2017 QCCQ 14368, 2017 QCCQ 14368

McKenzie c. Wawanesa Mutual Insurance Company of Canada 2017 QCCQ 14368 COURT OF QUEBEC (Civil Division) CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL No: 500-22-216827-140 DATE: December 5, 2017 ______________________________________________________________________ BEFORE THE HONOURABLE ENRICO FORLINI, J.C.Q. ______________________________________________________________________ BENEDICT McKENZIE Plaintiff v.

WAWANESA MUTUAL INSURANCE COMPANY OF CANADA Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] McKenzie claims $24,746.25 plus legal fees from Wawanesa Mutual Insurance Company of Canada (Wawanesa) on the grounds that damages to the roof and the interior of a building he owns are covered perils under a homeowners insurance policy issued by Wawanesa. [ 2 ] Wawanesa contests the claim. It argues that there was no occurrence and therefore coverage was never triggered.

If it was, it claims that the costs incurred to repair the roof are excluded perils, but admits that the damages to the interior of the building are covered. It has offered to pay for these. Finally, it contends that its insured failed to cooperate during the investigation of the claim and thus has forfeited coverage. Questions in Dispute

a) Has Mr. McKenzie proved that coverage under the Wawanesa homeowners’ policy is triggered?

b) Is the cost of repairing the damages to the roof excluded under the exclusion for “Faulty material or workmanship” (exclusion 15)?

c) Did Mr. McKenzie breach his duty to collaborate (section 3.2 of the General Conditions of the Policy and

article 2471 Civil Code of Québec ) with Wawanesa?

d) What is the indemnity owed to Mr. McKenzie, if any, under the Policy for the damages to the roof and to the interior of the Property?

e) Is Mr. McKenzie entitled to recover damages for inconvenience and loss of time and for legal fees? Context [ 3 ] Mr. McKenzie owns a duplex (“Property”) in the City of Montreal. The roof of the Property is flat and is covered with tar and gravel. In December 2013, the roof of the Property was 9 years old. [ 4 ] Wawanesa issued to Mr. McKenzie an all risks homeowners insurance policy bearing # HPC 8476975 for the period March 2, 2013 to March 2, 2014 (Homeowners Policy). [1] The Property is an insured property under the Policy. [ 5 ] The deductible under the Policy is $1,000. [2] [ 6 ] Mr.

McKenzie has owned the duplex for more than 30 years. In December 2013, he occupied the lower apartment and a tenant occupied the upper apartment. [ 7 ] In late December 2013, the tenant of the upper apartment of the Property informs Mr. McKenzie that water is leaking through the ceiling. [ 8 ] On January 3, 2014 Mr. McKenzie contacts Wawanesa and speaks to Éric Perron, claims adjuster. He informs Mr. Perron of the

water leak. According to Mr. McKenzie, the weight of the snow accumulated on the roof of the Property has caused a breach in the roof membrane, which allows water to seep through the cracks when the snow melts. [3] The water damages the walls of the upper floor apartment of the Property. [ 9 ] Wawanesa investigates the claim. After reviewing the facts surrounding the claim and the Policy, it concludes that (

i) the damages to the roof of the Property are not covered whereas (ii) the damages to the interior of the Property are covered and informs Mr. McKenzie verbally of this coverage position. By letter dated May 1, 2014, it reiterates this position to Mr. McKenzie. [4] [ 10 ] Mr. McKenzie disagrees with Wawanesa’s coverage position. In April 2014, he hires a contractor to apply a new roof on the Property at a cost of $13,797. [5] [ 11 ] By demand letter dated June 6, 2014, he enjoins Wawanesa to reimburse him for the cost of the new roof and for the estimated cost to repair the damages to the interior of the property ($3,449.25), for a total of $17,246.25. [6] Analysis and Decision

a) Has Mr. McKenzie proved that coverage under the Wawanesa Homeowners Policy is triggered? -and-

b) Is the cost of repairing the damages to the roof excluded under the exclusion for “Faulty material or workmanship” (exclusion 15)? [ 12 ] The Court will address these two issues together as they raise related and common themes. The Policy [ 13 ] The Homeowners Policy includes both property insurance and liability insurance coverage. The property insurance coverage is an all risks policy.

