Policyholders Stay Tuned: Final Word On The LEG 2/96 Defective Workmanship Exclusion Yet To Come

As we reported here, the BC Court of Appeal in Acciona Infrastructure Canada Inc. v. Allianz Global Risks US Insurance Company grappled with the proper interpretation of the LEG 2/96 defective workmanship exclusion common in many builder's risk insurance policies. Applying general principles of contract interpretation the Court held that the exclusion is restricted to denying only those costs that would have been incurred to prevent the damage from happening. Having been unsuccessful on the appeal, the Insurers filed an application for leave to the Supreme Court of Canada.

On October 20, 2016 the Supreme Court of Canada rendered its decision on the Acciona leave application and remanded the case to the B.C. Court of Appeal for disposition in accordance with Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. This result is not surprising given that the Supreme Court in Ledcor held that the standard of review for appeals involving the interpretation