Canadian National Railway Company v. Royal and Sun Alliance InsuranceCompany of Canada

Canadian National Railway Company v. Royal and Sun Alliance InsuranceCompany of Canada

The Court of Appeal majority allowed the insurers' appeal because the trial judge erred in finding the faulty or improper design exclusion inapplicable: the risk of excess differential deflection that caused the TBM failure was known and investigated by the designer and therefore the loss flowed from a faulty design...

Source-derived case information.

Citation
2007 ONCA 209
Parties
Plaintiff Respondent (cross‑appellant): Canadian National Railway Company; Plaintiff Respondent (cross‑appellant): Grand Trunk Western Railroad Incorporated; Plaintiff Respondent (cross‑appellant): St. Clair Tunnel Company; Defendant Appellant: Royal and Sun Alliance Insurance Company of Canada; Defendant Appellant: AXA Assurances Inc.; Defendant Appellant: The Continental Casualty Company of Canada; Defendant Appellant: Reliance Insurance Company; Defendant Appellant: Aviva Canada Inc.; Defendant Appellant: St. Paul Fire and Marine Insurance Company
Court
Court of Appeal for Ontario
Jurisdiction
Canada
Judgment Date
26 March 2007
Procedural Posture
Civil Insurance Coverage on Builders Risk Policy / Appeal and Cross‑appeal From Superior Court Trial Judgment (judgment Dated October 7, 2004)
Outcome
Appeal allowed; cross‑appeal dismissed; trial judgment dated October 7, 2004 set aside; action against insurers dismissed
Legal Topics
Faulty or Improper Design Exclusion, Inherent Vice Exclusion, All‑risks Builders Risk Policy, Foreseeability Standard, Resultant Loss or Damage, Sue and Labour, Causation, Prejudgment Interest, Costs, Appeal Review of Findings of Fact
Source Language
english
Insurance Law Construction Law Contract Interpretation Civil Procedure Faulty or Improper Design Exclusion Inherent Vice Exclusion All‑risks Builders Risk Policy Foreseeability Standard +6 more

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Parties

Canadian National Railway Company

Plaintiff Respondent (cross‑appellant)

Grand Trunk Western Railroad Incorporated

Plaintiff Respondent (cross‑appellant)

St. Clair Tunnel Company

Plaintiff Respondent (cross‑appellant)

Royal and Sun Alliance Insurance Company of Canada

Defendant Appellant

AXA Assurances Inc.

Defendant Appellant

The Continental Casualty Company of Canada

Defendant Appellant

Reliance Insurance Company

Defendant Appellant

Aviva Canada Inc.

Defendant Appellant

St. Paul Fire and Marine Insurance Company

Defendant Appellant

Procedural Posture

Civil Insurance Coverage on Builders Risk Policy / Appeal and Cross‑appeal From Superior Court Trial Judgment (judgment Dated October 7, 2004)

Legal Issues

  1. 1 Whether faulty or improper design exclusion applies where TBM failed due to excess differential deflection
  2. 2 Whether inherent vice exclusion applies
  3. 3 Whether resultant loss exception to design exclusion covers consequential losses such as delayed opening

Ratio Decidendi

The Court of Appeal majority allowed the insurers' appeal because the trial judge erred in finding the faulty or improper design exclusion inapplicable: the risk of excess differential deflection that caused the TBM failure was known and investigated by the designer and therefore the loss flowed from a faulty design within the exclusion; the inherent vice exclusion was not made out; resultant loss exception did not afford coverage for the insured�s claimed consequential losses; consequently the trial judgment was set aside and the action against the insurers dismissed.

Court Disposition

Appeal allowed; cross‑appeal dismissed; trial judgment dated October 7, 2004 set aside; action against insurers dismissed

Orders

  • Set aside trial judgment dated October 7, 2004
  • Dismiss action against the appellant insurers