Insurance Covenant In Construction Contract

Article by Sean Tessarolo and Samantha Ip

Jacobs v. Leboeuf Properties Inc., 2018 ONSC 4795

Covenants to insure are common in commercial leases and construction contracts. The insurance covenant is a contract provision that requires a covenantor to obtain insurance against certain perils with the effect that the risk of loss or damage arising from those perils is transferred from the covenantee to the covenantor under the contract. In the event of a loss, the covenantee is released of its liability for the loss and the covenantor is assured that it will be indemnified for such loss. The benefit to the covenantee is often referred to as a waiver of subrogation or tort immunity.

Insurance covenants have been interpreted as extending tort immunity in favour of a covenantee in cases where the loss is caused by negligence, breach of contract,1 gross negligence2 and even intentional conduct.3

In Jacobs v. Leboeuf Properties Inc., 2018 ONSC 4795, the Court determined that a claim for breach of contract and negligence arising from faulty workmanship was barred by the terms of an insurance covenant contained in a construction contract. The plaintiff owned a residential property. The plaintiff contracted with the defendant contractor to, among other things, build a residence. Section 9.1 of the contract required the plaintiff to purchase insurance for the project and to add the defendant as a named insured under those policies:

The Owner shall purchase and maintain in property and third party liability insurance in a form acceptable to the Construction Manager upon the entire Project for the full cost of replacement as of the time of any loss. This insurance shall include, as named insureds, the Owner, the Construction Manager, Trade Contractors, and their Trade Subcontractors and shall insure against loss from the perils of…and damage resulting from defective design, workmanship or material. …

The Court determined that pursuant to s. 9.1 the plaintiff and the defendant contractually allocated the risk of loss or damage resulting from defective workmanship to the plaintiff and the plaintiff’s claim could not succeed on this basis.

Citing precedent from Ontario’s Court of Appeal, the Court held that even if the Plaintiff failed to obtain the insurance contemplated under s. 9.1, the requirement to obtain that insurance acts as a voluntary assumption of the risk of loss caused by perils that would have been insured against. In effect, the “covenant to insure effectively provides an allocation of risks reflected in the price to be paid for the demolition and reconstruction of the plaintiff’s residence.”

In the result, the Plaintiff’s claims in negligence and breach of contract were dismissed.

The decision of Austeville v. Josan, 2016 BCSC 1963, which extended the application of insurance covenants to intentional acts, will be proceeding to appeal this month.

Footnotes

1 Orange Julius Canada Ltd. v. Surrey (City), 2000 BCCA 467

2 Orion Interiors Inc. v. State Farm Fire and Casualty Co., 2016 ONCA 164

3 Austeville v. Josan, 2016 BCSC 1963 (under appeal)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Source: Mondaq

Understanding ICBC’s ‘Minor Injuries’ For Crashes After April 1, 2019

This week the BC Government released their regulations setting out the framework for ICBC’s ‘minor injury’ scheme which will be in force for people involved in BC collisions after April 1, 2019.

First and foremost it should be emphasized that the term ‘minor injury’ is misleading.  It is a political term used to make the public ok with having your rights stripped.  In short many injuries that no-one should consider minor (such as brain injuries) are caught in this definition.  With the regulations now in force, however, British Columbians now have a better understanding of what the future will hold.  Here is the rundown.

Section 103 of the Insurance (Vehicle) Act notes that everyone in a BC crash after April 1, 2019 that suffers ‘minor’ injuries have their non-pecuniary damages capped at an amount set by regulation.  The regulations released last week set the cap at $5,500.

The term “minor injury” is defined in section 101 of the Act as follows:

a physical or mental injury, whether or not chronic, that

(a)subject to subsection (2), does not result in a serious impairment or a permanent serious disfigurement of the claimant, and

(b)is one of the following: 

(i)an abrasion, a contusion, a laceration, a sprain or a strain; 

(ii)a pain syndrome;

(iii)a psychological or psychiatric condition; 

(iv)a prescribed injury or an injury in a prescribed type or class of injury;

The Regulations went on to expand this list with the following ‘prescribed’ injuries

a. a concussion that does not result in an incapacity

b. A TMJ disorder

c. a WAD injury

A TMJ disorder was defined to mean “an injury that involves or surrounds the tempomandibular joint.“.

A WAD injury was defined to mean “a whiplash associated disorder other than one that exhibits one or both of the following:

(a) decreased or absent deep tendon reflexes, deep tendon weakness or sensory deficits, or other demonstrable and clinically relevant neurological symptoms;

(b) a fracture or dislocation of the spine”

Sprain was defined to mean “an injury to one or more ligaments unless all the fibres of at least one of the injured ligaments are torn“.

