Insurer not obligated to defend in construction dispute: Saskatchewan Court of Appeal

The case involves a failed construction project with Canadian Pacific Railway

Insurer not obligated to defend in construction dispute: Saskatchewan Court of Appeal

The Saskatchewan Court of Appeal has dismissed Kelly Panteluk Construction Ltd.'s (KPCL) appeal, which sought a declaration that its insurer had a duty to defend it under a course-of-construction, wrap-up liability insurance policy.

KPCL, a company specializing in earth-moving and excavation services, had entered into a contract with the Canadian Pacific Railway Company to construct an earthen embankment for a railway line in southern Saskatchewan. During the project, the embankment collapsed, causing significant damage and leading CP Rail to sue KPCL and others for $41 million in damages. KPCL sought coverage from its insurer, which was denied based on specific policy exclusions, leading to the current legal dispute.

The initial decision by the Court of King's Bench found that the insurer did not owe KPCL a duty to defend in the CP Rail lawsuit. The judge concluded that the claims against KPCL were excluded from coverage under the insurance policy's "Project Damage Exclusion" and "Operations Exclusion." These exclusions specified that damage to the property on which KPCL was working and the operations performed by or on behalf of KPCL were not covered.

KPCL appealed this decision, arguing that the judge had erred in interpreting the insurance policy and the nature of CP Rail's claims. KPCL contended that the judge had misapprehended the pleadings, failed to consider relevant case authorities, and incorrectly placed the burden of proving the applicability of policy exclusions on KPCL rather than the insurer.

The Court of Appeal upheld the lower court's decision, agreeing that the exclusions in the policy applied to the circumstances of the case. The appellate court found no error in the judge's interpretation of the insurance policy or his conclusion that the foundation soils were an integral part of the embankment project, thus falling under the policy exclusions.

The appellate court also dismissed KPCL's argument that the judge had improperly placed the onus on it to prove that the exclusions did not apply. The court stated that the insurer had met its burden of establishing that the claims were excluded from coverage.

In conclusion, the appeal court determined that the judge correctly applied the relevant legal principles, and that the insurer was not obligated to defend KPCL in the CP Rail lawsuit. The appeal was dismissed, and the insurer was awarded costs.

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