The relevant portions of the property insurance portion of the Policy, in both the French and English versions, are as follows: INSURED PERILS You are insured against all risks of direct loss or damage to insured property subject to the exclusions and limitations of this policy. BASIS OF SETTLEMENT Subject to the general conditions of the policy, we will pay for insured loss or damage up to the applicable amounts of insurance for any loss or damage arising out of one occurrence . Any payment for loss or damage will not reduce the amounts of insurance provided by this policy. ….

RISQUES COUVERTS NOUS COUVRONS tous les risques pouvant directement atteindre les biens assurés, sous réserve des exclusions et limitations du présent contrat. MODALITÉS DE RÈGLEMENT

Sous réserve des dispositions générales du présent contrat, nous vous verserons par sinistre une indemnité correspondant aux dommages couverts, à concurrence du montant de garantie applicable.

Après chaque sinistre , vous restez couvert pour les mêmes montants. [ 14 ] The term “occurrence” or “sinistre” is defined as follows in the Policy: Occurrence means an event causing loss , injury or damage; all loss, injury or damage arising out of the same general conditions will be considered as arising out of one occurrence, regardless of the number of claimants. … Sinistre , tout événement causant des dommages ; tous les dommages ayant la même origine seront imputés à un seul et même sinistre, quel que soit le nombre de tiers lésés. (Underlining added) [ 15 ] The Policy does not define what constitutes a loss, injury or damage for the purposes of the property insurance coverage. [ 16 ] Wawanesa argues that coverage is not triggered because the December 31 incident which gave rise to the claim is not an “occurrence” within the meaning of the Policy. [ 17 ] Moreover, Wawanesa argues that the “Faulty material or workmanship” exclusion (exclusion 15) applies and therefore the damages to the roof of the Property are not covered.

However, it does agree that the resulting damages to the interior of the Property are

covered under the Policy. [ 18 ] The “Faulty material or workmanship” exclusion provides as follows: COMMON EXCLUSIONS The following exclusions are additional to those contained elsewhere in this policy. WE DO NOT INSURE … 15. Faulty material or workmanship The cost of making good faulty material or workmanship. [ 19 ] In French, the exclusion reads as follows: EXCLUSIONS GÉNÉRALES … 15.

Malfaçons ou défauts Le coût des travaux de réfection ou de correction rendu nécessaires par la malfaçon ou des défauts dans les matériaux. [ 20 ] The Policy also contains an exclusion for gradual damage caused by wear and tear or gradual deterioration. [7] The Law [ 21 ] An insured making a claim under a property insurance policy has the burden of proving the facts which trigger coverage under the policy.

Once this burden has been discharged, the insurer has the burden of proving that an exclusion applies. [8] [ 22 ] Absent an event (in French, an “événement”) or an occurrence, damage insurance, which includes property insurance, does not come into play. This rule is reflected in the Policy itself, as one can see from the excerpts cited above. It is also found in the Civil Code of Québec at

article 2395 which provides: 2395. Damage insurance protects the insured against the consequences of an event that may adversely affect his patrimony. (Underlining added). [ 23 ] Likewise, damage insurance generally is not triggered when a latent defect causes the loss. This rule is set out in

article 2465 C.C.Q., which reads as follows: 2465. The insurer is not bound to indemnify for injury resulting from shrinkage, diminution or losses sustained by the property arising from an inherent defect in, or the nature of, the property. [ 24 ] The “Faulty material or workmanship” exclusion relied on by Wawanesa is not uncommon nor is it exorbitant of civil law as it is reflected in

article 2465 C.C.Q. [9] [ 25 ] The Courts of the province of Québec have applied the rule requiring the proof of an occurrence or an event to trigger coverage in damage insurance on numerous occasions. Likewise, the exclusionary rule for inherent defects or faulty materials or workmanship has given rise to abundant case law. Some of this case law will be summarized below. [ 26 ] In Tembec Inc. v. American Home Assurance Company [10] , the insured claimed damages from its insurer as a result of a leak from its pulp reservoir.

