A general contractor (“Westridge”) applied for a declaration that its general liability insurer was required to defend it in an action arising from defects in a hog barn constructed by Westridge. The court dismissed Westridge’s application holding that the true nature of the claim against Westridge was for breach of contract and that the claims in negligence were derivative of this contract claim and did not give rise to a duty to defend.

Westridge Construction Ltd. v. Zurich Insurance Co., [2004] S.J. No. 43, Saskatchewan Court of Queen’s Bench

Westridge contracted with Genex Swine Group Inc. (“Genex”) to construct a hog barn. Prior to construction, Westridge provided Genex with a list of modifications that it represented would achieve cost savings. One of these modifications was the use of Galvalume steel cladding as a roofing material. The roof to the hog barn failed, and Genex commenced an action against Westridge alleging both breach of contract and negligence.

The court agreed that careful examination of the Statement of Claim was required to determine the true nature of the claim being advanced against Westridge. Based on the decision of the Supreme Court of Canada in Non-Marine Underwriters, Lloyd’s of London v. Scalera, [2000] 1 S.C.R. 551, the court held that this examination entailed a three-step process:

1. A court should determine which of the plaintiff’s legal allegations are properly pleaded. In doing so, the courts are not bound by the legal labels chosen by the plaintiff;
2. Having determined what claims are properly pleaded, the court should determine if any claims are entirely derivative in nature; and
3. The court must decide whether any of the properly pleaded, non-derivative claims could potentially trigger the insurer’s duty to defend.

In this case, the court found that the essence of the claim by Genex was that the roof of the barn had failed prematurely and that the reason for this failure was that the Galvalume recommended and supplied by Westridge was unsuitable for use in the swine barn. No allegation was advanced against Westridge for property damage other than damage to the hog barn itself. The court found that the true nature of the claim by Genex was a breach of contract by Westridge. The court held that, insofar as the claim relied on alleged negligence, such a claim was entirely derivative of the contract claim and was not sufficiently disparate to render the two claims unrelated. The contract claim did not fall within coverage and would not trigger a duty to defend.

In the result, Westridge’s application was dismissed with costs.

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