836]
According to them, all material damage caused by the concrete is a single occurrence.
In its analysis, the Superior Court considered two aspects: the history of the clause and the facts in dispute.
Following the American interpretation, the Court was of the view that the non-cumulation of liability clauses was not designed to be applicable in a context where there are several claims, several alleged faults against the same people, and several claims by different people for continuous and progressive damages to different property. Moreover, according to American doctrine, when a court applies a method of apportioning damages in proportion to the period of insurance coverage of each insurer, non-cumulation of liability clauses is invalid.
Thus, based on the facts, the Court determined that there was not a single loss and rejected the argument that there was only one occurrence. Indeed, several hundred buildings belonging to a multitude of owners sat on defective concrete foundations. This concrete was purchased from two separate concrete mixers and was poured at various dates. In addition, the pyrrhotite concentration varied from one pour to another, depending on the rock vein mined at the B&B quarry at the time.
In short, according to the Superior Court, the non-cumulation of liability clauses was not intended to apply in such a case.
The Court of Appeal ruled that there was no manifest and determining error and therefore dismissed the insurers’ appeal on this point of law.