American Home denied the claim on the grounds of a faulty workmanship, material, construction or design exclusion as well as an exclusion for inherent or latent defect contained in an all risks property insurance policy. The trial judge ruled that the faulty workmanship/design exclusion applied and dismissed the claim. [ 27 ] The Québec Court of Appeal confirmed this decision and wrote the following in its reasons for judgment: [11] [22] Notons que l’exclusion convenue n’est pas exorbitante du droit commun.

Les articles 2563 et 2565 C.c.B.-C. , que l’on retrouve à la sous-section sur le caractère indemnitaire de l’assurance de dommages, se lisent : Art. 2563. L’exclusion du préjudice occasionné par cas forfuit ou par la faute de l’assuré n’est valable que si elle fait l’objet d’une stipulation expressément et limitativement énoncée au contrat . Toutefois, l’assureur ne répond pas, nonobstant toute convention contraire, du préjudice provenant d’une faute intentionnelle de l’assuré. Art. 2565.

L’assureur ne répond pas des déchets, diminutions et pertes subies par la chose et provenant de son vice propre . [Je souligne] [23] En l’espèce, la perte subie par Tembec découle du vice propre de son réservoir de soufflage, ce qu’a établi la preuve administrée en première instance. La conception du réservoir présentait des lacunes telles que le vice inhérent qui l’affectait aurait provoqué à terme sa perte, s’il n’avait été réparé promptement. En outre, l’exclusion stipulée à la police prévoit expressément que le

risque découlant d’une conception déficiente de la chose assurée n’est pas couvert. Il s’agit là d’une stipulation expresse valide et « limitativement énoncée ». [ 28 ] The Golden Eagle Canada Limited v. American Home Assurance Company [12] case also illustrates how a faulty workmanship and materials exclusion or the inherent defect exclusion found in

article 2465 C.C.Q. is applied. [ 29 ] Golden Eagle operated an oil refinery and had built nine 500,000 barrel steel storage tanks on its premises. In the fall of 1972, an inspection revealed that may of the supporting columns of the tanks were bowed and leaning, and the roof of a number of tanks collapsed or were damaged. Golden Eagle spent $2.7 million to rebuild the roofs of some tanks and to reinforce the other tanks.

It made a claim on its all risks property insurance policy. [ 30 ] The experts heard at the trial agreed that the cause of the damages sustained by the tanks was triggered by temperature differentials between the inside and the outside of the tanks and was caused notably by the weakness or instability of the various components on the interior structure. [13] [ 31 ] Golden Eagle’s all risks policy contained an exclusion clause that excluded damage caused by “errors in design, errors in processing, faulty workmanship or faulty materials…” [ 32 ] The Court held that the loss was excluded as it fell within this exclusion as well as the inherent defect exclusion of

article 2465 C.C.Q. [ 33 ] Bérubé v. Johnston [14] also illustrates these principles. Mr. Bérubé filed a lawsuit against Mr. Johnston on the grounds that the discovery of an unused oil tank found buried beneath the back yard of the property he purchased from him constituted a latent defect. Mr. Johnston called into warranty his property and liability insurer under a homeowners’ policy. [ 34 ] Chubb, Mr. Johnston’s insurer, denied coverage on the grounds that the policy was never triggered since there was no occurrence. The trial judge agreed and dismissed Mr.

Johnston’s claim. [ 35 ] The Québec Court of Appeal [15] confirmed this ruling on the following grounds: [3] The trial judge did not agree with this

interpretation of the policy and dismissed the action in warranty. His ratio decidendi is the lack of an occurrence, an event necessary to activate the liability coverage. The trial judge also concluded that the obligation to defend did not arise considering the nature of the claim against the appellant. [4] Art. 2465 C.C.Q. provides that the insurer is not liable to indemnify for injury (property and liability) arising from an inherent defect in the property. [5] This principle was not excluded in the instant case. To the contrary, the property

section of the appellant's policy specifically excludes latent defect. [6] With regard to the personal liability coverage, it is defined as follows: We cover damages a covered person is legally obligated to pay for personal injury or property damage which take place anytime during the policy period and are caused by an occurrence (…) [7] The trial judge was right to conclude that this coverage could not be trigged here since there had been no damage caused by an occurrence to the property. This conclusion is the only one to be drawn from a correct

interpretation of the policy, as it was decided in numerous cases. (footnotes omitted) [ 36 ] Finally, the following passage from Pageau v. Leblanc [16] summarizes the case law that governs this case: [12] Au

chapitre des " garanties ", le contrat prévoit que: «Seuls sont couverts les sinistres qui surviennent pendant que cette assurance est en vigueur.» [13] Le mot " sinistre " est définit ainsi: «Tout événement causant des dommages […].» [14] Le contrat stipule que la garantie se limite aux " dommages compensatoires " pour trois catégories de préjudice. « 1.

