Canada: Ledcor Decision Considers Standard Of Review And Insurance Policy Exclusion Clause

Last Updated: September 27 2016
Article by Mark E. Fancourt-Smith

On September 15, 2016, the Supreme Court of Canada (the "SCC) released its decision in Ledcor Construction Ltd. v Northbridge Indemnity Insurance (2016 SCC 37). In its decision, the Court considered the appropriate standard of review for standard form contracts, as well as the proper interpretation of an insurance policy exclusion clause.

Writing for all but Justice Cromwell, Justice Wagner held that – in most cases – the interpretation of standard form contracts (such as insurance policies) is a question of law and that such contracts thus constitute an exception to the rule in Sattva Capital Corp. v Creston Moly Corp. (2014 SCC 53), which held that contractual interpretation is a question of mixed fact and law. Additionally, Justice Wagner held that an exclusion clause, when ambiguous, is to be interpreted using the general principles of contractual construction, including the reasonable expectations of the parties, and the need for realistic and consistent results.

Though Justice Cromwell agreed with the rest of the Court in its disposition of the matter, he disagreed with its creation of the Sattva exception for standard form contracts. Furthermore, unlike the rest of the Court, Justice Cromwell did not find the exclusion clause to be ambiguous.

Window Washing Gone Awry

Station Lands, the owner of the newly-built EPCOR Tower in Edmonton, hired Bristol Cleaning to clean the tower's windows while the building was still under construction. As is standard across the construction industry, Station Lands held all-risk property insurance for the construction project. In the course of its work, Bristol damaged the tower's windows, requiring them to be replaced at a cost of $2.5 million. Station Lands, along with Ledcor Construction Ltd. (its general contractor), claimed the cost of replacement against the insurance policy. The insurers denied the claim, on the basis that an exclusion clause excluded coverage for faulty workmanship.

4(A) Exclusions
This policy section does not insure: ... (b) 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 shall insure such resulting damage.

(the "Exclusion Clause")

The Court of Queen's Bench of Alberta found that Bristol's work constituted 'faulty workmanship', but that the Exclusion Clause did not exclude coverage of the damage resulting from Bristol's work. However, the trial judge found the Exclusion Clause ambiguous, and only found for Station Lands and Ledcor, i.e.: that only the cost of redoing the cleaning work was excluded, after applying the contra proferentem rule against the insurers.

The Alberta Court of Appeal reversed the trial judge's decision, holding that the damage to the windows was excluded from coverage under the insurance policy. The Court of Appeal arrived at this decision by interpreting the insurance policy on the correctness standard of review, and creating a new test of "physical or systematic connectedness".

SCC: Standard Form Contracts – An Exception to the Sattva Rule

In finding that standard form contracts generally constitute an exception to the Sattva rule and that their "interpretation is best characterized as a question of law subject to correctness review" (Ledcor at para 24), the SCC provided guidance on a matter that has divided courts since 2014. In holding thus, Justice Wagner noted that standard form contracts usually have no 'meaningful factual matrix' specific to the signing parties, as such contracts are often signed without negotiation or modification. Further, since standard contracts (by definition) are generally standard across parties, their interpretation ought to attract greater precedential value than contracts that have been tailored to the individual parties' needs.

SCC: Ambiguity and the Exclusion in the Exclusion Clause

In interpreting the Exclusion Clause, Justice Wagner noted the general rules of contract construction ought to be used when interpreting ambiguous language in insurance policies. Finding the Exclusion Clause is ambiguous, Justice Wagner interpreted it by addressing the reasonable expectations of the parties, and the need for realistic and consistent results. Furthermore, he looked to Bristol's contract to determine that it had been hired to clean windows – and not "to install windows in good condition" (Ledcor at para 87).

Ultimately, Justice Wagner held that the Exclusion Clause only operated to exclude the cost of re-washing the windows from coverage under the insurance policy. The cost of re-installing the windows as a result of the damage done to them by Bristol constituted "physical damage not otherwise excluded" by the insurance policy, and was thus covered.


At first glance, the SCC's judgment in Ledcor provides much-needed guidance to lower courts on the interpretation of standard form contracts in a post-Sattva age. However, just as Justice Rothstein in Sattva left open the possibility for contracts to be interpreted as questions of law, in Ledcor, Justice Wagner leaves open the possibility for standard form contracts to be interpreted as questions of mixed fact and law in cases where a meaningful factual matrix exists or where a standard form contract has been modified.

Furthermore, with respect to the insurance policy exclusion clause, the Court appears to come down heavily on the side of the insured. Indeed, through judicial interpretation of the insurance policy and a narrow reading of Bristol's contract, the Court understands the Exclusion Clause as excluding very little from insurance coverage. However, the Court's decision on this issue rests on Justice Wagner's finding that the insurance policy's language is ambiguous. Were judges to find otherwise, Ledcor would instruct them to read the contract as a whole.

As such, though the SCC's judgment in Ledcor provides guidance and creates an exception to the Sattva rule and signals the Court's inclination towards the insured, it leaves open sufficient space for lower courts to interpret standard form contracts and insurance policy exclusion clauses differently.

With thanks to articling student Nabila Pirani for her assistance.

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

Click to Login as an existing user or Register so you can print this article.

Mark E. Fancourt-Smith
Similar Articles
Relevancy Powered by MondaqAI
Burnet, Duckworth & Palmer LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Burnet, Duckworth & Palmer LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
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).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions