In Hollowcore v. Visocchi1, the Ontario
Court of Appeal (ONCA) recently limited the application of a
"delay" exclusion where damages awarded against the
insured arose from two concurrent causes, notwithstanding that one
of these causes was excluded from coverage. The damages in
Hollowcore were caused by negligence and delay by the
insured. The policy covered damages arising out of negligence
claims, but excluded claims arising out of the insureds'
failure to complete engineering drawings on time.
In 1999, Hollowcore Incorporated and Prestressed Systems Inc.
(PSI) hired Visco Engineering Inc. to prepare engineering drawings
for an addition to an Ohio parking garage. There were a number of
problems with the work submitted by Visco and its owner, Mr.
Visocchi, who was a professional engineer. Many drawings had
errors, were deficient or submitted late. These issues delayed
construction and caused Hollowcore and PSI to incur back charges
and other damages.
Hollowcore and PSI brought an action for breach of contract,
negligence and negligent misrepresentation against Visco and Mr.
Visocchi. They later added their insurers as third party
The trial judge (TJ) , found Visco and Mr. Visocchi liable for
negligence and negligent misrepresentation. Visco was also found
liable for breach of contract. The TJ apportioned these damages
between Visco, Mr. Visocchi and the insurers, finding that some of
the damages were attributable to delay on the part of Visco and Mr.
Visocchi, while other damages arose out of Visco and Mr.
Visocchi's negligence. As a result, the TJ found a portion of
the damages were covered by the policy, while other portions were
not, as a result of an exclusion for claims arising from delay. The
TJ determined that certain heads of damages were covered, but that
for the vast majority of the damages it was virtually impossible to
separate the damages between negligence (covered) and delay
(excluded) damages. As a result, the TJ ordered the insurers to
only pay 55% of those damages. Visco and Mr. Visocchi appealed.
The ONCA's Decision
Writing for the ONCA, Justice Benotto found the insurers liable
for all of PSI's damages. The key to her decision turned on the
burden of proof which she noted rested squarely on the insurers who
sought to rely on the exclusion, a burden the insurers had not
According to Justice Benotto, the insurers had not discharged
this burden. Although the damages sustained by Hollowcore and PSI
had been caused by negligence and a failure to complete drawings on
time, the damages attributable to delay had, in turn, been caused
by Visco and Mr. Visocchi's negligence. Consequently, these
damages were captured by the policy's coverage of damages
arising out of negligence and did not fall within the exclusion for
delay. In order for the exclusion to apply, the damages must be
caused "by pure delay", rather than by a delay arising
The decision also considered the TJ's calculation of damages
and fixing of the exchange rate from US to Canadian dollars, which
are not relevant to the insurance issues in this case.
In Hollowcore, the ONCA was asked to interpret an
exclusion for losses arising from delay, that can typically be
found in errors and omissions insurance policies issued to
engineers and architects. The ONCA's interpretation of this
exclusion has limited its application to damages that are proven to
be solely attributed to delay and not also caused by another
covered act. In effect, the court found that where all of a loss is
caused by concurrent negligence and delay, an insurer will be
liable for the entire loss. The insurer will have the clear burden
to demonstrate specific damages that were caused solely by delay by
1. Hollowcore v Visocchi, 2016 ONCA
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Under B.C.'s former and current Limitation Act, the limitation period for a Plaintiff's claim can be extended on the basis of a Defendant having acknowledged in writing some liability for the cause of action.
Automobile drivers, like fine wine, tend to get better with age. Older drivers can draw on a wealth of experience from their years on the road to assist them when faced by a variety of dangerous conditions.
The insurance industry will be interested in Ledcor Construction Ltd v. Northbridge Indemnity Insurance Co because of principles the Supreme Court of Canada applied to the "faulty workmanship" exclusion in a Builders' Risk policy.
For the first time in BC, a Court has decided that an insured is entitled to special costs, rather than the lower tariff costs, solely because they were successful in a coverage action against their insurer.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).