Responsabilité civile de la vie privée Nous couvrons les conséquences pécuniaires de la Responsabilité Civile pouvant vous incomber en raison de dommages corporels , de dommages matériels ou de privation de jouissance , involontairement causés à autrui du fait: - […] - des lieux assurés, y compris: - la responsabilité de tiers assumée par vous par contrat écrit et se rattachant auxdits lieux; […]» [15] Au

chapitre de l'assurance responsabilité civile, s'ajoutent les " garanties subsidiaires" dont la suivante:

«Si vous êtes poursuivi pour des dommages que nous couvrons au

titre de la garantie Responsabilité Civile nour prendrons votre défense, entièrement à nos frais. […]» [16] En bref, comme dans l'affaire Géodex inc . et Raoul Altable c.

Zurich compagnie d'assurances : «[…] il faut un événement causant un dommage matériel pour provoquer l'application des polices.» [17] Le vice caché comme tel bénéficie d'une exclusion légale faisant en sorte qu'il n'est pas couvert par l'assurance: Art. 2465 C.c.Q. : L'assureur n'est pas tenu d'indemniser le préjudice qui résulte des freintes, diminutions ou pertes du bien et qui proviennent de son vice propre ou de la nature de celui-ci. (soulignement ajouté) [18] Cependant, " la portée de cette exclusion légale du vice caché est limitée à la chose atteinte " «Si le vice caché n'est pas couvert par l'assurance (art. 2465 C.c.Q. ), en revanche, le sinistre qui en résulte l'est quant à lui ( art. 2464 C.c.Q.).» [19] La présence d'un vice caché n'est donc pas un sinistre en soi.

Par contre, le dommage qui résulte d'un événement lié au vice caché peut être un sinistre couvert: «En d'autres termes, l'assureur serait tenu d'indemniser son assuré pour un dommage découlant ou causé par un vice caché mais non pas pour la correction du vice lui-même.» [20] Par exemple, les dommages qui résultent d'un incendie survenu après la vente mais attribuable à la présence d'un vice caché constituent un sinistre couvert. [21] Ces principes établis, voyons si les éléments de réclamation de la demande principale sont visés par la couverture d'assurance. (Footnotes omitted) Application of the Law to this Case: The Cause of the Water Infiltration [ 37 ] The Court heard two witnesses as to the cause of the water infiltration.

Martin Chernofsky [17] testified on behalf of Mr. McKenzie and Pierre Trudeau [18] on behalf of Wawanesa. [ 38 ] In the eyes of the Court, and for the reasons expressed below, Mr. Chernofsky’s opinion is not credible nor is it reliable. [ 39 ] Mr. McKenzie explains that he asked Mr. Chernonsky to inspect the roof in December 2013. The latter confirms he did go on the roof of the Property, but does not remember how much snow was on the roof. Mr. McKenzie and Mr. Chernofsky agreed that the latter would return to inspect the roof in the spring 2014, after the snow melt. [ 40 ] Mr.

Chernofsky writes in his Report that in “April, 2014 I re-inspected the roof and could not pin point the exact source of the problem.” Further in his Report, he writes as follows as to the cause of the water leak: “As I was contracted to do the work and after removing the membrane, there was noticeable damage to the actual wood deck (splits in the wood boards and pertruding bulges) which was most likely caused by an excessive amount of weight (snow and ice).” ( sic) [ 41 ] Asked at trial to explain his conclusion as to the cause of the water infiltration, Mr. Chernofsky is unable to do so.

