A CGL Policy does not extend coverage to customer’s equipment brought onto an insured farm

Bremner Farm sold and repaired farm equipment.  Customers would leave equipment at the farm while it was being repaired.  A fire damaged the farm and some of the customer’s equipment. Coverage under a commercial general liability policy was denied to the customers on the basis that third party personal property under Bremner Farms care and control was excluded by the policy.

Bremner Farms Ltd. v. Economical Mutual Insurance Co., (French) [2006] B.C.J. No. 535, New Brunswick Court of Queen’s Bench, G.S. Rideout J., December 8, 2006

Bremner Farms was in the business of selling and repairing farm equipment. On occasion, its customers brought equipment onto the premises of Bremner Farms where it remained for some time while being repaired. On September 20, 2004 a fire damaged the premises, including equipment of customers on the premises. Bremner Farms was insured by Economical Mutual Insurance Co. (“Economical”) who denied coverage for the claims relating to the property of customers on the premises on the basis of an exclusion in the policy. The parties agreed to have the matter decided by stated case before the Court.

At issue was the interpretation and interaction of the following two exclusion clauses:

2    This exclusion does not apply to:

(b) …”property damage” for which the insured is obligated to pay compensatory damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability or compensatory damages:

1)   Assumed in a contract or agreement that is an “insured contract”; or

2)   That the insured would have in the absence of the contract or agreement.

…

h)   “Property Damage” to:

4)   Personal property in your care, custody or control.

Bremner Farms conceded that section 2(h)(4) would normally preclude coverage but argued that the concluding portion of section 2(b) provided coverage which superseded the general exclusion of the 2(h)(4). The Court disagreed noting that no support was presented for the submission that an exception to an exclusion could not be trumped by another general exclusion clause. The Court held that the wording of 2(h)(4) clearly applied to the fact situation involved in the loss. The Court indicated that it was possible that in some situations an exception to an exclusion would permit coverage. However, where there is a clear and unambiguous exclusion which precludes coverage, this clause must be given its plain and simple meaning. In the result, recovery of damage for the loss of property of Bremner Farms’ customers was excluded pursuant to 2(h)(4) of the policy.

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