Negligent but not Liable

One of the key ways in which risk is allocated on a construction project is through insurance, typically in the form of builder’s risk, course of construction, or “all-risk” property policies. In most cases, the responsibility for obtaining insurance coverage is set out in a parties’ construction contract. It is common for these contracts to require a policy holder to add others, such as the owner or a subcontractor, as named insureds, which then affords this party the benefit of coverage. By ensuring all parties can be indemnified by a common insurer, there should be, in theory, less disputes over who is responsible for a loss on a construction project when such a loss occurs, which should allow construction projects, even in the event of loss, to proceed in a timely manner.

In Jacobs v. Leboeuf Properties Inc., an Ontario court had an opportunity to consider who should be responsible for a loss, on a construction project, when the owner fails to obtain the insurance coverage stipulated in the prime contract.

The basic facts of Jacobs were as follows:

1. The Owner executed a contract with a General Contractor to demolish and replace a residential property located in the City of Toronto.

2. The Prime Contract stipulated that:
The Owner shall purchase and maintain property . . . insurance in a form acceptable to the Construction Manager upon the entire Project for the full cost of replacement as of the time of any loss. This insurance shall include, as named insureds, the Owner, the Construction Manager, Trade Contractors, and their Trade Subcontractors and shall insure against loss from the perils of Fire, Extended Coverage, and shall include builder’s risk insurance for physical loss or damage including, without duplication of coverage, at least theft, vandalism, malicious mischief, transit, collapse, and where applicable, flood, earthquake testing, and damage resulting from defective design, workmanship or material. . .

3. The Owner did not include the General Contractor as a named insured.

4. Although it appears the demolition work scope was completed without issue, the Owner alleged that there were numerous issues with the workmanship of the General Contractor, which caused the Owner to suffer property damage.

5. Ultimately the Owner sued the General Contractor, alleging that the General Contractor was responsible for paying the Owner the costs incurred to correct this property damage.

6. The General Contractor then brought a court application to dismiss the lawsuit on the basis that the costs the Owner was claiming should have been covered by the Owner’s property insurance policy and, more particularly, on the basis that the General Contractor was supposed to be included as a named insured under that policy.

7. In response, the Owner argued that even if it had obtained a builder’s risk policy, the type of property damage that occurred would have been excluded from coverage.

Ultimately the Court agreed with the General Contractor and dismissed the Owner’s action. According to the judge, the Owner had clearly agreed to obtain a builder’s risk policy indemnifying the parties, including the General Contractor, from “damage resulting from defective design, workmanship or material”. The fact a “hypothetical” insurance policy may not have covered the loss was not important. Rather, by failing to obtain insurance, the Owner had voluntarily assumed the risk of loss. As such, even if the General Contractor was negligent, it could not be held liable. Jacobs is a timely reminder for both owners, as well as general contractors, who in many cases are responsible for obtaining builder’s risk policies, of the importance of ensuring that contract provisions, relating to who must obtain insurance as well as who must be added as an insured under an insurance policy, are followed.

Download Jared’s article here.

Case comment on Figley v. Figley

This article provides a Saskatchewan estate litigation update, offering a brief synopsis of the 2018 Saskatchewan decision in Figley v. Figley, 2018 SKQB 102, 21 C.P.C. (8th) 149.

Figley v. Figley reminds estate litigators of the important “wills exception” to solicitor-client privilege, which can ensure key solicitor records are producible, as long as they relate to the intention of a testator.

This case arose out of the estate of Ray Kenneth Figley, who died on October 4, 2007. Eugene Figley, as plaintiff, was attempting to probate what purported to be the Last Will and Testament of Ray Figley (the “Will”). Ronald Figley and Stanley Figley opposed probate, disputing the testamentary nature of the alleged Will.

Ronald Figley requested a court order, allowing Ronald to question a local lawyer (not a party to this action) who had been a witness to the Will now being probated. Ronald Figley requested a court order, first, to examine the lawyer, and second, to obtain certain documents from the lawyer, relating to the preparation and execution of the Will.

