What is the scope of the exclusion for making good faulty
workmanship under a builders risk insurance policy? If cleaners
scratch the windows during the construction process, does making
good just mean a repeat cleaning or does it also include repairs to
This was the issue that the Alberta Court of Queen's Bench
grappled with in Ledcor Construction Limited v. Northbridge
Indemnity Insurance Company, 2013 ABQB 585.
Station Lands Ltd. is the owner of the newly constructed EPCOR
Tower. Ledcor Construction Limited was the general contractor
responsible for building the new office tower. As the building
neared completion, Ledcor contracted with a cleaning company to
have the exterior of the building cleaned to remove accumulated
debris. This included cleaning the building's exterior windows.
While cleaning, the cleaners scratched those windows so badly that
they had to be replaced at considerable cost.
The owner and the general contractor made a claim under their
builders risk insurance policy for the cost of those replacements.
Northbridge Indemnity Insurance Company denied the claim, applying
an exclusion for "the cost of making good faulty
workmanship". The full exclusion stated:
This policy does not insure [...] the cost of making good faulty
workmanship, construction materials or design unless physical
damage not otherwise excluded by this policy results, in which
event this policy shale [sic] insure such resulting
The owner and the general contractor sued the insurance company,
arguing that they were not claiming the cost of making good the
cleaning, but rather were claiming the cost of damage done as a
result of the cleaning.
The court resolved the case in favour of the owner and the
general contractor, relying on the principles for interpreting
insurance policies established by the Supreme Court of Canada in
Progressive Homes Ltd. v. Lombard General Insurance Co. of
Canada, 2010 SCC 33.
It was conceded by the insurance company that but for the
exclusion, the policy as a whole would have applied to this type of
Turning to the exclusion, the court considered two aspects:
whether the cleaning was "faulty workmanship" and if it
was, what the "cost of making good" that cleaning would
On the first question, the court held that the cleaning was
"work": "[p]lainly, whether one is building
something or doing something to something else, work is being
done." (para. 11) Concluding that "work" and
"workmanship" were, in this context, synonymous, the
court held that the cleaning was clearly faulty workmanship.
On the second question, the court considered two interpretations
of "the cost of making good": the cost of re-doing the
cleaning or the cost of fixing the exterior of the building. The
court held that both of these interpretations were reasonable.
While some aspects of the policy, such as its generally broad
scope, suggested that the policy should cover the cost of replacing
the windows, the court was not satisfied that this was conclusive.
As a result, the court found the exclusion to be ambiguous, and
applied an interpretive presumption endorsed by the Supreme Court
to construe the contract against the interest of the insurer
(contra proferentem). The court held that the damage
caused by the cleaners was not excluded from the builders risk
This decision considerably narrows the application of the faulty
design/work exclusion in builder's risk policies.
Policyholders are reminded that they should seek advice from an
insurance coverage lawyer when their claims are denied by an
Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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