In Dominion of Canada General Insurance Company v. Viking Fire Protection Inc., 2019 NLCA 13, the Newfoundland and Labrador Court of Appeal provided an insightful analysis of the nature of builders’ risk coverage and observed that the term “property insured” does not necessarily include all property at the project site. In the Court’s view, the insuring phrase “[this policy] … insures the following property at the ‘project site’” implicitly meant that insurance coverage was provided “only to a particular subset of property at the project site”. Of course, as we well know, each particular case will turn on the specific policy wording at issue.
With respect the facts:
The construction project involved renovations undertaken at a hospital complex in St. John's. During construction, when work on the project was almost complete, water escaped from a sprinkler system being worked on by the plumbing contractor, causing flooding.
The water damage was not confined to the new property which had been incorporated into the construction project. Water also spilled into other areas of the hospital complex (i.e. nearby rooms and hallways where no construction was taking place), causing damage to existing property located in those areas (the "pre-existing property").
With respect to the particular property insured, the Policy provided: “This Form, … insures the following property at the "project site" for the amount of insurance specified in the "Declarations" for the Project Site: …” (“the Property Insured Clause”).
In the Supreme Court of Newfoundland and Labrador, the applications judge held that the insurance policy covered damage to the pre-existing property. The insurer appealed. Having regard to the particular policy wording, the Newfoundland and Labrador Court of Appeal reversed the lower court’s decision, explaining:
65 [The Property Insured Clause] does not insure all property at the project site. Rather, the policy language in clause 2 differentiates between "property insured" and "property at the project site".
66 It does so in the opening words of [the Property Insured Clause], which indicates that insurance coverage is provided only to a particular subset of property at the project site; that is, the policy does not insure all property at the project site, but rather "the following property at the project site".
....
70 An interpretation of the policy language must not conflate "property insured" (property in course of construction, installation, repair etc. which forms part of the completed project, including materials and supplies necessary to complete the project) with other pre-existing property at the project site (i.e. the hospital complex).
The Court then considered the particular property for which coverage was sought and the context of the Property Insured Clause’s specific language. Speaking for the Court, O'Brien J.A. explained:
102 The absence of an exclusion clause relating to pre-existing property in this context (where the language of [the Property Insured Clause] of the policy is clear regarding what property is insured) does not result in the presence of coverage.
103 It was unnecessary to have specifically excluded pre-existing property, and the absence of an exclusion clause does not create ambiguity.
…
115 Having considered the policy language in its entirety, and especially in view of the definition of "property insured" in [the Property Insured Clause], I would conclude that no ambiguity exists in the clear language of the policy. As in Sabean, the "ordinary meaning" of the words used in [the Property Insured Clause], as understood by the "average person applying for insurance" would, in my view, be unambiguous.
…
197 For the reasons provided above I would conclude that this onus, of establishing that damage to pre-existing property at the hospital complex falls within the grant of coverage provided under the Builders’ Risk policy, has not been met.
Viking Fire is a dense and lengthy decision, but worth a read: https://www.canlii.org/en/nl/nlca/doc/2019/2019nlca13/2019nlca13.html?resultIndex=1