The Court’s decision

On the first request to orally question the third-party lawyer, the Court looked to Rule 5-20 of the Saskatchewan Queen’s Bench Rules. This rule outlines when a court will order the questioning of a third-party. The critical wording in the Rule, is underlined below, for emphasis:

5-20(1) The Court may grant leave to question any person who may have information relevant to any matter in issue in the action, other than an expert engaged by or on behalf of a party in preparation for contemplated or pending litigation.

(3) An order pursuant to subrule (1) must not be made unless the Court is satisfied that:

(a) the applicant has been unable to obtain the information from other persons whom the applicant is entitled to question or from the person the applicant seeks to question;

(b) it would be unfair to require the applicant to proceed to trial without having the opportunity of questioning the person; and

(c) the questioning will not:

(i) unduly delay the commencement of the trial of the action;

(ii) entail unreasonable expense for other parties; or

(iii) result in unfairness to the person the applicant seeks to question.

            [emphasis added]

 

Rule 5-20(3) says that before a person can question a third-party, the person seeking to question, must first have been “unable to obtain the information from other persons whom the applicant is entitled to question.”

Here, the Court found that the applicant, Ronald, had apparently not made such efforts. Ronald had previously had the chance to question Eugene Figley, in Eugene’s capacity as the purported executor of the estate. Eugene Figley would have been obliged in such questioning, to inform himself of the discussions that the deceased had with his lawyer surrounding the Will, including documents prepared by the lawyer.

However, in that previous questioning opportunity, Ronald Figley did not ask any questions of Eugene Figley to attempt to obtain this information. Thus, Ronald had not satisfied this precondition. Ronald’s application to question the third party lawyer, failed on this basis.

This then left the second part of Ronald’s application. It was a request for an order requiring the local lawyer, as a non-party, to produce certain documents relating to the Will’s execution.

The Court consequently turned to consider Rule 5-15:

 

5-15(1) On application, and after notice of the application is personally served on the person affected by it, the Court may order the production of a document from a person who is not a party at a date, time and specified place if:

(a) the document is in the possession, custody or control of that person;

(b) there is reason to believe that the document is relevant to any matter in issue; and

(c) the person who has possession, custody or control of the document might be required to produce it at trial.

            …

The third-party lawyer had resisted the application, noting the sanctity of the solicitor-client relationship, and the privilege that attaches to documents surrounding the making of the Will.

However, the Court rejected any defence of privilege. The Court noted the decision in Geffen v. Goodman Estate, [1991] 2 S.C.R. 353 (SCC), and other Canadian case law. In such previous decisions, Canadian courts had established a so-called “wills exception” to privilege. The principled basis for such an exception, was that if privilege were automatically upheld, such would prevent a court from seeing documents which could shed light on the true intention of a testator’s intention over their estate. As such, the lawyer’s documents were ordered disclosed.

Lessons from Figley:

Figley emphasizes a useful tool available to parties involved in disputes over a Will’s validity. Namely, a key source of evidence of a deceased testator’s intentions, or voluntariness, can sometimes be found in the lawyer’s documents which were created when a Will was made.

Such documents would ordinarily be privileged, but are subject to a “wills exception.” This means that if the documents are capable of showing a deceased’s intentions for their estate, they may be produced to shed light for a court. As such, parties should consider if such documents exist in their Will dispute, and may wish to take steps to determine their contents. As shown in Figley, it may be that a formal court application is required, however.

 

 

 

Contacting a Lawyer on this Subject

For more information on this subject or specific legal advice, contact James Steele at 1 306 933 1338.

The above is for general information only. Parties should seek legal advice prior to taking action in specific situations. For more information or for specific legal advice, please contact James Steele at 1 (306) 933-1338 and j.steele@rslaw.com.

 

Robertson Stromberg LLP offers legal advice and representation in all areas of law, including experience in estate litigation.

 

Month: November 2018