Strain was defined to mean “an injury to one or more muscles unless all the fibres of at least one of the injured muscles are torn“.

Psychological or Psychiatric Condition is defined as follows:

a clinical condition that

(a) is of a psychological or psychiatric nature, and

(b) does not result in an incapacity

The word “incapacity” was defined as well with the Regulations noting as follows:

in relation to a claimant, means a mental or physical incapacity that

(a) is not resolved within 16 weeks after the date the incapacity arises, and

(b) is the primary cause of a substantial inability of the claimant to perform

(i) essential tasks of the claimant’s regular employment, occupation or profession, despite reasonable efforts to accommodate the claimant’s incapacity and the claimant’s reasonable efforts to use the accomodation to allow the claimant to continue the claimant’s employment, occupation or profession.

(ii) the essential tasks of the claimants training or education in a program or course that the claimant was enrolled in or had been accepted for enrollment in at the time of the accident, despite reasonable efforts to accommodate the claimant’s incapacity and the claimant’s reasonable efforts to use the accomodation to allow the claimant to continue the claimant’s training or education, or

(iii) the claimant’s activities of daily living.

So, if you have any of the above “minor injuries” you are facing capped non-pecuniary damages.  A concussion by default is minor but if it does result in the above definition of ‘incapacity’ it will not be subject to the cap.  The same goes for psychological or psychiatric conditions.

A “minor” injury can also get around the cap if it results in  “serious impairment or a permanent serious disfigurement“.

These terms have also been defined as follows:

“permanent serious disfigurement”, in relation to a claimant, means a permanent disfigurement that, having regard to any prescribed criteria, significantly detracts from the claimant’s physical appearance;

“serious impairment”, in relation to a claimant, means a physical or mental impairment that

(a)is not resolved within 12 months, or another prescribed period, if any, after the date of an accident, and

(b)meets prescribed criteria.

The “prescribed criteria” set out in the regulations basically mirror the test for ‘incapacity’ with the regulations stating as follows:

The claimant’s physical or mental impairment must meet the following  prescribed criteria:

(a) the impairment results in a substantial inability of the claimant to perform

(i) the essential tasks of the claimant’s regular employment, occupation or profession, despite reasonable efforts to accommodate the claimant’s incapacity and the claimant’s reasonable efforts to use the accomodation to allow the claimant to continue the claimant’s employment, occupation or profession,

(ii) the essential tasks of the claimants training or education in a program or course that the claimant was enrolled in or had been accepted for enrollment in at the time of the accident, despite reasonable efforts to accommodate the claimant’s incapacity and the claimant’s reasonable efforts to use the accomodation to allow the claimant to continue the claimant’s training or education, or

(iii) the claimant’s activities of daily living.

(b) the impairment is primarily caused by the accident and is ongoing since the accident;

(c) the impairment is not expected to improve substantially.

You will see from this combination the injury not only has to last more than 12 months as set out in the Act but the Regulations went on to basically require the injury to be permanent to not be considered minor.

Even if a ‘minor’ injury goes on to meet the test for no longer being considered minor ICBC has the right to argue that it is still minor if you did not follow their treatment protocols with s. 101(2)(3)(4) of the Act holding as follows

(2)Subject to subsection (3) and the regulations, an injury that, at the time of the accident or when it first manifested, was an injury within the definition of “minor injury” in subsection (1) is deemed to be a minor injury if

(a)the claimant, without reasonable excuse, fails to seek a diagnosis or comply with treatment in accordance with a diagnostic and treatment protocol prescribed for the injury, and

(b)the injury

(i)results in a serious impairment or a permanent serious disfigurement of the claimant, or

(ii)develops into an injury other than an injury within the definition of “minor injury” in subsection (1).

(3)An injury is not deemed, under subsection (2), to be a minor injury if the claimant establishes that either of the circumstances referred to in subsection (2) (b) would have resulted even if the claimant had sought a diagnosis and complied with treatment in accordance with a diagnostic and treatment protocol prescribed for the injury.

(4)For the purposes of this Part, a minor injury includes a symptom or a condition associated with the injury whether or not the symptom or condition resolves within 12 months, or another prescribed period, if any, after the date of an accident.

And who has the burden of proving an injury is minor?  Not ICBC.  You must prove your injury is not minor if ICBC suggests otherwise with the regulations noting “In civil proceedings relating to an injury, the burden of proof that the injury is not a minor injury is on the party making the allegation that it is not a minor injury“.

