Burnaby (City) v. Intact Insurance Company

2020 BCSC 221 Burnaby (City) v. Intact Insurance Company

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Burnaby (City) v. Intact Insurance Company, 2020 BCSC 221 Date: 20200220 Docket: S199792 Registry: Vancouver Between: City of Burnaby Petitioner And Intact Insurance Company Respondent Before: The Honourable Madam Justice Norell Reasons for Judgment Counsel for Petitioner: J. Silvester Counsel for Respondent: J. Forsythe Place and Date of Hearing: New Westminster, B.C. January 24, 2020 Place and Date of Judgment: Vancouver, B.C. February 20, 2020 [1] The petitioner, the City of Burnaby ("Burnaby"), seeks declarations that Intact Insurance Company ("Intact") is obligated to assume the defence of the claim and third party claims brought against Burnaby in B.C. Supreme Court Action No. M162655, Vancouver Registry (the "Underlying Action") and indemnify Burnaby for the defence costs it has incurred to date. Law [2] The parties agree on the general principals which guide the Court in deciding whether an obligation to defend a claim exists. Those principals were reviewed in Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49 at paras. 28 - 36. In summary: a) The court examines the pleadings filed against the insured to determine whether the pleadings allege facts which, if true, fall within coverage under the policy. The truth of the facts alleged, or the insurer's view of the strength of the claim, is not relevant. b) The mere

possibility of a claim falling within coverage is sufficient. In that sense, the duty to defend is broader than the duty to indemnify. c) Where it is clear from the pleadings that the claim falls outside coverage because of an exclusion clause, there is no duty to defend. d) Where pleadings are not precise enough to determine whether a claim is covered, the duty to defend is triggered if, on a reasonable reading of the pleadings, a claim within coverage can be inferred. When there is genuine ambiguity or doubt, the duty to defend must be resolved in favour of the insured. e) However, bare assertions in a pleading are not necessarily determinative; the court must look to the "substance" or "true nature of the claim" and determine whether, if the factual allegations are true, they could possibly support the legal allegations. f) Extrinsic evidence which has been explicitly referred to within the pleadings may be considered to determine the true nature of the claim. Pleadings in the Underlying Action [3] The Underlying Action concerns a single motor vehicle accident on August 17, 2015. I will review the pleadings below. However, in determining whether there is a duty to defend, I am considering only allegations in the amended notice of civil claim and third party notices against Burnaby, and not those made by Burnaby in its defence and against others. As stated by the court in

Dave's K & K Sandblasting (1988) Ltd. v. Aviva Insurance Company of Canada, 2007 BCSC 791 [Dave's K & K Sandblasting] at para. 12: The insurer's obligation to defend arises from the allegations in the statement of claim. Nothing filed by an insured in its statement of defence can create a duty to defend if that duty does not already exist [4] On April 8, 2016, the plaintiff in the Underlying Action filed a notice of civil claim naming only Burnaby as a defendant. The plaintiff alleges she was the driver of a vehicle that collided "with a curb that went across the roadway and a pole that was in the middle of the roadway" near Woodsworth St. and Westminster St. in the City of Burnaby (the "Accident Site"), and that "[no] warning signs or markings were placed on or near the roadway warning road users of the curb or pole". The plaintiff alleges Burnaby was negligent by placing the curb and pole in a dangerous location, failing to provide warning signs or markings, and creating a trap. [5] On May 25, 2016, Burnaby filed a response to civil claim and a third party notice against R.F. Binnie and Associates Ltd. ("Binnie") and Jack Cewe Ltd. ("Cewe"). Binnie is an engineering firm. Cewe is a construction company. In the pleadings, Burnaby denies any negligence, and alleges the accident was caused by the negligence or breach of contract of Binnie and Cewe who each had contracted with

