Determination of entitlement to various insurance entitlements should not be tried separately

An insured brought an application to determine whether they were entitled to coverage under their insurance policy for consequential damages for a claim that was settled at mediation.  In addition to the consequential damages, there were other significant issues related to the availability of insurance to various insureds under the builder’s risk policy.   The Court determined that the issue of entitlement to insurance proceeds for the consequential loss should not be determined separately from the other coverage issues.  Canadian Underwriters.ca has also digested this case: Alberta court denies request for a split trial in builders risk policy case.

Inland Concrete Ltd. v. Commonwealth Insurance Co, [2008] A.J. No. 571 Alberta Court of Queen’s Bench J.J. Gill J. May 21, 2008

A claim was brought against the Insured in respect of concrete piles which it supplied for the construction of a penthouse, parkade and information/communication technology centre.  The Insured settled the claim by way of mediation with contributions from the other parties involved in construction.

In this action, the Insured sought a declaration from its Insurer under a Builders Risk Policy that the Insurer was obligated to provide coverage for the Insured’s settlement contribution, including its contribution toward consequential losses suffered by the third party and costs.  The Insurer had denied coverage, arguing that the damages sustained by the third party did not fall within the wording contained in the policy.

The Insured brought this application for the determination of an issue pursuant to the Alberta Rules of Court, Rule 221.  Rule 221 provides that a court may order any question or issue arising in a proceeding be tried before, at, or after the trial and may give direction as to the manner in which the question or issue is to be stated.  The Insured argued that its application would determine the issue of whether its settlement contribution toward the consequential losses of the third party fell within the coverage contemplated by the policy.

The court considered the principles that had been established with respect to Rule 221 applications and the submissions of counsel and concluded that, even if the Insured was successful on the application, there would still be unresolved issues in the litigation between the Insured and Insurer. The court was concerned that further evidence would be required to make a determination of whether some or all of the payments made by the Insured were within coverage and also that evidence relating to the issues on the Rule 221 application would be the same as, or similar to, evidence that would be required in the subsequent action.  The court therefore declined to hear the Insured’s application, finding that this was not an appropriate case in which to use Rule 221.

This case was originally summarized by Shanti Davies and originally edited by David W. Pilley.

To stay current with the new case law and emerging legal issues in this area, subscribe here.