An injured party can obtain funds directly from the negligent party’s insurer pursuant to section 132 of the Insurance Act, even if the insured has been denied insurance coverage

The Plaintiffs were granted summary judgment pursuant to s. 132 of the Insurance Act against the Insurer who denied coverage under a CGL policy for a claim against a general contractor who was found to have supplied a defective dewatering system which caused damage to property owned by third parties.

York Region Condominium Corp. No. 772 v. Lombard Canada Ltd., [2007] O.J. No. 534, Ontario Superior Court of Justice, J.M. Wilson J., February 13, 2007

This was a motion for summary judgment brought by a Plaintiff condominium corporation (“York”) and others against, inter alia, the Defendant Lombard Canada Ltd. (“Lombard”). In a previous action, the Plaintiffs sued the general contractor Bradsil Leaseholds Limited (“Bradsil”) alleging that soil had been pumped away under York’s condominium complex due to a faulty dewatering system installed by Bradsil. Lombard insured Bradsil under a CGL policy. The Plaintiffs obtained summary judgment in the previous action against Bradsil in excess of the policy limits of $2 million. As Bradsil was not able to satisfy that judgment, the Plaintiffs brought the current action against Lombard pursuant to section 132 of the Insurance Act, R.S.O. 1990, c.I-8. Throughout the previous action and the current action, Lombard denied coverage.

The first issue was whether the Plaintiffs proved that their claim was covered under the policy as compensatory property damage caused by an occurrence. Lombard asserted that the damage resulted in a “pure economic loss” and therefore the policy did not engage. The Court concluded that Bradsil supplied a defective dewatering system which caused damage to property owned by third parties. Accordingly, the damage was compensatory within the meaning of the policy.

The second issue was whether the property damage was caused by an “occurrence,” meaning an accident. Lombard asserted that negligence on the part of the Insured causing damage to third parties could not support the finding that the occurrence was an accident. The Court concluded that a CGL policy is intended to provide compensatory damages to third parties for an accident which includes any “unlooked for, mishap, or occurrence”.

Finally, the Court found that the Plaintiffs were entitled to enforce the policy against Lombard even though the judgment was obtained pursuant to a motion for summary judgment, not “an actual trial” as required under the policy. As Lombard had reputed the policy by refusing to defend either action, it no longer had the right to raise defences which might have ordinarily been available to it. In addition, the Court found that it would be contrary to public policy to enforce the term in the policy requiring “an actual trial” as it was in conflict with the requirements of section 132 of the Insurance Act.

Accordingly, the Court found that the policy applied and that the Plaintiffs were entitled to judgment against Lombard in the amount of $2 million plus costs.

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