Burnaby to do work at the Accident Site "including the design and installation of the curb and pole". Burnaby alleges that Binnie and Cewe had care and control of the Accident Site at the time of the accident and "were responsible for signage and road markings" to advise drivers of the installation of the curb and pole. [6] After obtaining an order permitting the addition of Binnie and Cewe as defendants to the Underlying Action, on February 9, 2017 the plaintiff filed an amended notice of civil claim against Burnaby, Binnie and Cewe. The plaintiff alleges the accident was caused by the breach of the duty of all three defendants "either at common law, statutorily, or both". The plaintiff alleges that the Accident Site was under the care and control of one or more of the three defendants "pursuant to a contract for works" between the defendants, and that the defendants "were in the course of installing a curb, or revising the curb and roadway" and "installing a bollard". It is not in dispute the "bollard" is the pole the plaintiff referred to in her original notice of civil claim. The plaintiff also alleges that one or more of the three defendants were responsible for the "design and installation" of the curb and bollard, "maintaining the roadway during said installation", and warning drivers of the "ongoing curb installation, change in curb design and the bollard installation". The plaintiff alleges that each of the defendants were occupiers of the Accident Site and pleads the Occupiers Liability Act, R.S.B.C. 1996, c.

337. The particulars of the negligence of one or more of the defendants are alleged to be: a) placing a pole and curb on and across a roadway, and in a dangerous location; b) failing to provide any or sufficient warnings of the pole and curb, either on them or around them; c) creating a trap [7] On March 31, 2017 Cewe filed a third party notice against Burnaby, Binnie and Blue Pine Enterprises Ltd. ("Blue Pine"). Blue Pine is alleged to be a contractor retained to carry out the installation of the bollard at the Accident Site. Cewe adopts the allegations of the plaintiff against Burnaby and Binnie. On June 22, 2018 Cewe discontinued its third party notice against Blue Pine, but has maintained its third party action against the other third party defendants. [8] On May 18, 2018 Burnaby filed an amended third party notice making allegations of negligence against Blue Pine, but not naming it as a third party defendant. [9] On December 17, 2019 Binnie issued a third party notice against Burnaby and Cewe. Binnie adopts the allegations made by the plaintiff against Burnaby and Cewe. Binnie alleges it completed its work on the Accident Site around June 24, 2015, two months prior to the accident, and that on the date of the accident the Accident Site was under the care and control of one of or both Burnaby and Cewe. Contract between Burnaby and Cewe [10] The contract between Burnaby and

Cewe is referred to in the pleadings and can be considered in assessing the nature of the claims. [11] On March 31, 2015 Burnaby and Cewe entered into a contract (the "Contract") to perform street, sewer and water works throughout Burnaby. The Contract incorporated the Master Municipal Construction Documents (the "MMCD") and supplementary specifications. In the Contract, the Contractor is Cewe, the Owner is Burnaby, and the Contract Administrator is identified as Binnie. The revision and installation of the curb and bollard at the Accident Site was part of the Contract, amongst many other projects. [12] The general conditions of the MMCD contain the following clauses: 1.54.1 "Place of the Work" means the designated site or location where the Work products are to be finally or permanently constructed or installed. 1.77.1 "Work" means and includes anything and everything required to be done for the fulfilment and completion of this Contract. 4.1.1 The Contractor shall have complete control of the Work and shall effectively direct and supervise the Work so as to ensure conformance with the Contract Documents. Subject to the Owner's rights as specifically set out in the Contract Documents to give directions regarding the Work, the Contractor shall be solely responsible for construction means, methods, techniques, sequences and procedures and for coordinating the various parts of

the Work under the Contract. 4.3.3 The Contractor shall at the Contractor's own cost, as part of the Work, provide all necessary safety devices and supervision at the Place of the Work so as to protect the public. [13] The specifications for traffic control include the following: .9 Traffic Control Informational and Warning Devices .2 Provide and maintain signs and other devices required to indicate construction activities or other temporary and unusual conditions resulting from project work which may require road user response. .3 Supply and erect signs, delineators, barricades and other miscellaneous warning devices in accordance with Municipal requirements. .4 Place signs and other devices in additional locations as appropriate or as directed by the Contract Administrator. [14] The relevant terms of the MMCD with respect to indemnity and insurance are: 22.1.1 The Contractor shall indemnify and hold harmless the Owner and the Contract Administrator, their agents and employees from and against claims, demands, losses, costs, damages, actions, suits or proceedings by third parties that arise out of, or are attributable to, any act or omission or alleged act or omission of the Contractor, the Contractor's agents, employees or Subcontractors or suppliers in performance of the Contract. 24.1.1 [as amended in the supplementary general conditions] Contractor will at the Contractor's

