Canadian General Insurance v. Western Pile, [1972] SCR 175

Supreme Court of Canada

Canadian General Insurance v. Western Pile, [1972] S.C.R. 175

Date: 1971-06-28.

Canadian General Insurance Company (Defendant) Appellant;

and

Western Pile and Foundation (Ontario) Ltd. (Plaintiff) Respondent.

1971: February 26; 1971: June 28.

Present: Judson, Ritchie, Hall, Spence and Laskin JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Insurance—Liability—Coverage for completed construction operations excluded—Insured contracting to drive piles for cofferdam—Negligence in performance of work later resulting in substantial damage—Liability imposed on insured—Failure of claim for indemnity.

On November 11, 1963, the respondent, a pile driving contractor, entered into a contract with D for the driving of steel sheet piles in a cofferdam which was being constructed by D. The actual construction to be carried out by the respondent was simply the driving of steel sheet piles into the ground to specified depths in an interlocking pattern, and, so far as could be ascertained from a surface inspection, the piles were properly driven to the prescribed depths by January 29. On that date the respondent withdrew his men and equipment from the site.

On March 5, a “blow-in” occurred at one of the corners of the cofferdam. The wall of the dam gave way at some point in the corner and large quantities of sand, soil and water extruded into the coffer causing very substantial damage. D instituted an action against the respondent and recovered damages. The judge found that there was a gap in the piles as driven by the respondent, which gap was the responsibility of the respondent and which gap was the cause of the accident.

In the face of a request by the respondent that the appellant take over the defence of D’s action pursuant to the terms of a general public liability policy, the appellant denied liability under the contract and refused to defend the action. The respondent therefore commenced an action on the contract of insurance claiming damages in the amount paid to D as a result of D’s action, and in addition claiming expenses incurred by it in the defence of that

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action. The respondent’s action was dismissed at trial but on appeal was allowed. The insurance company then appealed to this Court.

A clause in the policy excluded from coverage “Construction, installation or repair operations of the Insured for another after such operations have been completed or abandoned.”

Held: The appeal should be allowed.

To conclude, as did the Court below, that “construction operations” were incomplete simply because the insured had the intention to remedy any defects which might become apparent even though all men and equipment had been removed from the job site, was to confuse the question of the legal relationship between the insured and a third person which might or might not have required work to be done in the future with the question of the actual performance of the work itself. The “operation” in which the respondent was involved was “completed” by January 29, 1964, and it was out of this operation, negligently performed, that the respondent’s claim arose. Accordingly, the general exclusion clause applied and the respondent’s claim failed.

Baynes Manning (Alberta) Ltd. v. Employers Liability Assurance Corp. Ltd., [1956-60] I.L.R. 814, referred to.

APPEAL from a judgment of the Court of Appeal for Ontario[1], allowing an appeal from a judgment of Thompson J. Appeal allowed.

W.B. Williston, Q.C., W.M. Avery and W.C. Graham, for the defendant, appellant.

D.K. Laidlaw, Q.C., for the plaintiff, respondent.

The judgment of the Court was delivered by

RITCHIE J.—This is an appeal by Canadian General Insurance Company from the judgment of the Court of Appeal for Ontario dated April 3, 1970, allowing an appeal by Western Pile and Foundation (Ontario) Ltd., from the judgment of the Supreme Court of Ontario pronounced by Thompson J., on April 3, 1969. The Court of Appeal gave judgment in favour of the respondent for $66,275.45 and costs.

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The appeal concerns the respondent’s right to be indemnified by the appellant for a liability imposed on it as a result of an accident arising out of a construction operation being carried on by it in late 1963 and early 1964.

The appellant, an insurance company, entered into a general public liability contract of insurance with the respondent on January 21, 1963. This contract was in force at all material times, and by its property damage endorsement the appellant, amongst other things, agreed:

TO PAY on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of the Liability imposed upon the Insured by law,   , for damages because of damage to or destruction of property caused by accident occurring within the Policy Period and while this Endorsement is in force.

