Inspect your contracts: limitation of liability upheld

Insurance law – Liability insurance – Limitation of actions – Practice – Summary judgments – Appeals

Ferrer v. Janik, [2020] B.C.J. No. 370, 2020 BCCA 83, British Columbia Court of Appeal, March 5, 2020, H. Groberman, A.W. MacKenzie, S. Stromberg-Stein JJ.A.

The appellant plaintiffs discovered water leaking into their house two months after purchasing their property. The appellants claimed against numerous defendants including the home inspector they hired to inspect the property prior to completing the contract of purchase and sale. The contract with the home inspector contained a clause limiting the inspector’s liability for errors, omissions, breaches of contract and negligence to the amount of the fee paid for the inspection. The home inspector brought a summary trial application seeking an order that the limitation clause was enforceable. The chambers judge concluded that the matter was appropriate for summary determination and granted the application. The chambers judge noted that the appellants’ attention was specifically drawn to the limitation clause, which they initialed.

On appeal, the appellants argued that the chambers judge erred in determining that the matter was suitable for summary trial, erred in finding that the limitation clause applied to the claim, and erred in finding that the limitation clause was enforceable. In deciding that the matter was suitable for summary trial, the Court of Appeal considered conflicting jurisprudence on the test for whether a single issue should be separated out and determined. The Court concluded that the test under Rule 12-5 for severance of an issue for conventional trial is separate from the test for whether individual issues are suitable for summary trial under Rule 9-7. One of the most important considerations is whether the issue to be tried summarily is intertwined with other issues. The Court encouraged an analytical approach, taking into account the implications of determining only some of the issues, the amount involved, the complexity of the matter, the urgency, any prejudice likely to arise by reason of delay, and the cost of a conventional trial. In this case, the limitation clause issue was relatively straightforward, and its disposition would greatly assist the parties in determining what resources should be devoted to the trial.

Regarding the application of the limitation clause, the appellants argued that the chambers judge erred in refusing to consider the possibility that an allegation of gross negligence would fall outside the scope of the limitation clause. However, gross negligence was not pleaded, and no evidence was led at the summary trial to suggest that anything done by the home inspector could amount to gross negligence.

Finally, the appellate Court dismissed the appellants’ argument that the limitation clause was contrary to public policy. There was no inequality of bargaining power between the appellants and the home inspector. Although a new regulation had since come into force that prohibited similar limitation clauses, it did not apply retroactively. The appellants argued that the chambers judge erred in rejecting a public policy argument in the absence of a full record. However, the Court noted that the appellants had a full opportunity to develop whatever record was necessary.

This case was digested by Joe Antifaev, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Joe Antifaev at jantifaev@harpergrey.com.

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