expense, carry with an insurance company or companies and under policies of insurance acceptable to and approved by Owner the following insurance with limits not less than shown in the respective items: (2) Commercial General Liability Insurance covering bodily injury and property damage on an Occurrence form. The insurance shall include Owner and Operator's Protective Liability and Contractual Liability of sufficient scope to include the liability assumed by the Contractor under the terms of this Contract . The policy shall include the Owner, and the Contract Administrator as Additional Insured with a Cross Liability Clause. Certificate of Insurance and Policy [15] The certificate of insurance is one page and identifies Cewe as the insured and Burnaby as the certificate holder. [16] In a box in the top right corner, the certificate states: This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded by the policies below. [17] In a box under the heading "COVERAGES", the certificate states: This is to certify that the policies of insurance listed below have been issued to the Insured named above for the policy period indicated, notwithstanding any requirement, term or condition of any contract or other document with respect to which this certificate may be

issue or may pertain. The insurance afforded by the policies described herein is subject to all the terms, exclusions, and conditions of such policies. Limits shown may have been reduced by paid claims. [18] In a box under the heading "DESCRIPTION OF OPERATIONS/LOCATIONS/AUTOMOBILES/SPECIAL ITEMS/ADDITIONAL INSURED" the certificate includes: The City of Burnaby and R.F. Binnie & Associates are added as Additional Insureds but only with respect to liability caused directly by the operations of the Named Insured with respect to the 2014 Local Area Service Program, Contract No. 2015-08 . [Emphasis added.] [19] The 2014 Local Area Service Program Contract No. 2015-08 is the Contract. [20] The policy is a commercial general liability policy insuring, amongst other coverages and subject to terms and conditions, liability for bodily injury and property damage, and providing a defence for such claims. [21] In the policy wordings, under a section entitled "SECTION II - WHO IS AN INSURED" the policy states: "Insured" means (e) Each person, firm corporation or government body for which the Named Insured has contracted to provide insurance but only with respect to vicarious liability that arises out of the operations of the Named Insured, and only to the extent required by such contract. [Emphasis added.] Burnaby's position [22] Burnaby relies upon the definition of insured in the policy

wordings. Burnaby argues that the pleadings against it in the Underlying Action allege liability that "arises out of" the operations of Cewe. [23] Burnaby refers to two case authorities: Kelowna (City) v. AXA Pacific Insurance Co., 2010 BCSC 904; and Penticton (City) v. AXA Pacific Insurance Co., 2009 BCSC 1404. In both cases the cities were named as additional insureds under policies issued to construction companies, and the policies provided coverage for liability "arising" from the operations of the construction companies. The underlying actions involved accidents at the construction site and allegations that insufficient safety precautions were taken at the times of the accidents. In both cases the court found that the pleadings alleged liability that could arise out of the operations of the contractor, and held that the insurer had a duty to defend. [24] Burnaby argues that the claims against Burnaby are that: the curb and bollard as installed constituted a trap, and were installed without adequate markings on the roadway or warnings signs; or alternatively, there was a failure to maintain the roadway during the installation and a failure to advise drivers of the changing curb design and bollard installation. An issue in the Underlying Action will be whether there were omissions with respect to advising drivers of the changing conditions, deficiencies in the installation

