On Covenants To Insure And The (Un)Reasonable Inference Of Risk Assumption

In Capital Sewer Servicing Inc v Crosslinx Transit Solutions Constructors,¹ the Court of Appeal for Ontario confirmed that covenants to insure do not, as matter of law, mean the covenantor agrees to assume the insured risk. Instead, the contractual relationship must be assessed in the ordinary fashion, with the covenant to insure as merely one of its incidents. The decision serves to remind contracting parties that inferences arising from agreements must be considered with the express provisions and circumstances in mind. 

Capital Sewer Servicing Inc and Crosslinx Transit Solutions Constructors were involved in constructing a light rail transit line in Toronto. Crosslinx subcontracted Capital to conduct sewer lining work (the "Subcontract"). When two residents sued both Capital and Crosslinx for property damage following a sewage backup, both parties brought applications to interpret their contract and determine the responsible party.