The Supreme Court of Canada’s oft-quoted reasoning in Ledcor v. Northbridge is a “go-to” analysis when it comes to applying faulty workmanship exclusions in builders’ risk policies. Last week, in 9312374 v. Aviva, 2020 ABCA 166, Alberta’s Court of Appeal reversed a Queen’s Bench decision premised on the notion that Ledcor’s faulty workmanship/resulting damage analysis is limited to course-of-construction policies. In doing so, the Court of Appeal very clearly illustrated how the SCC’s reasonable expectations doctrine applies more generally to “all-risks” policies of all types.
Had the parties’ intended a different outcome, they ought to have employed a different exclusionary wording to reflect their objective intent. Ultimately, insurers should welcome the decision in 931, which supports certainty and a uniformity of analysis across different commercial contexts.
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"The parties reasonably expected that the cost of making good the faulty or improper workmanship (determined by the scope of work contracted for) would be excluded, but that the consequences of that faulty workmanship would be covered. This interpretation does not create unrealistic results because, among other reasons, loss of structural integrity to the parkade (and the building itself) is a loss covered by the terms of the Policy."