of the curb and bollard, and whether there were any express or implied obligations on the part of Cewe to place any or any additional markings or warning signs on the roadway as part of its installation. Cewe was responsible for all aspects of the work which included ensuring all necessary safety devices and supervision of the work were present to protect the public during the course of the work until the time of substantial completion, which occurred on November 25, 2015. The Contract required Cewe to have adequate warning signs. The potential liability of Burnaby is inextricably tied to and arises out of the operation of Cewe. There is more than a mere possibility that liability will arise out of the operations of Cewe. [25] Burnaby filed an affidavit attaching the contract documents. The affidavit also attached the certificate of substantial performance which states that all of the work under the Contract was substantially completed as of November 25, 2015. In my view, there is an issue whether the certificate of substantial performance is admissible in these proceedings as part of the contract documents. Neither party addressed this. However, even if it is admissible, it does not establish whether the work at the Accident Site was completed at the time of the accident. Intact's position [26] Intact relies upon the wording of the certificate of insurance, in particular that

Burnaby is an insured only with respect to liability "caused directly by" the operations of Cewe. Intact argues that liability "caused directly by" is narrower than liability that "arises out of" the operations of Cewe. [27] Intact referred to two case authorities: Vernon Vipers Hockey Club v. Canadian Recreation Excellence (Vernon) Corporation, 2012 BCCA 291 [Vernon Hockey Club]; and Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R.

405. In Vernon Hockey Club the plaintiff was injured when he fell on a pathway outside of an arena after attending a hockey game. An issue was whether the pleadings alleged liability that arose out of the insured's operations. After reviewing a number of case authorities the court stated: 52 I conclude that the contractual term "arising out of the Named Insured's operations", as written in the Hockey Club's policy endorsement, imposes a causal requirement greater than a simple "but for" test. Borrowing from the cases discussed above, the phrase "arising out of" should be construed as requiring "an unbroken chain of causation" and a connection that is more than "merely incidental or fortuitous." [28] In Amos, which concerned a claim arising out of the ownership, use or operation of a vehicle, the Court at para. 21 stated in obiter, "the words "arising out of" have been viewed as words of much broader significance than "caused by"". Intact relies upon this and argues that by implication "caused directly by" in the certificate of insurance requires a stricter causal connection. [29] Intact notes that there is no evidence about when the work at the Accident Site was underway, and that when the plaintiff in the Underlying Action first filed the notice of civil claim she did not allege that the Accident Site was under construction at the time of the accident. It was only after

Burnaby filed a response alleging work was done by Cewe and Binnie that the plaintiff filed an amended notice of civil claim importing the language from Burnaby's response and alleging that those parties were in the course of installing a curb, revising the curb and installing the bollard when the accident occurred. [30] Intact argues that Cewe's operations were the actual construction work, but not the design for the work at the Accident Site. The specifications and drawings were provided by Burnaby as part of the Contract. The insured's "operations" must be causally connected to the alleged liability and the true nature of the plaintiff's allegations is negligence in the design of the area near the Accident Site. [31] Intact argues that in the pleadings in the Underlying Action, the plaintiff alleges that the accident occurred because the defendants "placed a pole and curb on or across a roadway". This is what Cewe had contracted to do. If that allegation is the foundation of any liability, it cannot be said that the liability is caused directly by the operations of Cewe. Intact makes similar arguments with respect to the plaintiff's allegations that the defendants failed to provide any or sufficient warnings of the curb and bollard. Intact argues if there was lack of proper warnings provided for in the design, the design was provided by Burnaby, and it was not caused

directly by the operations of Cewe. Similarly, Intact argues that the decision to modify the curb and install a bollard was a decision made by Burnaby and if it is a "trap", it is a trap of Burnaby's design. Finally, the contract does not make Cewe an occupier of the Accident Site in law. [32] In summary, Intact argues the true nature of the claim is the presence of the curb creating the narrowed roadway and the bollard, not that they were faultily constructed. Their presence is the result of Burnaby's design, not Cewe's operations. Burnaby's potential sources of liability are the possibility the roadway was designed negligently or liability based on the Occupiers Liability Act. Neither of those potential sources can be said to be caused directly by the operations of Cewe. Analysis [33] The first issue is Intact's argument that it is the wording of the certificate of insurance that governs. In my view, that cannot be given the wording on the certificate, which states: This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded by the policies below. [34] The certificate of insurance is subject to the terms of the policy. Burnaby comes within the first part of the definition of Insured in the policy as Cewe contracted to provide insurance for Burnaby. The

