




CITATION:
Hector v. Piazza, 2012 ONCA 26



DATE: 20120116



DOCKET: C53491



COURT OF APPEAL FOR ONTARIO



Weiler, Armstrong and Rouleau JJ.A.



BETWEEN:



Daniel Hector



Plaintiff



and



John Baptist Piazza
, Giuseppe Antonio Reitano
          and the City of Ottawa



Defendants (Respondent)



and



The estate of Angelo Antonio Reitano, Penta Construction
          & Building  Maintenance Ltd., North American Realty Inc., A.J.
          Garwood & Associates, Anthony Garwood,
AXA Insurance
          Canada
, and Aviva Insurance Company of Canada




Third Parties (Appellant)



Mitchell Kitagawa, for the appellant



Sean E. Cumming, for the respondent



Heard: January 9, 2012



On appeal from the judgment of
          Justice Peter B. Annis of the Superior Court of Justice, dated March 4, 2011.



By the Court:



[1]

The broad issue on this appeal is whether the appellant, Axa, is
    required to provide a defence for the respondent Piazza.

Facts

[2]

T
he respondent and Giuseppe Antonio Reitano
    (Reitano) purchased a four-unit apartment building in Ottawa for the purpose
    of renovating and redeveloping it.  The respondent had located the property and
    arranged for financing.  He played no role in the renovation work.  This
    work was carried out by Reitano, other third parties and a number of
    construction companies.

[3]

The property was sold to the plaintiff in January
    2006.  In 2009, the plaintiff sued the respondent, Reitano and the City of
    Ottawa (the defendants) in respect of faulty construction related to the
    settling of the foundation.  They have denied liability.

[4]

The respondent was insured by the appellant under a
    commercial general liability policy that covered the property from October 15,
    2001 to October 15, 2002 (AXA policy).   He also obtained property
    insurance coverage with the appellant.  The property was subsequently insured
    by Aviva Insurance Company of Canada (Aviva) for a short period of time,
    followed by Dominion of Canada General Insurance (Dominion) from December
    2002 to the transfer of the property to the plaintiff in January 2006.

[5]

The respondent sought coverage under the AXA
    policy.  The appellant has denied coverage and any duty to defend.  The respondent,
    however, joined the appellant as a third party to the main action.  He also joined
    Aviva as a third-party, but has since let them out.  No proceedings were
    brought against Dominion.

[6]

The statement of claim alleges negligent
    construction, negligent misrepresentation and breach of contract against the respondent
    and the other defendants.  The particulars of negligence speak primarily to the
    negligent renovation work on the building, mostly relating to negligent
    supervision, lack of inspection and failure to deal with deficiencies.  The respondent
    bases his claim of a duty to defend on the pleadings against him of negligent
    construction.

[7]

The respondent brought a motion against the
    appellant claiming that it had a duty to defend the respondent.

[8]

The motion judge confirmed that a three-step process must be
    applied to determine whether a claim could trigger indemnification by an
    insurer.  First, a court should determine
which of the
    plaintiffs legal allegations are properly pleaded, particularly to ensure that
    the plaintiff is not changing the nature of the allegation, i.e. an intentional
    tort into negligence.  Second, the court should determine if any claims are
    entirely derivative in nature.  Third, the court must decide whether any
    of the properly pleaded, non-derivative claims, potentially trigger the
    insurers duty to defend.

[9]

The two issues before the motion judge were: (1)
whether the plaintiffs claim in negligence was derivative of the
    contract for purchase and sale of the property; and (2) whether the insureds
    claim was excluded by the terms of the policy.  The motions judge held the
    claim was not derivative and that the wording of the policy in issue was
    ambiguous.  As a result, the insurers duty to defend was triggered.


[10]

The only issue on this appeal is whether the
    motions judge correctly interpreted the exclusion in the Comprehensive General
    Liability (CGL) policy, an enhanced policy known as the GL-Plus, which
    excluded:

(y)       property damage 

(z)        to property
owned
or occupied by or rented to the
    Insured, or, except with respect to the use of the elevators, to property held
    by the Insured for sale or entrusted to the Insured for storage or safekeeping. 
    [Emphasis added.]

