



COURT OF APPEAL FOR ONTARIO

CITATION: G & P Procleaners and General Contractors Inc.
    v. Gore Mutual Insurance Company, 2017 ONCA 298

DATE: 20170413

DOCKET:
C62683

Simmons, Lauwers and Hourigan JJ.A.

BETWEEN

G & P Procleaners
    and General Contractors Inc.

Plaintiff (Appellant)

and

Gore Mutual Insurance
    Company

Defendant (Respondent)

Vahe Avagyan, for the appellant

Pino Cianfarani and Stephen W. Ronan, for the respondent

Heard: February 10, 2017

On appeal from the judgment of Justice Edward P. Belobaba
    of the Ontario Superior Court of Justice, dated August 25, 2016.

Hourigan J.A.:

[1]

The appellant was contracted to provide window
    cleaning services at a newly-constructed commercial building. During the
    cleaning, a number of windows were scratched. The appellant paid the owner of
    the building to replace the damaged windows and then sought reimbursement under
    its commercial general liability insurance policy, issued by the respondent. Coverage
    was denied by the respondent on the basis of exclusions in the policy.

[2]

The appellant commenced an action against the
    respondent seeking indemnification under the policy. The respondent brought a
    motion for summary judgment to dismiss the action on the grounds that
    exclusions applied and there was consequently no coverage under the terms of
    the policy. The motion judge granted the motion and dismissed the claim, ruling
    that the claim was barred by two exclusions and there was, therefore, no
    genuine issue requiring a trial.

[3]

On appeal, the appellant submits that the motion
    judge erred in his interpretation of the exclusions and in holding that there
    was no coverage under the terms of the policy, and further that he provided
    insufficient reasons. For the reasons that follow, I would dismiss the appeal.

A.

Background

[4]

In 2014, the appellant was contracted to clean
    the exterior and interior of a newly-constructed commercial building. As part
    of that contract, the appellant was required to clean the interior and exterior
    of the windows on the first two stories of the building.

[5]

While the windows were being cleaned,
    approximately 180 of the 2,000 windows were scratched. The appellant
    indemnified the owner of the building for the damaged windows in the amount of
    approximately $134,000.

[6]

The appellants position is that the damage to
    the windows arose as a result of unforeseen environmental conditions at the
    construction site. Specifically, it argues that, at the time of the cleaning,
    stone cutting machines on the site generated vast amounts of airborne cement
    debris that adhered to the wet windows. When the appellants employees applied
    squeegees to the windows, the interaction of the squeegees and the debris
    resulted in scratched windows.  According to the appellant, its employees could
    not hear the scratching of the glass because of the loud noise emanating from
    the stone cutting machines.

[7]

The appellant maintained that its claim against
    the respondent for indemnification for the cost of replacing the windows was
    covered by the policy. The initial grant of coverage in the policy insures
    against occurrences, providing as follows:

1.

Insuring Agreement

We will pay those sums that the insured
    becomes legally obligated to pay as compensatory damages because of bodily
    injury or property damage to which this insurance applies  This insurance
    applies only to bodily injury and property damages which
occurs
during the policy period. The bodily injury or property damages must be
    caused by an 
occurrence.
  [Emphasis added.]

[8]

The term occurrence is defined in the policy
    as meaning an accident, including continuous or repeated exposure to
    substantially the same general harmful conditions.

[9]

In response to the appellants claim for indemnification,
    the respondent denied coverage under the terms of the policy on the basis that
    the claim fell within the your work exclusions contained therein. Those
    exclusions provide:

2.       Exclusions

This insurance does not apply to:



(h) Property damage to:



(v) that particular part of real
    property on which you or any contractor or subcontractor working directly or
    indirectly on your behalf is performing operations, if the "property
    damage" arises out of those operations; or

(vi) that particular part of any
    property that must be restored, repaired or replaced because "your
    work" was incorrectly performed on it.

[10]

The term your work is defined in the policy as
    meaning:

(a)

work or operations performed by you [the insured] or on your behalf;
    and

(b)

materials, parts or equipment furnished in connection with such work
    or operations

Your work includes warranties or
    representations made at any time with respect to the fitness, quality,
    durability or performance of any of the items included in (a) or (b) above.