issue is whether the claims "arise out of" the operations of Cewe, a broader test. [35] Further, even if it could be said the certificate of insurance limits Burnaby's coverage, there would then be two conflicting clauses creating an ambiguity. As an insurance contract is essentially a contract of adhesion, this ambiguity should be resolved in favour of Burnaby: Non-Marine Underwriters, Lloyd's of London v. Scalera, 2000 SCC 24, at paras. 70-71. [36] The second issue is the true nature of the pleadings. In my view, Intact interprets the pleadings in the Underlying Action too narrowly. In the amended notice of civil claim the plaintiff alleges: 9. At all material times, the area where the accident occurred was under the care and control of the Defendants and/or each of them as, pursuant to a contract for works between the Defendants, the said Defendants were in the course of installing a curb, or revising the curb configuration and roadway on Woodsworth Street, as well as installing a bollard in the area of Woodsworth Street where the Plaintiff's accident occurred on August 17, 2015.

10. At all material times, the Defendants and/or each of them were responsible for the design and installation of the curb and the bollard that the Plaintiff struck and were further responsible for maintaining the roadway during said installation and advising drivers on Woodsworth Street of the ongoing curb installation, the changing curb design and the bollard installation through adequate warning, signing or other reasonable means. [Emphasis added.] [37] Those allegations are adopted in the third party notices against Burnaby. [38] The pleadings do allege negligent design. However, the pleadings are not limited to that allegation. The pleadings also allege a failure of the defendants to warn of the changes to the roadway during the course of installation. These are potentially attributable to the alleged failure of Cewe to perform its obligations under the Contract. The Contract requires Cewe to maintain warning signs of "construction activities or other temporary and unusual conditions resulting from project work which may require road user response". In my view, the pleadings against Burnaby raise allegations which arise out of the operations of Cewe and are sufficient to trigger a duty to defend. [39] I acknowledge, as Intact points out, that there is no evidence of when the work at the Accident Site was complete, and that the plaintiff did not initially plead ongoing

installation at the time of the accident. However, it is the current pleadings which govern, and the test for determining the duty to defend assumes the allegations of fact are true. On this application, the court should not make findings of fact that could affect the Underlying Action. As stated by the court in Dave's K & K Sandblasting: [17] In Monenco Ltd. v. Commonwealth Insurance Co., [2001] 2 S.C.R. 699, the Supreme Court of Canada provided guidance on when and for what purpose extrinsic evidence could be considered. Iacobucci J., speaking for the Court, concluded that extrinsic evidence, which is specifically referred to in the pleadings, may be considered in determining the substance and true nature of the allegations and, thus, to appreciate the nature and scope of an insurer's duty to defend. He cautioned, however, against examining evidence that could impact the underlying litigation. He said at ¶ 37: It should be recalled that the question whether an insurer is bound to provide defence coverage in an action taken against the insured arises as a preliminary matter. Of course, after trial, it may turn out that there is no liability on the insurer, and thus, no indemnity triggered. But that is not the issue when deciding the duty to defend. Consequently, we cannot advocate an approach that will cause the duty to defend an application to become "a trial within a trial".

In that connection, a court considering such an application may not look to "premature" evidence, that is, evidence which, if considered, would require findings to be made before trial that would affect the underlying litigation. Order [40] I make the following declarations: a) Intact is obligated under Policy No. 5A1174668 to provide Burnaby with a defence to the amended notice of civil claim and third party claims made against Burnaby in the Underlying Action. b) Intact is obligated under Policy No. 5A1174668 to assume the continuation of conduct of the defence of Burnaby to the amended notice of civil claim and third party notices made against Burnaby in the Underlying Action, and to indemnify Burnaby for the legal fees and disbursements incurred by it to date in defence of the Underlying Action. [41] I order that Intact pay to Burnaby the costs of this Petition at Scale B. "Norell J."