5 million claimants expected benefit from reduction of Employment Insurance waiting period

The Government of Canada is commited to help the middle class and  those working hard to join it. As a result of changes made on January 1, 2017, the waiting period for Employment Insurance (EI) benefits has been cut to one week. Reducing the waiting period  provides more money for EI-eligible individuals when they become unemployed or leave work temporarily due to health or family pressures. By October 1, 2019, about five million cumulative claimants will have benefitted from this change.

Today, the Honourable Jean-Yves Duclos, Minister of Families, Children and Social Development, announced that this change has resulted in an estimated additional $650 million dollars a year.

For example, for an eligible claimant who is laid off, and subsequently finds work after 12 weeks, the change means that up to 11 weeks of EI benefits will be payable whereas only up to 10 weeks were payable in the past. The reduction of the waiting period applies to all types of EI benefits—regular, fishing, sickness, maternity, parental, compassionate care, Family Caregiver benefits.

This is just one part of the Government of Canada’s recent actions to provide workers, parents and caregivers with more flexible, inclusive and easier to access EI benefits. These include:

  • making the default rules of the most recent Working While on Claim pilot project permanent and extending them to EI maternity and sickness benefits;
  • providing a choice of duration of parental benefits;
  • providing additional weeks of EI regular benefits to eligible seasonal claimants in 13 targeted regions; and,
  • providing more opportunities for eligible EI claimants to upskill and enhance their employability while still receiving EI benefits.

Finally, new parental sharing benefits that provide additional weeks of benefits to families when parents of a newborn or newly adopted child share parental benefits will be available starting in March 2019.

Quote
“Every Canadian’s situation is unique. By providing support sooner, we are ensuring middle class families has the money they need, when they need it the most.  We are making EI caregiving, maternity and parental benefits more flexible, inclusive and easier to access, we are providing hard-working middle-class Canadian families with more options to better balance their work and life responsibilities.”
– The Honourable Jean-Yves Duclos, Minister of Families, Children and Social Development

Quick Facts

  • The reduction in the waiting period does not affect the speed of the first payment. The current standard of providing payment within 28 days, 80 percent of the time, continues to apply.
  • About two-thirds of claimants return to work before using all their weeks of entitlement.
  • The 2019 EI premium rate will be $1.62 per $100 of insurable earnings—a decrease of 4 cents for employees compared to the 2018 rate and an effective decrease of 5 cents for employers, who pay 1.4 times the employee rate.
  • It is estimated a cumulative total of about 2.2 million claimants would benefit from the Working While on Claim measure as of October 1, 2019.
  • The pilot project aimed at assisting seasonal workers is expected to help approximately 51,500 EI seasonal claimants annually.
  • With Skills Boost,it is estimated that about 7,000 adult learners per year will take advantage of the expansion of EI options to take training while continuing to receive EI benefits.

Associated Link

Reducing the two-week waiting period to one week

Employment Insurance Improvements

Tactics used to sell credit card balance protection ‘problematic’ and ‘high risk’ to consumers, watchdog says

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BCSC alleges $47 million investment fraud by insurance group’s top officers

The British Columbia Securities Commission (BCSC) has issued a notice of hearing alleging that three leaders of a once fast-growing insurance group committed fraud by getting hundreds of people to purchase unsecured loan agreements.

The BCSC alleges that Aik Guan “Frankie” Lim and Scott Thomas Low, the directors and founders of FS Financial Strategies Inc. and related companies in the FS insurance group, dishonestly raised over $47 million between 2012 and 2017 by failing to disclose to investors that the company wasn’t profitable, its financial situation was deteriorating, and it survived by raising money from investors to cover its expenses.

The notice says that Darrell Wayne Wiebe, the company’s general manager, was aware of the FS insurance group’s true financial condition and contributed to the fraud by routinely advising Lim and Low how much the company needed to raise from investors to stay afloat.

The BCSC says investors were promised interest payments of 10 per cent to 12 per cent, payable monthly. Lim and Low “created an illusion of profitability” by opening new offices in rapid succession; donating money to charities; telling customers that they planned to take the insurance group public; and hosting parties for clients and staff at expensive hotels.

The notice of hearing names six additional people – Chun Ying “Jim” PanChung-Sheng “Johnson” KaoGeorge LayGagan Deep BachraChi Kay “Dixon” Wong and Meng Cher “Philip” Tsai who were appointed by Lim and Low as directors of related companies in the FS insurance group that also sold the unsecured loans. The related companies are alleged to have sold securities without a prospectus and without being registered to do so.

