Rochette v. Travelers Indemnity Co., [1974] SCR 22

Supreme Court of Canada

Rochette v. Travelers Indemnity Co., [1974] S.C.R. 22

Date: 1973-01-31

Charles-E. Rochette (Plaintiff) Appellant;

and

The Travelers Indemnity Company (Defendant) Respondent.

1972: November 1; 1973: January 31.

Present: Fauteux C.J. and Abbott, Martland, Judson and Laskin JJ.

ON APPEAL FROM THE COURT OF QUEEN’S BENCH, APPEAL SIDE, PROVINCE OF QUEBEC

Insurance—Professional Liability—Exclusionary clause regarding dams—Dam collapsing—Property damages and loss of life—Insurer’s refusal to intervene in an action against the policy-holder—Definition of the words “dam” and “reservoir”.

The appellant, an engineer, had been retained by “La Corporation du Village Les Eboulements” to prepare plans and specifications for a “barrage-réservoir” which subsequently collapsed resulting in extensive property damage and loss of life. The only survivor of the victims, all members of the same family, brought an action claiming damages jointly and severally from (1) the appellant, (2) one of his employees, (3) the village «Les Eboulements» and (4) the contractor by whom the works were carried out. The appellant, who was insured with the respondent under an «Architects and Engineers’ Professional Liability Policy», called upon the latter to intervene in the said action. The respondent refused to do so on the ground that it was not liable under the terms of the policy. The proceedings to compel such intervention were successful before the Superior Court but that judgment was unanimously reversed by the Court of Appeal. Hence the appeal to this Court.

Held (Justice Laskin dissenting): The appeal should be allowed.

Per Fauteux C.J. and Abbott, Martland and Judson JJ.: The sole question in issue is whether the loss is one for which liability is excluded under the policy issued by respondent. The relevant exclusionary clause reads: “This policy does not apply to liability arising out of operations in connection with fairs or exhibitions, tunnels, bridges or dams.” Appellant built a dam the effect of which was to prevent water from a stream from emptying into the river. An accumulation of water resulted, a reservoir. The dam broke and water burst suddenly forth, causing the

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damage complained of. The real cause of the damage was the breaking of the dam. This is a clear case of “liability arising out of operations in connection with … dams” in the words of the exception provided in the insurance policy.

Per Laskin J., dissenting: When a comparison is made of the primary dictionary meanings of “dams” and “reservoir” it is obvious enough that their respective different purposes determine their proper use. The primary meaning given to the term “dam” is “a bank or barrier of earth, masonry, etc. built across a steam to obstruct its flow and raise its level”, when the secondary meaning is “any similar work to confine water”. The primary meaning given to the term “reservoir” is “a receptacle specially constructed to contain and store a large supply of water for ordinary use”. This definition fits exactly the entire structure involved in the present case which, having regard to the purpose for which it was built, does not fit any definition of “dam” in any dictionary.

Furthermore, a clause excluding coverage is in issue and, accordingly the insurer is obliged to bring itself clearly within it to avoid liability. The insured may properly claim to have the narrowest construction placed upon a word which limits his coverage, and it must be the insurer who must bear the consequences of doubt or lack of clarity in an exclusionary clause.

APPEAL fom a judgment of the Court of Queen’s Bench, Appeal Side, Province of Quebec1[1], reversing a judgment of the Superior Court. Appeal dismissed, Justice Laskin dissenting.

M. St-Hilaire, and G. St-Hilaire, Q.C., for the plaintiff, appellant.

L. Rémillard, Q.C., and P. Morin, for the defendant, respondent.

The judgment of Fauteux C.J., and Abbott, Martland and Judson JJ. was delivered by

ABBOTT J.—In 1965, the appellant Rochette, an engineer by profession, was retained by “La

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Corporation du Village Les Éboulements” to prepare plans and specifications for what is referred to in the pleadings as “un barrage-réservoir d’une capacité de deux millions et demi de gallons, à une altitude d’environ mille pieds et à une distance d’environ un mille et demi du village de St-Joseph-de-la-Rive, lequel est en bordure immédiate du St-Laurent.”

This work, for which appellant’s firm had prepared the plans collapsed on November 16, 1966, resulting in loss of life and extensive property damage. An action was taken in 1967 claiming $102,280.30 (as damages resulting from the collapse) jointly and severally from (1) the appellant, (2) one of his employees, (3) the village “Les Éboulements” and (4) the contractor by whom the works were carried out.

The appellant was insured with the respondent The Travelers Indemnity Company under what is described as an “Architects and Engineers’ Professional Liability Policy” which was issued on January 1, 1966. The respondent was called upon by the appellant to intervene in the said action to defend it on his behalf and to pay the amount of any judgment which might be rendered against him. The respondent refused to do so on the ground that it was not liable under the terms of the policy.

The present proceedings to compel such intervention were successful before the Superior Court but that judgment was unanimously reversed by the Court of Appeal.