[11]

The motion judge held that the property damage
    claimed fell within exclusion 2(h)(v). He reasoned that the appellant had
    admitted that the scratches on the windows (the occurrence) resulted from or
    arose out of its window cleaning operation, so they were caught by the
    exclusion. In so ruling, he declined to follow the Newfoundland and Labrador Court
    of Appeal decision in
Lombard General Insurance Company of Canada v.

Crosbie Industrial Services Limited
, 2006 NCLA 55,
    260 Nfld. & P.E.I.R. 96. Although not necessary for the disposition of the
    appeal, the motion judge also noted that, in his view, exclusion 2(h)(vi) also applied.

B.

Analysis

(1)

Standard of Review

[12]

The parties agree, and I accept, that the
    standard of review applicable to the interpretation of a standard form contract
    of insurance is correctness
:
see
Ledcor Construction Ltd. v
.
Northbridge Indemnity Insurance Co.,
2016 SCC 37, [2016]
    2 S.C.R. 23, at para. 46; and
MacDonald v
.
Chicago Title Insurance Company of Canada,
2015 ONCA 842,
    127 O.R. (3d) 663, at para. 41.

(2)

Interpretation of the Policy

[13]

The proper approach to the interpretation of a
    contract of insurance is well established in the case law.
The primary
    interpretive principle is that when the language of the policy is unambiguous,
    courts will give effect to clear language, reading the contract as a whole. If
    the language of the insurance policy is ambiguous, courts will apply the general
    rules of contract construction. When these rules fail to resolve the ambiguity,
    courts will construe the policy
contra proferentem
against the
    insurer. A corollary of the
contra proferentem
rule is that
    coverage provisions are interpreted broadly and exclusion clauses narrowly:
Progressive
    Homes Ltd.

v.

Lombard General Insurance Co. of Canada
, 2010 SCC 33, [2010] 2 S.C.R. 245, at paras. 22-24.

[14]

In
Progressive Homes
, at
    paras. 29, 51 and 71, Rothstein J. held that in interpreting
insurance
    policies the onus is on the insured to demonstrate that the claim in issue falls
    within the initial grant of coverage. Once that is established, the onus shifts
    to the insurer to establish that an exclusion applies. If that is the case, it
    is then open to the insured to prove that one of the exceptions to the
    exclusion is applicable.

[15]

Thus, in the case at bar, the proper analysis requires the appellant to
    establish that the claim for indemnification for the cost of replacing the
    windows falls within the initial grant of coverage. Once that is established,
    the onus shifts to the respondent to prove that there is no coverage because
    the claim is excluded under the policy. That is the end of the analysis because
    in the case at bar no exceptions to the exclusions are relied upon.

[16]

The appellant submits that the motion judge erred in finding that the occurrence
    under the policy was the scratching of the windows. It argues that, in fact,
    the occurrence was the confluence of the various environmental factors,
    including the debris produced by the stone cutters, which established the
    conditions for the scratching.

[17]

I do not accept this argument. An occurrence in this context is an event
    that causes property damage that is neither expected nor intended by the
    insured:
Progressive Homes
, at paras. 43 and 49. The environmental
    factors mentioned by the appellant did not cause the scratches to the windows. They
    were merely the conditions in which the appellants workers chose to undertake
    their window cleaning operations.

[18]

I see no error in the motion judges conclusion that the occurrence that
    caused the property damage in this case was the scratching of the windows. The
    windows were scratched by means of the application of the squeegees to the
    windows by the appellants employees. The cleaning of the windows using the
    squeegees was expected and intended, but the scratching of the windows while
    they were being cleaned through the application of the squeegees was unexpected
    and unintended. This is what caused the property damage. Under the terms of the
    initial grant of coverage under the policy, this was a claim that was potentially
    recoverable.

[19]

The next part of the analysis is to determine whether the presumptive
    coverage is negated by an exclusion in the policy. The motion judge concluded
    that the wording of exclusion
2(h)(v)
is unambiguous
    and excluded coverage in the circumstances of this this case.

[20]

I see no error in that analysis either. No property damage occurred
    until the appellants workers performed their window-cleaning operation by
    applying their squeegees to the windows. If the workers had chosen not to
    undertake the window cleaning amid the airborne cement debris given the
    conditions on the site, there would be no property damage. Therefore, the
    property damage clearly did arise out of the window cleaning operation.

[21]

The appellant submits that the motion judge should have adopted the
    reasoning in
Crosbie
, which considered a nearly identical exclusion
    clause. In
that case
, a fuel
    oil tank was destroyed following an explosion that occurred while the inside of
    the tank was being cleaned. The owner of the tank sued the cleaning company, which
    turned to its insurance company to provide a defence to the suit under its
    commercial general liability policy.