The BCSC alleges that Lim and Low, in addition to committing fraud, selling securities without a prospectus and selling securities without being registered, also violated the B.C. Securities Act by continuing to trade and sell securities after making a legal promise to the BCSC’s executive director, in 2014, that they would stop.

A hearing on the matter will be held Dec. 4, 2018 at 9:00 a.m., which all of the individuals named in the notice, or their counsel, have been invited to attend.

The notice of hearing can be viewed on the BCSC’s website, www.bcsc.bc.ca, by typing the names of any of the respondents or 2018 BCSECCOM 330 in the search box. Information about disciplinary proceedings can be found in the Enforcement section of the BCSC website.

Please visit the Canadian Securities Administrators’ (CSA) Disciplined List for information relating to persons and companies disciplined by provincial securities regulators, the Investment Industry Regulatory Organization of Canada(IIROC) and the Mutual Fund Dealers Association of Canada (MFDA).

About the British Columbia Securities Commission (www.bcsc.bc.ca)

The British Columbia Securities Commission is the independent provincial government agency responsible for regulating capital markets in British Columbia through the administration of the Securities Act. Our mission is to protect and promote the public interest by fostering:

  • A securities market that is fair and warrants public confidence
  • A dynamic and competitive securities industry that provides investment opportunities and access to capital

Learn how to protect yourself and become a more informed investor at www.investright.org

SOURCE British Columbia Securities Commission

BC Lawsuit For Alberta Car Crash Dismissed for Lack of Jurisdiction

Reasons for judgment were published today by the BC Supreme Court, Victoria Registry, dismissing a BC lawsuit on grounds that it had no jurisdiction over an Alberta based collision claim.

In today’s case (Brooks v. Leithoff) the Plaintiff was involved in a total of 5 collisions.  Four of the five occured in BC.  The third occured in Alberta.  The Plaintiff sued the Alberta motorist in BC alleging the crashes all gave rise to a single indivisible injury.

The Defendant sought to have the claim dismissed on the basis that there was no connection to BC to the crash.  The Court agreed with the Defendant and dismissed the lawsuit.  In doing so and finding the claim should have been filed in Alberta Madam Justice Power provided the following reasons:

[49]         When I consider the plaintiff’s arguments, I am not persuaded that the facts that the plaintiff points to are sufficient to displace what I view to be the clear weight of case law in British Columbia:  neither the plaintiff’s residency in British Columbia, nor the fact of indivisible injuries, nor the fact that the plaintiff is suffering ongoing damages in British Columbia, are, by themselves, sufficient to establish a clear and substantial connection to British Columbia.  When these three elements are combined, do these elements together then prove sufficient to ground jurisdiction?  I cannot conclude that they do.

[50]         During the course of argument, the plaintiff fairly conceded that some of the plaintiff’s arguments related to forums conveniens, which is not something I should take into account at this stage.  The plaintiff may have to mount two separate trials on substantially the same evidence as a result of this ruling, but again, that is not a factor I should take into when determining whether jurisdiction has been established.

[51]         During arguments, counsel for the plaintiff also suggested that if I did not accept that there was jurisdiction under s. 3(e) of the CJPTA, I could nevertheless exercise my residual discretion under s. 6 of the Act to find that this Court has jurisdiction.

[52]         In my view, this argument must fail because the exercise of discretion under s. 6 requires that either a) there is no court outside British Columbia in which the plaintiff can commence the proceeding, or b) that the commencement of the proceeding in a court outside British Columbia cannot reasonably be required.  The fact that the plaintiff has already commenced an action in Alberta leads me to conclude that it is open to the plaintiff to continue litigation of this matter in that jurisdiction.

[53]         During the arguments before me, counsel for the plaintiff also pointed to concerns relating to fairness, and the practical difficulties that Ms. Brooks would face in bringing two separate but essentially identical claims in two separate jurisdictions.  While I appreciate these practical difficulties, there are times when appeals to fairness in the law must yield to the demands for clarity and order in the law.  The words of Mr. Justice La Forest in Tolofson v. Jensen, [1994] 3 S.C.R. 1022 at 1058, although made in a somewhat different context, are nevertheless applicable here:

While, no doubt … the underlying principles of private international law are order and fairness, order comes first.  Order is a precondition to justice.

[54]         Overall, it is my view that the weight of the case law clearly establishes that the facts here are not sufficient to establish a real and substantial connection to British Columbia.

[55]         In the result, the defendant’s application to strike and dismiss the plaintiff’s claim for want of jurisdiction in British Columbia is granted.

 

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