English / Français

Supreme Court Finds Damaged Windows Covered Under Builders’ Risk OPolicies

Ledcor Construction Ltd v. Northbridge, 2016 SCC 37

In this case, the Supreme Court of Canada interpreted the “faulty workmanship” exclusion under a Builders’ Risk insurance policy.

During a construction project, a company hired to clean windows used the wrong equipment and products and scratched the windows. The windows had to be replaced at a cost of $2.7 million dollars.

The building owner and general contractor claimed the cost of replacing the windows against their respective Builders’ Risk insurance policies. The insurers denied coverage on the basis of the exclusion for the “cost of making good faulty workmanship”.

The question before the court was whether this loss was excluded under the “cost of making good faulty workmanship” or was covered as “resulting damage” flowing from that faulty workmanship.

At the trial level, the judge found that the loss was “resulting damage” covered under the policy. This decision was overturned at the Court of Appeal, and then appealed to the Supreme Court of Canada.

The Supreme Court of Canada found that the exclusion for faulty workmanship was meant to exclude the cost of “redoing” the faulty work. In this case, the cost of redoing faulty work was the cost of re-cleaning the windows. Meantime, the cost of replacing and reinstalling the windows was not excluded.

The Supreme Court of Canada overturned the decision of the Court of Appeal and restored the trial judge’s decision which found the claim was covered as “resulting damage”.

You can read Ledcor Construction Ltd v. Northbridge, 2016 SCC 37, in its entirety here.

Related Posts