The relevant facts, which are not in dispute, are conveniently summarized by Mr. Justice Taschereau in his reasons for judgment as follows:

[TRANSLATION] Plaintiff alleges that during the year 1965 the Corporation du Village des Éboulements wished to build, on its own territory, near the village of Les Éboulements, a dam-reservoir with a capacity of two and a half million gallons, at an altitude of about a thousand feet, and a distance of one and a half mile from the village of St-Joseph-de-la-Rive, which is immediately adjacent to the St. Lawrence. To this end it passed a resolution retaining

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the services of defendant Rochette to prepare plans and specifications, and provide the various professional services which might be required in connection with the construction of the reservoir. The plans and specifications were however prepared by the co-defendant Réal Lajoie, who was employed by Rochette. Work on the reservoir was completed in October 1965, and the reservoir was then filled to capacity and placed at the disposal of defendant, the Corporation du Village des Éboulements, which moreover made use of it. It consisted of a concrete wall, perpendicular to the water flowing under it, and of two lateral concrete wings joined to the wall perpendicular to the stream.

During the summer of 1966, when the reservoir had been filled with water since 1965, representatives of defendant, the Corporation du Village des Eboulements, discovered large cracks in the concrete wall of the reservoir, and advised defendant Lajoie, and defendant J.M.G. Construction, of this fact. Further, these cracks allowed water to escape, and this had the effect of weakening the banks both internally and externally. Defendant Lajoie and defendant J.M.G. Construction objected, however, to work being done to remedy this defective condition, claiming that it was useless. The reservoir was filled again, and on August 8, 1966, Lajoie wrote to the Corporation du Village des Eboulements to inform it that the work had been completed. On November 16, 1966, when the reservoir was filled to capacity, the front wall of the dam gave way under hydrostatic pressure, and collapsed. The body of water so released swept towards the St. Lawrence, and reached the village of St-Joseph-de-la-Rive, where it hit the property of Charles-Edouard Tremblay—consisting of a large area of land and of a two-story building, with basement and outbuildings, which was the residence of the family of Charles-Edouard Tremblay—, a general store and a dwelling occupied by the family of Yvan Bouchard. Charles-Edouard Tremblay, his wife and their daughter Andrée were drowned in the St. Lawrence. Their son, Jean-Yves Tremblay, their only survivor, brought an action seeking to have defendants ordered jointly and severally to pay him the sum of $102,280.30, with interest since the date of service, and costs.

The sole question in issue on this appeal is whether the loss in question is one for which liability is excluded under the policy issued by

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respondent. The relevant exclusionary clause reads:

This policy does not apply:

…

(k) to liability arising out of operations in connection with fairs or exhibitions, tunnels, bridges or dams, but this exclusion does not apply:

(1) to permanent structures erected or to be erected in connection with fairs or exhibitions,

(2) to tunnels not over 150 feet in length designed for use exclusively for pedestrian traffic or for the housing of electrical installations, heating and water pipes,

(3) to bridges not over 150 feet in length designed for use exclusively for pedestrian traffic, or

(4) to the extent that this exclusion is stated in the declarations to be inapplicable.

It should be noted that in this clause the words “dams” is used without any qualification.

The end result of the work—for which appellant had prepared the plans and specifications—was a reservoir for the storage and distribution of water, but that reservoir was created by the construction of an earth dam with a cement core. That dam was described in evidence by Dr. Bernard Michel a civil engineer, professor of hydraulics at Laval University and a member of the National Research Council, in the following terms:

[TRANSLATION] It is a classic and rather ancient form of dam. It is an earth dam with an impervious core of cement. This type of construction is still undertaken, a construction of an earth dam with an impervious cement core. In shape it is a polygon with several sides; it is an open-ended polygon. At its highest point it is thirty-one feet (31’), and this is where it collapsed.

I agree with the reasons for judgment of Chief Justice Tremblay and Mr. Justice Taschereau in the Court below and there is little I could usefully add. I do not think any purpose would be served by repeating definitions of “dam” or “barrage” contained in various English and French dictionaries, some of which are cited by Mr. Justice Taschereau in his reasons.

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In my view, the two words are synonymous. Dr. Bernard Michel so testified and his evidence on that point is quoted by Mr. Justice Taschereau.

The conclusions reached by the Court of Appeal were summarized by Chief Justice Tremblay in the following passage in his reasons which I respectfully adopt:

[TRANSLATION] According to the allegations in the pleadings, respondent built a dam the effect of which was to prevent water from a stream from emptying into the river. An accumulation of water resulted, a reservoir. Further, according to the pleadings, the dam broke and water burst suddenly forth, causing the damage complained of. The real cause of the damage was the breaking of the dam. In my opinion, this is a clear case of “liability arising out of operations in connection with … dams”, in the words of the exception provided in the insurance policy.

I would dismiss the appeal with costs.

