The insured’s property damage claim under a homeowner’s policy for damage to her house alleged to have been caused by a contractor fell within the “faulty workmanship” exclusion of the insured’s insurance policy, which also excluded resulting damage from faulty workmanship.
Monk v. Farmers’ Mutual Insurance Co. (Lindsay),  O.J. 3509, June 27, 2014, Ontario Superior Court of Justice, E.J. Koke J.
The insured plaintiff, Monk, hired a contractor to perform restoration work on her log home. The scope of the contractor’s work was limited to restoring the log parts of the home’s exterior. The contractor was also required to prepare and protect the site and clean up once the restoration work was completed.
In the course of completing the work, the contractor allegedly damaged the insured’s carpet, windows, doors, and a light fixture. The insured made a claim to her insurer, the defendant, Farmer’s Mutual Insurance Co. (Lindsay), which denied the claim on the basis of the “faulty workmanship” exclusion. The exclusion stated that “we do not insure… the cost of making good faulty material or workmanship”.
The insured commenced an action against her insurer for indemnity under the policy. She also commenced an action against her broker, Muskoka Insurance Brokers Ltd.
The insured argued that the term “faulty workmanship” in the exclusion clause extended only to the work that she retained the insured to do, which was to rejuvenate the logs. Therefore, the incidental or corollary damage resulting from the alleged faulty workmanship, i.e. damage to windows and doors, fixtures and carpets, was not faulty workmanship.
The motions judge rejected the insured’s position. Unlike the case law cited by the insured, here, the “faulty workmanship” exclusion in the case at bar did not contain a specific exception for “resulting damage”. Given the fact that “resulting damage” is a commonly appearing exception in other homeowner’s insurance policies, the court viewed that the “resulting damage” exception was an intentional omission by the drafter of this policy.
The court also examined the relationship between the “faulty workmanship” exclusion in the policy and the “property excluded” exclusion in the policy, which contained a “resulting damage” exception. This “property excluded” exclusion stated “we do not insure loss or damage to… property… while being worked on, where the damage results from such process or work (but resulting damage to other insured property is covered)”.
The motions judge noted that the inclusion of resulting damage in the property exclusion supported the finding that the drafters of the faulty workmanship exclusion clause intended to exclude resulting damage.
Additionally, the court held that the exception in the “property excluded” exclusion did not trump the exception for resulting damage in the property damage exclusion clause. An exception to an exclusion could not override the clear and unambiguous provisions of another general exclusion clause. Furthermore, the two provisions were reconcilable. Damage occurring to property while being worked on did not necessarily have to result from faulty workmanship. There could be other causes for such damage, such as damage caused by accident. The motions judge held that that the exception for resulting damage in the property damage exclusion only applied to property which is damaged as a result of something other than faulty workmanship.
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