The insuring agreement, however, was subject to certain exclusions, two of which are relevant. The first is found in the general policy exclusions:

This Policy shall have no application with respect to and shall not extend to nor cover any claim arising or existing by reason of any of the following matters:...

4.B. Construction, installation or repair operations of the Insured for another after such operations have been completed or abandoned.

By the second exclusion, found in endorsements numbers 1 and 2, the Insurer’s liability was restricted to $10,000 arising out of claims for damage to or destruction of or loss of use of:

Any (a) real property, land, work, building, or structure or (b) wires, conduits, pipes, mains, shafts, sewers, tunnels, or any apparatus in connection therewith, if such damage or destruction is caused by vibration, the moving, shoring, underpinning, raising, rebuilding or demolition of any building, structure or support or by excavation, tunneling or other work below the surface of the ground or water.

During the currency of this policy the respondent carried on business in the Province of Ontario as a pile driving contractor and on November 11, 1963, it entered into a contract with Louis Donolo (Ontario) Limited for the

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driving of steel sheet piles in a cofferdam which the latter company was constructing in order to enable it to excavate an area at the Greenway Pollution Centre at London, Ontario. Under the contract the respondent was to supply the labour, equipment and other materials required for the driving of the piles. The contractor, Donolo, was to supply the piles. The contract provided for a lump sum payment by Donolo to the respondent and final payment under the agreement was to be made within 37 days after completion of the work and acceptance thereof by Donolo and the architect or engineer on the job, and upon presentation of a completion certificate issued by the architect or engineer.

On December 15, 1963, the respondent moved its men, equipment and supplies onto the job site and commenced construction operations. The work force was made up of six or seven men, together with a foreman. There was also considerable amounts of heavy equipment. A vibrating pile hammer and several generators were added later.

The actual construction to be carried out by the respondent was simply the driving of the steel sheet piles into the ground to specified depths in an interlocking pattern, and, so far as could be ascertained from a surface inspection, the piles had been properly driven to the prescribed depths by January 29th. On that date the respondent withdrew all its men and equipment from the site.

Two days later, on January 31, 1964, the respondent submitted its account to Donolo for the full amount of the contract price, plus certain extras, less the 20 per cent statutory holdback required by The Mechanics Lien Act, R.S.O. 1960, c. 233, as amended. The account contained the following reference caption:

Install & Complete Sheet Pile Cofferdam at West End Sewage Plant—London, Ontario.

After the respondent’s men had vacated the job site, the actual excavation for the sewage plant was commenced. While this work was proceeding between February 5th and February 26th, the respondent’s superintendent and its secretary-treasurer made several trips to the site to inspect the piles. During this time the respondent, how-

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ever, maintained no men at the site nor did it carry on any further work in relation to the piles. In fact, when minor repairs were required on February 17th to close a small seam which had developed between the piles, the necessary repairs were made by the main contractor, Donolo, and the cost of these repairs was charged back to the respondent.

Shortly before March 4, 1964, the respondent received Donolo’s cheque in payment of its January 31st account minus the 20 per cent holdback and the cost of the minor repairs. Payment was made although no completion certificate had been given by the architect or engineer.

On March 5th what is described as a “blow-in” occurred at one of the corners of the cofferdam. The wall of the dam gave way at some point in the corner and large quantities of sand, soil and water extruded into the coffer causing very substantial damage. This damage lead Louis Donolo (Ontario) Limited to institute an action against the respondent.

After trial, judgment was awarded on December 5, 1966, against the respondent in the sum of $45,416.99 and costs subsequently taxed at $6,347.02. The trial of the action was before Morand J. who in his reasons made a finding that there was a gap in the piles as driven by the respondent, which gap was the responsibility of the respondent and which gap was the cause of the accident. In the face of a request by the respondent that the appellant take over the defence of this action pursuant to the terms of the general public liability policy, the appellant denied liability under the contract and refused to defend the action. The respondent therefore commenced this action on the contract of insurance claiming damages in the amount paid to Donolo as a result of that action, and in addition claiming expenses incurred by it in the defence of that action. The appellant sought to avoid liability on three main grounds:

(a) There was no “accident” within the terms of the policy;

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(b) any damages occasioned were caused by “work below the surface of the ground” and liability was limited; and,

(c) the damages complained of arose out of construction operations of the insured for another after such operations had been completed.