He adds “I don’t really recall it because I don’t think I was there. My workers were there, but I saw the pictures.” In cross-examination, he adds that he has no recollection of his visit to the Property in the spring 2014. [ 42 ] Plaintiff adduced no pictures (taken by Mr. McKenzie or Mr. Chernofsky or his employees) into evidence portraying the roof of the Property which Mr. Chernofsky allegedly relied on to draft his Report. More importantly, in cross-examination, Mr. Chernofsky admits he took no pictures.

Finally, he adds that his wife wrote the report, based on his input [ 43 ] Considering the foregoing, the Court affords no credibility to Mr. Chernofsky’s opinion. [ 44 ] In contrast, Mr. Trudeau’s testimony is direct, thorough, detailed and convincing. [ 45 ] His mandate was to inspect the roof and the interior of the Property, and to determine the state of the roof and the cause of the water infiltration. He inspected the Property and its roof on February 8, 2014. [ 46 ] Mr. Trudeau did not notice any cracks in the ceiling or gypsums wall of the upper floor apartment.

This points out to him that the weight of the snow could not have caused the water infiltration because cracks in the walls and ceilings are a telltale sign of excessive weight on a roof. [ 47 ] Rather, all he saw was peeling paint and water stains in the apartment. This is not consistent with an overloaded roof. [ 48 ] On the roof, he noticed signs of poor maintenance. [19] Moreover, despite the presence of snow, he was able to take a picture of the roof structure through a roof vent. [20] The roof structure is comprised of 2” X 8’ wood support beams on which are nailed 1” X 6’ planks.

Tar paper, tar (liquid asphalt) and gravel are added on top of the wood structure to form a watertight membrane. [ 49 ] Based on his experience, he concludes that the water infiltration was caused by a shifting nail or 1” X 6’ plank, which then pierced the membrane. This movement is triggered with the passage of time as the structure weakens and there are shifts in ground soil or changes in temperature (freeze and thaw cycle). According to Mr. Trudeau, it is not possible that the weight of snow accumulation on

the roof caused the water infiltration. [ 50 ] Mr. Trudeau adds that this phenomena is simply normal wear and tear that happens with the passage of time. It is not triggered by a specific occurrence or event. [ 51 ] The Plaintiff did not offer any expert evidence to rebut Mr. Trudeau’s testimony on the cause of the water infiltration. Mr. Chernofsky left the courtroom after his testimony and he was not present to hear or rebut Mr.

Trudeau’s testimony on the cause of the water infiltration. [ 52 ] Based on this evidence, and the law as summarized above, the Court concludes that no event or occurrence caused the December 2013 water infiltration at the Property and therefore, coverage under the Homeowners Policy was never triggered. [ 53 ] The reasoning of the Court of Appeal in Johnston v. Chubb applies to the case at bar.

The water infiltration discovered at the Property in December 2013 does not trigger the Homeowners Policy as it does not constitute an event or occurrence. [ 54 ] Moreover, the cost to replace the roof of the Property is excluded, both under

article 2465 C.C.Q. and the “Faulty material or workmanship” exclusion (#15). [ 55 ] The exclusionary rule of

article 2465 C.C.Q. operates to exclude coverage. The evidence reveals that the design or construction of the roof structure is an inherent defect. An inherent defect includes a defect that results from faulty design or construction. [21] A nail that shifts and pierces a roof membrane or a plank that also shifts and causes the same result is evidence of faulty design or construction. [ 56 ] The Faulty material or workmanship exclusion also applies. Its wording is clear and unambiguous. Mr.

Trudeau’s evidence reveals that the water infiltration was caused by a shifting nail or 1” X 6’ plank, which then pierced the membrane. This movement is triggered with the passage of time as the structure weakens and there are shifts in ground soil or changes in temperature (freeze and thaw cycle). This constitutes faulty material or workmanship and thus comes within the scope of the exclusion. [ 57 ] While Mr.

McKenzie testified that he asked for and expected “full deck” insurance when he purchased the Homeowners Policy from Wawanesa, his insurer delivered its end of the bargain: it delivered an all risks policy, albeit with some exclusions that are not uncommon. The evidence reveals that one of these exclusions applies in the present matter, in addition to

article 2465 C.C.Q.

c) Did Mr. McKenzie breach his duty to collaborate (section 3.2 of the General Conditions of the Policy and

article 2471 Civil Code of Québec ) with Wawanesa? [ 58 ] In light of the Court’s conclusions with respect to the first two questions in dispute, there is no need to adjudicate this question.

d) What is the indemnity owed to Mr. McKenzie, if any, under the Homeowners Policy for the damages to the roof and to the interior of the Property? [ 59 ] Mr.