[22]

The court reviewed the your work exclusions relied upon by the
    insurance company and concluded that they were ambiguous because they failed to
    identify a relationship between an occurrence and the exclusions. The court
    went on to find that the exclusions would apply only where there was
    incorrectly performed work with no occurrence.

[23]

I agree with the respondents submission that the courts analysis in
Crosbie
is circular and inconsistent with the established principles for the
    interpretation of contracts of insurance. The first step of the coverage
    analysis is a determination of whether the claim falls within the initial grant
    of coverage. In order for there to be coverage, there must first have been an
    occurrence. The court will not take the next step of considering whether an
    exclusion applies in the absence of an occurrence. Thus, the courts conclusion
    in
Crosbie
that the your work exclusions applied only in the absence
    of an occurrence is not legally or logically sound and should not be followed.
    See also
Hipperson Construction (1996) Ltd.
v.
H.J.H Steel
    Erectors Inc.
, 2007 SKCA 52, 293 Sask. R. 153, at para. 13.

[24]

The appellant further submits in its factum that the motion judges interpretation
    of the policy renders coverage under the policy illusory. I disagree. Commercial
    general liability policies are generally intended to cover an insureds liability
    to third parties for property damage other than to the property on which the
    insureds work is being performed. They also cover consequential damage to parts
    of the property other than to the particular part of the property on which the
    work is performed. But they are not all-risk policies. They do not insure the
    manner in which the insured conducts its business. They do not generally cover
    the cost of repairing the insureds own defective or faulty work product: see
Alie
    v. Bertrand & Frere Construction Co
. (2002), 62 O.R. (3d) 345 (C.A.),
    at para. 27;
Parkhill Excavating Limited v. Royal & Sunalliance
    Insurance Company of Canada
, 2016 ONCA 832, 404 D.L.R. (4th) 337, at para.
    25; and
Swagger Construction Ltd. v. ING Insurance Company of Canada
,
    2005 BCSC 1269, 47 B.C.L.R. (4th) 75, at para. 4.

[25]

That is what the parties in the present case bargained for. To hold them
    to that bargain is entirely reasonable and does not render the coverage under
    the policy meaningless:
Hipperson Construction,
at para. 12; and
601260
    Saskatchewan Ltd. v. ING Insurance Company of Canada
, 2008 SKQB 470, 327
    Sask. R. 76, at para. 51.

(3)

Insufficient Reasons

[26]

The appellant submits that the reasons of the motion judge are
    insufficient to permit appellate review.

[27]

Reasons serve four functions: (i) to justify and explain the result;
    (ii) to tell the losing party why they lost; (iii) to provide for informed
    consideration of the grounds of the appeal; and (iv) to satisfy the public that
    justice has been done:
R. v. Sheppard
, 2002 SCC 26, [2002] 1 S.C.R.
    869, at para. 24; and
F.H. v. McDougall
, 2008 SCC 53, [2008] 3 S.C.R.
    41, at para. 98.

[28]

The alleged inadequacy of reasons is not a freestanding ground of
    appeal:
R. v. Walker
, 2008 SCC 34, [2008] 2 S.C.R. 245, at para. 20;
    and
F.H
., at para. 99.

[29]

In the present case, the reasons were very brief. However, they were
    written in a manner such that the motion judges chain of reasoning is readily
    apparent. It is clear from the reasoning that the motion judge dealt with all
    of the relevant issues raised on the motion. In my view, the reasons fulfill
    all of the functions articulated by the Supreme Court of Canada in
Sheppard
.
    I would, therefore, not give effect to this ground of appeal.

C.

Disposition

[30]

I would dismiss the appeal.

[31]

The appellant submits that this is one of those rare cases where costs
    should not be awarded because the issues in the case transcend the interests of
    the parties and the courts ruling is necessary for the development of the law.
    While I concede that this case may have some general application, the same
    could be said of the interpretation of any standard form insurance contract. In
    my view, this is not a case where the court should exercise it discretion not
    to award costs of the appeal. I would award costs to the respondent in the
    amount of $6,000, inclusive of fees, disbursements, and taxes.

Released: CWH APR 13 2017

C.W.
    Hourigan J.A.

I
    agree. Janet Simmons J.A.

I
    agree. P. Lauwers J.A.


