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04 Sep 2018

Subcontractors Found to Be Covered Despite Not Being Named Insured In Liability Policy

by Jason Caissie
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Surespan Structures Ltd. V. Lloyd’s Underwriters, 2018 BCSC 1058

Stantec Engineering purchased a Liability Policy related to a contract to design and build two hospitals with parkades in British Columbia.   The application for insurance included an attached list of subcontractors as additional insureds.

At the time of the application, it was believed that Stantec would be designing the parkades, however, the design was later contracted to Surespan Structures Ltd and HGS Limited, who were not in the subcontractor list provided to the insurer. 

After the building was complete, Surespan was advised that cracks had been discovered in both parkades and would need to be repaired.  Surespan and HGS applied for coverage under Stantec’s policy, and coverage was denied.  Surespan and HGS applied to the Court for a finding that they were insureds under the policy.

The Policy had a definition of Insured(s) which included the following two clauses:

  • 3. Any other firm(s) which have or will provide PROFESSIONAL SERVICES in regard to the project;
  • 5. Any other firm(s) which have or will provide professional services in regard to the Project provided that such additional firms are reported and accepted by the Insurer along with details of the professional services to be provided, the date on which the firm is to commence the provision of services, and their professional fees;

The Insurer presented evidence to suggest that Clause 3 had been included in error and did not reflect the intent of the parties.  The insurer presented evidence that Stantec understood that all additional insureds had to be approved by the insurer and subject to additional premiums.

Alternatively, the insurer argued that Clauses 3 and 5 caused ambiguity, which should be resolved in favor of what the parties had agreed to.

The Court found that it was bound by the terms of the policy as written, even if there was a clause added in error and the issue before the court was whether the inclusion of Clauses 3 and 5 created an ambiguity.

The Court sided with Surespan and HGS finding that clauses 3 and 5 could be read together so as not to create ambiguity. The Court agreed with their position that Clause 3 should be read to cover any additional contractors who were performing the work described in the insurance application; and Clause 5 should be read to cover professional services in addition to those described in the insurance application and which would need approval.

The Court found that Clause 3 provided coverage to Surespan and HGS.

You can read Surespan Structures Ltd. V. Lloyd’s Underwriters, 2018 BCSC 1058, in its entirety here.

At Foster & Company, we represent institutions and individuals looking for help understanding insurance coverages and responding to claims. Contact us by phone at 506-462-4000 or reach us online for advice.