McKenzie not only bears the burden of proving that the water infiltration and the damages to the roof and the interior of the Property trigger coverage under the Policy, but he also bears the burden of proving that the amount of the loss is within the terms of the Policy. [ 60 ] The Policy provides “if [the insured] repair or replace the damaged or destroyed dwelling building…” Wawanesa undertakes to pay “the cost, at the date of the occurrence, of repairs or replacement (whichever is less) “ [ 61 ] He claims $13,797 for the cost of an entirely new roof.

There is no evidence offered to support his claim that it was necessary to completely replace the roof to solve the water infiltration problem that he discovered in December 2013. [ 62 ] As Mr. Trudeau testified, it was not necessary to install a whole new roof to fix the water infiltration problem. A localized repair would have solved the problem. Mr. McKenzie offered no proof to contradict this evidence. Mr. Chernofsky did not address this issue in his testimony in chief nor did he attend the trial during and after Mr.

Trudeau’s testimony to rebut the latter’s evidence on this issue. [ 63 ] Therefore, even if the Court had decided that the damage to the roof of the Property triggered coverage, it would not have awarded the full amount claimed for a new roof. [ 64 ] As for the damages to the interior of the Property, Wawanesa acknowledges that this resulting damage is a covered loss and offered in its Defence to pay the cost of repairs ($3,449.25), less the $1,000 deductible. [22] It reiterated this offer at trial. [ 65 ] This position is consistent with the case law. [23] [ 66 ] However, Wawanesa argues that it should not be obliged to pay interest on the principal amount because it followed the rules of tender and deposit. [24] It alleges in its Defence that $2,449.25 was deposited into its trust account. [25] [ 67 ]

Article 1586 C.C.Q. provides that a deposit made according to the conditions set forth in the articles 1573 to 1585 C.C.Q. releases the debtor, for the future, from the payment of interest. One of the conditions required for the debtor to be released from the payment of interest is that the tender must be accompanied by a deposit of the sum of money with a trust company, and the receipt for the deposit is filed in the record. [26] [ 68 ] There is no evidence that Wawanesa deposited the money which it admits it owes to Mr. McKenzie with a trust company nor was a receipt ever filed in the court record.

Accordingly, Wawanesa will be obliged to pay interest on $ 2,449.25 calculated from June 23, 2014. [27]

e) Is Mr. McKenzie entitled to recover damages for inconvenience and loss of time and for legal fees?

[ 69 ] Considering that the Court has decided that Wawanesa’s denial of coverage for the damages to the roof of the Property was well founded, there is no basis for Mr. McKenzie’s claim for $7,500 for inconvenience and loss of time. [28] [ 70 ] As for the claim for reimbursement of legal fees, there is likewise no basis in law and fact to award such damages. Moreover, no evidence was offered at trial as to the amount of legal fees incurred by Mr. McKenzie. Legal Costs [ 71 ] According to

article 340 C.C.P., legal costs are owed to the party that was successful, unless the court decides otherwise. In the present case, while Mr. McKenzie’s application will be granted in part, Wawanesa’s Defence has been substantially maintained, but for the issue of the interest on the $2,449.25. [ 72 ] Accordingly, the Court will exercise its discretion and will not award legal costs FOR THESE REASONS, THE COURT: [ 73 ] GRANTS in part Benedict McKenzie’s Motion Introductive of Suit; [ 74 ] CONDEMNS Wawanesa Mutual Insurance Company of Canada to pay to Benedict McKenzie $2,449.25 with interest at the legal rate plus the additional indemnity provided for by

article 1619 C.C.Q. calculated from June 23, 2014; [ 75 ] WITHOUT COSTS. __________________________________ ENRICO FORLINI, J.C.Q. Mtre Dominique Douglas Mtre Dominique Douglas Plaintiff’s lawyer Mtre Stéphanie Beaudoin Donati Maisonneuve Defendant’s lawyer Date of hearing: May 18, 2017