"All-Risks" Insurance Policies Don't Cover All The Risks

In a recent decision, Ledcor Construction Limited v. Northbridge Indemnity Insurance Company (Ledcor), the Alberta Court of Appeal (Court) gave guidance on the scope of defects exclusions in "all-risks" construction insurance policies. The Court established guidelines for determining whether damage during the course of construction is part of the cost of making good poor workmanship and therefore excluded from coverage, or whether it is resulting physical damage and therefore covered under these policies. This ruling gives contractors and insurers a better understanding of the extent of damage excluded by standard defects exclusion language.

BACKGROUND

Station Lands Ltd. (Station Lands), the owner, retained Ledcor Construction to serve as construction manager and coordinator of the EPCOR tower in Edmonton. Station Lands obtained an "all-risks" insurance policy from Northbridge Indemnity Insurance Co. (Northbridge). The policy provided coverage for all "direct