[11]

Simply put, if the word owned refers only to the
    past tense, the exclusion applies and the appeal must be allowed and the motion
    judges decision set aside.  If, however, as held by the motion judge, the word
    owned can refer to the present as well as the past tense, the policy cannot
    be said to clearly and unambiguously exclude coverage.

Analysis

[12]

The threshold for the duty to defend an insured is
    only the possibility of coverage.  In relation to an exclusion, the insurer
    must show that the exclusion clearly and unambiguously excludes coverage:
Progressive
    Homes Ltd. v. Lombard General Insurance Co. of Canada
[2010] S.C.J. 33, at
    para. 51.

[13]

Both the appellant and respondent referred to the
    decision in
McGrimmon v. The Personal Insurance Company
, 2010 ONSC 108,
    upheld 2010 ONCA 655 in which the court was dealing with an exclusion clause
    that excluded coverage for claims made against you arising from damage to
    property you own.  The property in issue was no longer owned by the respondent
    although it once was.  McKinnon J. held that the past tense had not been
    employed in the exclusionary word own and that there was no express exclusion
    for property that was owned, used or occupied or sold.  Accordingly the
    insurer could not show that the exclusion was clearly and unambiguously
    operative.  In a brief endorsement upholding that decision, this court
    commented, The exclusion cannot be read as if it was written both in the
    present tense and in the past tense.  It is in the present tense only.

[14]

Before us, the appellant contends that as the word,
    owned must be read in the past tense only and there is no ambiguity as to
    whatever it refers to the past or the present tense.

[15]

We do not agree.  Property owned by the insured
    can grammatically refer to property which is now owned or which was previously
    owned.  Words take their meaning from the context in which they are used.  In
    the case before us, the words surrounding the word owned, namely,  occupied
    by or rented to the Insured, or, except with respect to the use of the
    elevators, to property held by the Insured for sale or entrusted to the Insured
    for storage or safekeeping can all be read in the present tense.  They do not
    exclusively relate to the past tense.

[16]

A CGL policy provides third party liability
    insurance.  Looking at the policy as a whole, the exclusions for the most part
    deal with items that would be the subject of first-party coverage, for example,
    (b) claims related to cars, (d) boats, (e) and (f) injuries to employees on the
    job, or which are not insurable like (g) intentional assault or (j)
    deficiencies in the insureds own work.  As stated in the annotation from
    Lichty and Snowden, 
Annotated Commercial General Liability Policy,
at
    p. 20-5:

The plain meaning of this exclusion
    is clear: the Policy does not provide security from liability for damage to
    property that it is within the power of the insured to protect.

[17]

The appellant submits that a third party liability
    claim can only be made with respect to property that was owned in the past by
    the insured.  Unexpected property damage can never give rise to a third party
    liability claim against an insured while the insured still owns the property.  Therefore,
    the appellant submits if the exclusion is to have any purpose, the words property
    owned must be read in the past tense.

[18]

The answer to this submission is that while a CGL
    policy is intended to insure against third party liability and it is not
    intended to respond to first party claims, strict rules of construction mean
    that this is not always the result.  At times, there is an overlap of coverage:
    See Lichty and Snowden, supra, at p. 20-5.

[19]

We note that if the words property owned in the
    exclusion are interpreted as referring to the present tense, property that was
    owned by the insured in the past, and that is subject to a third party claim,
    could fall within the ambit of coverage under the policy.  Contrary to the submission
    of the appellant, this is not inconsistent with the intention of the parties to
    exclude first party liability.

Conclusion

[20]

Inasmuch as the word owned as used in the phrase,
    property
owned
or occupied by or rented to the Insured, or, except with
    respect to the use of the elevators, to property held by the Insured for sale
    or entrusted to the Insured for storage or safekeeping can refer to the
    present as well as the past tense, the policy cannot be said to clearly and
    unambiguously exclude coverage.  Accordingly, the appellant is obliged to
    provide a defence for the respondent and the appeal is dismissed.

Costs

[21]

The respondent is entitled to its costs on a
    partial indemnity scale which are fixed in the amount of $6, 610.50 inclusive
    of disbursements and all applicable taxes.

RELEASED:  Jan. 16, 2012                                                            K.M.
    Weiler J.A.

KMW                                                                                           R.P.
    Armstrong J.A.

Paul
    Rouleau J.A.


