Coverage Under a Wrap-up Policy May Be Excluded When the Work Is Not Completed

In Constructions Reliance inc. (Constructions Reliance du Canada ltée) c. Compagnie d’assurances Temple, 2020 QCCA 947, recently rendered by the Court of Appeal, the Court concluded that the judge of first instance had not committed any error in deciding that the wrap-up policy issued by Temple did not cover damages caused by a painter since the paint work had not been completed when the loss occurred.

Essentially, Reliance acted as general contractor for the construction of a condominium complex. In turn, it retained the services of J&K Peinture to carry out the paint work. On November 14, 2011, one of J&K’s employees struck a sprinkler head causing water damages to the condominium complex. La Compagnie d’assurance Missisquoi (“Missisquoi”) indemnified its insured, Syndicat Lofts Wilson, for the water damages and instituted subrogation proceedings against defendants, Reliance, J&K and its insurer Société d’assurances générales Northbridge (“Northbridge”) as well as Temple in recovery of the sums paid. The proceedings against J&K were suspended given the latter’s bankruptcy.

Both Reliance and Northbridge argued that only Temple could ultimately be responsible for the damages as they were invoking the benefit of the wrap up coverage issued by Temple which covered completed renovation works to the immovable. Temple denied liability arguing that the loss was not covered by the wrap up policy given that the paint work had not been completed on the date of the loss. There was an admission that the wrap up policy contained an exclusion for damages caused to the insured project which occur during the work. However, the exclusion contained an exception which covered a loss occurring when the work was completed.

The relevant exclusion reads as follows:


To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay, or for any liability assumed by the Insured under Contract (as defined herein), for damages arising out of the Insured’s Work in connection with the Insured Project, because of:


2. Coverage B – Property Damage (as defined herein)



This policy does not apply to any liability:


2. Under Coverage B for:

Injury to, or destruction of, or loss of use of:


(d) property of every kind and description either forming part of or to form part of the Insured Project. This exclusion does not apply during any extension beyond the expiry date of the policy with respect to the Products Hazard and Completed Operations Hazard as defined herein;



3. Completed Operations Hazard

As used in this policy means liability arising out of the Insured’s Work in connection with the Insured Project because of Bodily Injury or Property Damage, but only if such Bodily Injury or Property Damage results from an occurrence after the Insured’s Work has been completed or abandoned.

The Insured’s Work shall be deemed completed at the earliest of the following times:

(a) when all of the Insured’s Work to be performed under the Insured’s Contract is completed;

(b) when all of the Insured’s Work to be performed for the Insured Project is completed;

(c) when that portion of the Insured’s work out of which the Bodily Injury or Property Damage arises has been put to its intended use by other than another Contractor or Subcontractor engaged in performing operations for the named Insured as part of the same Insured Project.

(d) when the Insured’s Work has been accepted by or on behalf of the owner.

[Bold added by the Court]

The judge of first instance maintained the action against Reliance and Northbridge and condemned them solidarily to pay to Missisquoi $169,000. She then concluded that the wrap up policy did not apply and dismissed the warranty proceedings against Temple.

When the loss occurred, 80% of the condominium complex was occupied by co-owners and the architect surveying the work had issued the certificate of substantial conclusion of work. Consequently, appellants were of the view that the work was reputed completed within the meaning of paragraphs (c) and (d) of article 3 and the exception should apply. Appellants argued that the judge of first instance committed an error in law by interpreting the exception to the completed operations hazard as requiring in all cases that the work be completed without taking into consideration the fact that the policy underlines certain circumstances in which they are presumed completed.

The Court of Appeal dismissed the appeal. Essentially, it reviewed the reasons of the judge of first instance stating that there was no proof which demonstrated that the paint work had been accepted by or on behalf of the owner adding that at the time of the loss the certificate issued by the architect contained a list of deficiencies which underlined that several of the paint work was incomplete or had to be corrected, which was contrary to the idea that their work could have been accepted. The Court of Appeal stated that the reasons of the trial judge indicate that she dismissed the argument based on paragraph (d), not because the work was not completed as the appellants maintained rather because the architect had mentioned them in a list of work to be completed and to be corrected. Consequently, one cannot conclude that the work had been accepted.

With respect to the appeal based on the trial judge’s understanding of paragraph (c), the Court of Appeal concluding that the trial judge dismissed the argument due to the nature of the work carried out by J&K. After having identified the meaning of the expression “has been put to its intended use”, the judge of first instance focused on the paint work which was in the course of execution at the time of the loss. As long as the paint work had not been completed and the painters were still painting, it was reasonable to conclude that the work was not being put to its intended use. The comments made by the Court of first instance do not include all types of work as argued by the appellants, rather the paint work in the course of execution in this case. The judge of first instance does not exclude the possibility that incomplete work of another nature may be reputed as being completed when such work is put in service.

The Court of Appeal could not intervene as there were no manifest errors.



Mariella De Stefano

Lawyer, Partner and Co-chair of the Insurance Law Group

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