LASKIN J. (dissenting)—This appeal turns on the meaning of the word “dam” as it appears in an exclusionary clause of a professional liability policy, issued by the respondent in favour of the appellant, and as it applies to the facts upon which the insurer contests coverage. The exclusionary clause, so far as material here, reads as follows:

This policy does not apply … to liability arising out of operations in connection with fairs or exhibitions, tunnels, bridges, or dams …

The appellant is the head of an engineering firm to which a municipality committed the preparation of plans for a “projet de réservoir d’emmagasinement et d’usine d’épuration”. There was an existing reservoir on the site which was of insufficient capacity to meet the municipality’s needs and it was proposed to enlarge it. The construction which resulted involved use of a natural hillside and the erection of three concrete walls to form an enclosure in which water from an underground spring was contained. It was the collapse of the front wall during the term of the policy that brought the coverage of the policy into issue.

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The exclusionary clause uses the word “dam” in the sense of a structure. The word also has a dictionary meaning of the body of water so confined: see John White & Sons v. J.M. White[2]. A like subordinate meaning is carried by the word “reservoir” which, in its primary sense, is defined in the Shorter Oxford English Dictionary to mean “a receptacle (of earthwork, masonry, etc.) specially constructed to contain and store a large supply of water for ordinary use”. This definition fits exactly the structure involved in the present case, and it was on the distinction between “dam” and “reservoir” that the trial judge proceeded in holding that the insurer did not bring itself within the exclusionary clause.

The trial judge based himself on the documentary material which referred to a reservoir and on the purpose of the structure which was to gather in and distribute water for municipal purposes; it was not designed to hold back running water or to raise its level. In reversing the trial judge, the Quebec Court of Appeal adopted a secondary meaning of the term “dam” given in the Shorter Oxford English Dictionary, namely, “any similar work to confine water”. The primary meaning given is as follows:

A bank or barrier of earth, masonry, etc. built across a stream to obstruct its flow and raise its level.

It appears clear to me that to act on the secondary meaning does not result in avoiding the purposive aspect; a “similar work” is obviously one designed to obstruct the flow of a stream and raise its level.

I have already indicated that the work or structure in the present case was not of that kind. It seems to me that Taschereau J.A., whose reasons commended themselves to Casey J.A., almost answered his statement of the issue by the way he formulated it, that is, “la seule question qui se pose est donc celle de savoir si le barrage qui retenait l’eau dans le réservoir

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était un ‘dam’ au sens de la police”. Chief Justice Tremblay in his concurring reasons used the word “reservoir” in the subordinate meaning to which I alluded above when he said of the “barrage” that “il en résulta une accumulation d’eau, un réservoir”. I am of the opinion that when a comparison is made of the primary dictionary meanings of “dam” and “reservoir”—and I note that the two words are not interchangeable in any of the four dictionaries that I consulted, save in the subordinate sense of a collection or accumulation of water—it is obvious enough that their respective different purposes determine their proper use.

The fact that one wall of the structure proved defective does not mean that it alone must be regarded in determining whether or not it was a “dam” which burst. Had the land at the other end given way, I cannot conceive that it would have been correct to speak of the breaking of a dam when a natural hillside was involved. Be that as it may, the entire structure, having regard to the purpose for which it was built, does not fit any definition of “dam” in any English dictionary known to me, and there is no basis in the words of the policy to proceed beyond a dictionary meaning. I may add that the Osford Dictionary of English Etymology (1966) defines “dam” as “barrier checking the downward flow of water, expanse of water thus held up”; and “reservoir” is shown as “capacious receptacle for storage; reserve supply”.

I have, however, more formidable grounds for disagreeing with the Quebec Court of Appeal. They do not appear to have given any consideration to the fact that a clause excluding coverage is in issue and that, accordingly, the insurer is obliged to bring itself clearly within it to avoid liability. It is not entitled to rely on the largest meaning that can be given to the word “dam” merely because it used it in an unqualified way. The insured may properly claim to have the narrowest construction placed upon a word

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which limits his coverage unless the insurer has taken care to give it a meaning or a context which goes beyond a narrow but admitted meaning. I do not need to labour contra proferentem; its application here is obvious enough. Indeed, even if I were not as convinced as I am that the structure in this case is not a dam, I would have no hesitation in concluding that it must be the insurer and not the insured who must bear the consequences of doubt or lack of clarity in an exclusionary clause.

In addition to its reliance on the exclusionary clause the insurer raised a defence of prematurity, contending that the insured could not implead it to defend an action brought against the insured by reason of the rupture of the front wall of the reservoir. This defence was based on the terms of the policy but was decided adversely to the insurer by the Superior Court, which gave primacy to the insurer’s undertaking in the policy to defend any action against the insured, notwithstanding a subsequent provision forbidding, inter alia, the impleading of the insurer by the insured. The point was not dealt with by the Quebec Court of Appeal, nor was it pressed in the argument before this Court. I refrain therefore from passing on it in this case.

Accordingly, I would allow the appeal with costs here and in the Quebec Court of Appeal and restore the judgment of the Superior Court.

Appeal dismissed with costs, Laskin J. dissenting.

Solicitors for the plaintiff, appellant: Letarte, St-Hilaire & Associés, Quebec.

Solicitors for the defendant, respondent: Taschereau, Drouin & Drouin, Quebec.