COURT FILE NO.: CV-16-550435

DATE: 20180830

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: DAVID JACOBS, Plaintiff/Responding Party

AND:

LEBOEUF PROPERTIES INC., Defendant/Moving Party

BEFORE: Dietrich J.

COUNSEL: Robert J. Kennaley, for the Plaintiff/Responding Party

Andrew Rance, for the Defendant/Moving Party

HEARD: July 26, 2018

ENDORSEMENT

[1] This motion brought by the defendant under Rule 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 asserts that the cause of action pleaded by the plaintiff is barred by contract and as such must be dismissed.

[2] The subject contract was agreed to by the plaintiff as owner of a residential property and the defendant as a general contractor retained to demolish a residence and build a replacement residence on the property municipally known as 179 Gordon Avenue in the City of Toronto. The project covered by the contract required the owner to purchase insurance coverage, both property and third party liability, for both the demolition and the reconstruction. The defendant was to be included as a named insured.

[3] In his statement of claim the plaintiff alleges faulty workmanship by the defendant during the reconstruction of the residence causing property damage to the plaintiff. He claims damages for breach of contract and damages in negligence to cover costs and expenses incurred by the plaintiff to correct and complete work he claims was negligently done at the residential property.

[4] The defendant submits that the plaintiff’s contractual obligation to insure the project and the defendant act as a bar to this action.

[5] Specifically, section 9.1 of the contract reads as follows:

The Owner shall purchase and maintain in property and third party liability insurance in a form acceptable to the Construction Manager upon the entire Project for the full cost of replacement as of the time of any loss. This insurance shall include, as named insureds, the Owner, the Construction Manager, Trade Contractors, and their Trade Subcontractors and shall insure against loss from the perils of Fire, Extended Coverage, and shall include builder’s risk insurance for physical loss or damage including, without duplication of coverage, at least theft, vandalism, malicious mischief, transit, collapse, and where applicable, flood, earthquake testing, and damage resulting from defective design, workmanship or material. The Owner will increase limits of coverage, if necessary to reflect estimated replacement costs. The Owner will be responsible for any co-insurance penalties or deductibles. If the Project covers an addition to or is adjacent to an existing building, the Construction Manager, Trade Contractors and their Trade Subcontractors shall be named as additional insureds under the Owner’s Property Insurance covering such building and its content.

[6] The defendant argues that, pursuant to the contract, the plaintiff undertook to purchase and maintain property insurance coverage for any “damage resulting from defective design, workmanship or material” at the residence. The plaintiff further promises to include the defendant as a named insured on the policy. The owner’s covenant to insure therefore relieved the contractor of liability for damages caused by its negligence.

[7] Covenants to insure have been given specific interpretation in the jurisprudence. In Greater Toronto Airports Authority Assn. v. Foster Wheeler Ltd., [2011] O.J. No. 1121 (Greater Toronto Airports), at para. 22, Sproat J. quotes from Canadian Contractual Interpretation Law, First Edition (LexisNexis Canada) by Geoff R. Hall, at p. 225:

Covenants to insure have been given a specific interpretation in the case law. They not only obligate one party to obtain insurance (the meaning apparent from the wording of the covenant) but also relieve the other party of liability for losses, subject to the covenant, even if such losses are caused by its own negligence. …

[8] In Madison Developments Ltd. v. Plan electric Co., 1997 CanLII 1277 (ONCA), leave to appeal to S.C.C. refused, a subcontractor and two of its employees negligently caused a fire that damaged the property of the contractor. The Court of Appeal found that the covenant between the contractor and subcontractor that obligated the contractor to obtain comprehensive fire insurance covering the whole project protected the subcontractor from a subrogated claim for damage caused by fire through its negligence.

[9] An exception to the relief of liability for loss would occur where the covenant to insure itself contains express language preserving the obligation of a contractor to be responsible for the cost of remediating its own work: Greater Toronto Airports at para. 32. There is no such express language in section 9.1 of the contract. The language in this section is much more general.

[10] The defendant submits that even if the plaintiff failed to obtain the requisite insurance as he promised to do, his written commitment to obtain such insurance operates as a voluntary assumption by the plaintiff of the risks of loss or damage to the residence. I agree. In the case of Active Fire Protection 2000 Ltd. v. B.W.K. Construction Co., 2005 CanLII 24226 (ONCA), the Court of Appeal held, at para. 19, that where the appellant failed to obtain insurance for the entire construction period that would have responded to the loss, as it was contractually bound to do, its commitments to obtain the requisite insurance operated as a voluntary assumption by the appellant of the risk of loss or damage caused by the perils to be insured against. As a matter of contract, it assumed the risks.

[11] The covenant to insure effectively provides an allocation of risks reflected in the price to be paid for the demolition and reconstruction of the plaintiff’s residence. I find that the plaintiff accepted the risks of the very type of losses or damages that he alleges were caused to the residence. Accordingly, the plaintiff cannot pursue the defendant for such damages in negligence or due to breach of contract.

[12] The plaintiff attempted to rely on a series of cases in which each of the subject insurance policies had specific exclusion clauses relating to faulty workmanship. Whether the plaintiff obtained an insurance policy in accordance with the contract is not in evidence before me. If he breached the contract and failed to do so, speculative hopes for exclusion clauses will not assist him.

[13] The plaintiff’s action is dismissed with costs to the defendant. If the parties are unable to agree on costs they may make their costs submissions in writing. The defendant shall make submissions not exceeding four pages (plus a costs outline) within 21 days of this endorsement and the plaintiff may make submissions not exceeding four pages (plus a costs outline), if any, 14 days thereafter.

Dietrich J.

Date: August 30, 2018