Westridge Construction Ltd. was insured through a commercial general liability policy by a number of insurers over various times. Westridge constructed a swine barn pursuant to a request for tenders issued by Genex Swine Group. The swine barn collapsed, and Westridge was sued by Genex for breach of contract in constructing a faulty swine barn, and for negligently failing to warn Genex about the unsuitability of the materials that were proposed in the construction of the swine barn. The commercial general liability policy clearly excluded damages resulting from the breach of contract, but the Saskatchewan Court of Appeal determined that the allegations in negligence constituted an actionable claim, and that Westridge was entitled to a defence under the terms of its commercial general liability policy.

Westridge Construction Ltd. v. Zurich Insurance Co., [2005] S.J. No. 396, Saskatchewan Court of Appeal

In 1993, Genex Swine Group Inc. (“Genex”) prepared instructions to tenderers for the construction of a swine barn. Westridge Construction Ltd. (“Westridge”) delivered a tender for the construction of the swine barn in accordance with the specifications set out by Genex. Westridge later provided Genex with a list of cost-saving alternatives which included a proposal to replace the painted roof with a galvalume steel cladded roof (the “Galvalume Roof”). In 1994, Westridge entered into an agreement with Genex to construct the swine barn according to the original specifications, with the addition of the Galvalume Roof.

The construction of the swine barn was completed in October 1994. In May of 2001, Genex discovered that the roof of the swine barn was rusting, and was corroded to the point that it constituted a danger to persons and property. In 2001, Genex commenced an action against Westridge for compensation for the costs and losses associated with the premature failure of the swine barn roof, increased maintenance costs, disruption to production, including damages for loss of profits and other business interruption losses. Genex specifically claimed a breach of contract against Westridge, and negligence in proposing the addition of the Galvalume Roof to the swine barn.

Westridge was insured through a commercial general liability policy by Zurich Insurance Company and Sovereign General Insurance Company (“Zurich”), and some other insurance companies. Westridge commenced an action against Zurich for a declaration of entitlement to a defence in the action that Genex had commenced against Westridge. The trial judge determined that the true nature and substance of the claims against Westridge were that it had failed in its contractual duties. The trial judge further found that the negligence claim against Westridge was entirely derivative of the contract claim, and dismissed Westridge’s application. Westridge appealed to the Saskatchewan Court of Appeal.

The Saskatchewan Court of Appeal noted that unlike Sansalone v. Wawanesa Mutual Insurance Co., [2001] 1 S.C.R. 627, the allegations of Westridge’s negligence and breach of contract arose from different and separate sets of facts. The negligence claim is based upon the fact that Westridge held itself out to have expertise and qualifications to carry out work and to make certain recommendations with respect to the work to be done and materials to be used. Whereas the action for breach of contract is based upon the fact that the terms of the contract required Westridge to correct defects or deficiencies in its work and to reject defective material and workmanship. The Saskatchewan Court of Appeal concluded that the only overlap between the contract and tort claims were the damages. The Court of Appeal noted that the fact that the claims of negligence and breach of contract were supported by different facts conclusively demonstrated that the claims were entirely separate and that the negligence claim was not derivative of the contract claim.

The Saskatchewan Court of Appeal determined that the two claims arose from separate facts, that Genex was entitled at law to pursue the claims in contract and tort concurrently, and that Westridge was entitled to a defence from Zurich. Zurich was ordered to pay their proportionate share of the cost to defend Westridge in the Genex action.

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