Trial to decide insurer’s duty to defend in seniors lodge explosion

It’s going to take a trial to decide whether or not Co-operators General Insurance Company owes a duty to defend in a complicated legal case concerning a 2015 gas explosion that happened on a construction site at the Bow River Seniors Lodge in Canmore, Alta.

Alberta’s Court of the King’s Bench declined a request by Royal & Sun Alliance Insurance Company of Canada (RSA) and its client, APM Construction Services Inc. (APM), for a summary declaration that Co-operators owes APM a duty to defend and owes RSA a duty to contribute to APM’s defence.

“In all the circumstances, I find that there is a genuine issue requiring a trial as to the legal effect of [a subcontractor’s certificate of insurance], the rights it conferred on APM (if any), and the effect of the fact that APM was never designated in the Declarations [section of Co-operators’ policy] as an additional insured,” an Alberta Court of the King’s Bench justice ruled in a decision released last Tuesday.

“I have concerns about the state of the record in determining these issues. While this does not, in my view, foreclose a declaration of a duty to defend, it is a factor that supports deferring the determination to a trial process.”

In June 2015, during the course of construction work to expand the Bow River Seniors Lodge, an excavator struck and ruptured a live, pressurized methane gas line operated by Atco Gas and Pipelines Ltd., causing natural gas to escape. An hour later, the escaped natural gas ignited; a large explosion occurred, causing property damage at the site and nearby properties.

The explosion registered 1.1 on the closest Richter scale approximately 80 kilometres south of Calgary, an Alberta court decision noted in 2020. “Miraculously, no deaths or injuries resulted as the interior of the home was unoccupied at the time.”

The explosion resulted in 13 separate legal actions filed in 2017, including more than 90 different plaintiffs and more than 20 defendants.

Related: The obligation to defend additional insureds

APM had a commercial general liability (CGL) policy with RSA for the relevant period. APM initially tendered to RSA its defence in the Canmore legal actions. RSA acknowledged its duty to defend APM under the RSA policy, on a reservation of rights basis.

But one of APM’s subcontractors, DCR Construction Inc., has its own CGL policy with Co-operators.

DCR had received a certificate of insurance from a Co-operators agent. On its face, the certificate of insurance references APM as an ‘additional insured’ on the CGL policy that DCR held with Co-operators. DCR shared the certificate of insurance with APM, and APM claims it relied on this certificate to show DCR had named it as an additional insured.

However, in January 2021, Co-operators said it owed no duty to defend APM for five reasons:

Co-operators never received a request to add APM as an additional insured.
APM was never in fact added as an additional insured.
The certificate of insurance was issued for ‘information only’ and conferred no rights on APM or obligations on Co-operators.
DCR assigned its project obligations to another contractor, Ground Zero Grading Inc. (Ground Zero).
By the time of the explosion there was no longer any contract between APM and DCR, and therefore the certificate of insurance “was superfluous and had no effect.”

Citing the certificate of insurance signed by a Co-operators agent, RSA asked the court to issue a summary judgement on whether Co-operators had a duty to defend.

The court declined, finding many facts had to be determined at trial to figure out whether Co-operators had such a duty. For example, the court noted Co-operators produced no evidence to support its fifth claim, that there was no longer any contract between APM and DCR at the time of the explosion.

The court found the duty to defend action will be heard concurrently or consecutively with the other Canmore legal actions.

Feature image courtesy of iStock.com/eonid Ikan