Commercial General Liability (CGL) Policies – Major Decision on Coverage for Claims Arising from Construction Defects

The Supreme Court of Canada, in a major insurance coverage decision released on September 23, 2010, Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, has held that commercial general liability (CGL) coverage can apply to claims against general contractors arising from construction defects.

In doing so, the Supreme Court of Canada overruled recent cases in British Columbia. Since 2005, British Columbia courts have consistently held that CGL policies do not cover claims against general contractors arising from construction defects (under standard policy language), because the policies are usually worded to respond to an "accident" or "occurrence" for "property damage". In the recent BC cases, the courts decided that construction defects are not sudden "fortuitous" events, and that "property damage" means property damage to the work of someone other than the beneficiary of the insurance policy. These BC decisions came to different conclusions from the