In our first case this month, the New Brunswick Court of Appeal reviewed Rule 31.11, Documents in the Possession of a Person Not a Party. The Court held that the consent of the non- party to produce the requested documents is not determinative of the application and the requesting party much still establish the conditions precedent under the applicable Rule.
In our second case this month, the BC Court of Appeal applied the SCC decision in Progressive Homes (found in our November 2010 newsletter) in the context of coverage under a CGL policy and has expanded coverage for loss of the use of the insured's products.
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Bennett v. State Farm Fire and Casualty Company, 2011 NBCA 27
Following a suspicious house fire, the RCMP launched an investigation but no criminal charges were laid. The insured sought indemnity from State Farm pursuant to a home insurance policy. State Farm denied the claim on the basis that the house had been vacant for more than 30 consecutive days. The insured commenced an action for recovery under the policy.
Following the close of pleadings, State Farm sought an order under Rule 31.11 compelling the RCMP to produce two of its investigation files regarding the suspected arson and an earlier break and enter into the house. The RCMP consented to production of the files, however, the insured objected. Despite the insured’s objection, the Motions Judge granted the order and the insured appealed.
The Court of Appeal, in overturning the production order, stated that there was no evidence presented which might reasonably give rise to the inference that a document contained in the RCMP files related to the applicability of the vacancy exclusion. The Court further noted that no sworn statement of facts had been provided which prompted an inference that it would have been unfair for State Farm to proceed to trial without the documents.
With respect to the Rules of Court, the Court of Appeal concluded that the RCMP is not a “person” under Rule 31.11 and therefore, the rule did not authorize the Motions Judge to order the RCMP to produce the documents. Further, the Order signed by the Motions Judge overshot the boundaries of Rule 31.11 in that the subject “records” were described in vague terms and the Order was for the “production of information” from the RCMP files, while Rule 31.11 is for the “production for inspection of a document”. Rule 31.11 is not a means of discovering potentially relevant documentation of a nonparty.
The Court of Appeal concluded that due to the narrow issue in question, namely the applicability of the vacancy exclusion, and the obviously unrelated purposes for which the RCMP files were generated, discovery of the files was a fishing expedition on the part of State Farm. The Court of Appeal also warned that the consent of a non-party to an order for document production is not determinative of the application. The Defendant is still required to establish the conditions precedent under the applicable Rule.
Bulldog Bag Ltd. v. AXA Pacific Insurance Company, 2011 BCCA 178
This action arose as a result of defective plastic packaging provided by Bulldog Bag Inc. (“Bulldog”) to Sure-Gro Inc. (“Sure-Gro”). Due to the defective packaging, Sure-Gro sustained losses stemming from the removal of raw materials from the defective packing, the disposal of the defective packaging, the loss of about 10% of the raw material in the salvaging process and the cost to package different raw materials held in reserve in order to meet third party supply contracts. Bulldog settled the claim made by Sure-Gro for $732,420.60 and reported the loss to its insurer, AXA Pacific Insurance Company (“AXA”), under its CGL policy. AXA denied the claim.
The trial decision, which was released prior to the SCC ruling in Progressive Homes, held that Bulldog was entitled to indemnification only with respect to the costs associated with the loss of 10% of Sure-Gro’s product through the salvaging process. The other claims were dismissed. Bulldog appealed the dismissal of its claims and AXA cross-appealed the order to indemnify Bulldog for the loss of 10% of Sure-Gro’s product.
At the outset of its decision, the Court of Appeal stated that the SCC decision in Progressive Homes largely superseded the trial judge’s analysis. Newbury J. went on to review the proper interpretation of “property damage”, “accident” and the “work performed” exclusion as established by the SCC. Applying the proper interpretation, Newbury J. held that the exclusion clause in this case was even more favorable to the insured than the version at issue in Progressive Homes. Here the clause did not purport to exclude coverage for “claims that flow from” the Plaintiff’s defective work or work product, it excluded only coverage for property damage to goods supplied by the insured. As such, the exclusion clause did not operate to bar Bulldog’s recovery of its claim and AXA was required to indemnify Bulldog for the sum of $732,420.60.
With respect to the cross-appeal, AXA argued that the loss did not arise as a result of an accident or occurrence, rather it was the result of a decision that it was not possible or not economically feasible to recover the 10% of the product that was loss. Newbury J. held that the 10% product that remained stuck to the defective bags was “physically injured or destroyed”, at least in the sense that it had ceased to be useable for its intended purpose. As such, AXAs cross-appeal was dismissed.