At the trial of the action, Thompson J. assessed the respondent’s damages at $66,275.45, but dismissed the claim. Although he concluded that the “blow-in” was an accident within the meaning of the policy; that the damages did arise out of that accident; and that the limitation of liability clause did not apply under the circumstances disclosed by the evidence, he was of the view that the respondent’s claim failed since the construction operations undertaken by the respondent had been completed and therefore the general exclusionary clause applied.

The respondent’s appeal was allowed. In a unanimous decision, the reasons for which were written by Jessup J.A., it was held that neither of the two exclusions in the policy earlier quoted were applicable to the facts of the situation. In particular, as regards the general exclusionary clause, the Court of Appeal held that the operations of the insured were not completed as long as it retained the subjective intension to return to the job site to remedy any defects which it might be required to do by virtue of its contractual responsibilities to Donolo. The trial judge’s finding that the damage was caused by an “accident” within the meaning of the policy was not disturbed and it is not in question now.

The arguments raised in this Court were directed at Jessup J.A.’s findings on the completion question. Counsel relied strongly on the decision of the Court of Appeal for British Columbia in Baynes Manning (Alberta) Ltd. v. Employers Liability Assurance Corp. Ltd.[2] The facts there are remarkably similar to those in the case at bar. The plaintiff contracted to construct a waterworks and sewerage system for the Town of Forest Lawn by December 31, 1955, and completion was made on December 23, 1955. The system was put into operation that day. Because of leaks, however, additional work was required in the spring of the next year and the

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time for completion was extended. In August 1957, a section of pipe which had been laid on July 30, 1955, broke, causing damage and the plaintiff became obligated to pay the sum of $1,926.09 in damages. When the plaintiff sought to be indemnified for this payment under a general liability policy it carried with the defendant, liability was denied. The defendant relied on an exclusion clause framed in almost identical language to that here in contention. The clause provided:

1. …Sec. N.–1 of this policy… shall not cover the liability for claims arising out of…

(b) Construction, installation or repair operations of the assured for another away from the premises of the assured after such operations have been completed or abandoned…

(The emphasis is my own).

The plaintiff’s claim was allowed at trial but dismissed on appeal. Counsel for the plaintiff, although it was admitted that the actual construction had been completed, relied upon the plaintiff’s legal obligation to maintain the works in perfect order and repair to restrict the application of the exclusionary clause. The plaintiff’s contention amounted to a submission that as long as “contractual obligations” existed under the construction contract, it could be said that “construction operations” had not been completed. Davey J.A. (as he then was) rejected this argument in language which to me is particularly apposite to the case before this Court:

The words ‘construction operations’ mean actual work, not a legal relationship between the insured and a third person that may or may not require work to be done.

To conclude, as did the Court of Appeal for Ontario, that “construction operations” are incomplete simply because the insured has the intention to remedy any defects which become apparent even though all men and equipment have been removed from the job site, is to confuse the question of the legal relationship between

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the insured and a third person which might or might not have required work to be done in the future with the question of the actual performance of the work itself. Here it was clear that the actual work or “construction operation” in which the respondent was involved was the sinking of piles in an interlocking pattern to specified depths. This “operation” was “completed” by January 29, 1964, and it was out of this operation, negligently performed, that the respondent’s claim arose.

Accordingly, on the clear wording of the general exclusion clause and for the reasons above given, the respondent’s claim must fail. I would therefore allow this appeal with costs in this Court and in the Court of Appeal, and restore the judgment of the trial judge.

Appeal allowed with costs.

Solicitors for the defendant, appellant: MacMillan, Rooke, Avery and Forbes, Toronto.

Solicitors for the plaintiff, respondent: McCarthy & McCarthy, Toronto.