Canadian Underwriter

Court orders Travelers to defend “your work” exclusion case in Quebec

August 17, 2022   by David Gambrill

Multi-level highway through a mountain canyon.

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Quebec’s Court of Appeal has rejected Traveler’s challenge of a Wellington-style motion that requires the insurer to defend a construction contractor in a “your work” exclusion case against Quebec’s attorney general.

The appeal court also rejected Tuesday Traveler’s motion to cross-appeal, which, if successful, would have required Aviva Canada and Royal & SunAlliance (now owned by Intact) to join Travelers in defending the case.

In Travelers Insurance Company of Canada v. Gervais Dubé inc., Gervais Dubé inc. acted as a project manager during the design and construction of a retaining wall on Route 185 in Dégelis, Quebec. Built in 2003, the wall partially collapsed in May 2013.

Quebec’s attorney general has filed a lawsuit against Gervais Dubé and other professionals, alleging design and monitoring defects. More specifically, the attorney general claimed inadequate drainage, lack of densification of the granular bed, use of oversized stones, and equipment near the wall, contrary to the requirements of the installation specifications. These allegations have not been proven in court.

When the wall was built in 2003, and until 2011, Gervais Dubé inc. held a liability insurance policy with Aviva Canada. During this period, cracks in the wall were detected and repaired.

In March 2011, Gervais Dubé inc. changed its liability insurer, taking out a policy with RSA that continued until Mar. 31, 2013. During RSA’s policy period, deformations were noticed on the wall; some were are repaired while others were subject to further investigation.

As of Mar. 31, Gervais Dubé inc. obtained a liability insurance policy issued by Travelers. On May 2013, a 20-meter section of the wall, measuring nearly half a kilometer in total, collapsed. A Quebec motions judge found no warning sign announced this event, and that this section of the wall had not been subject to any prior deformation.

Aviva, RSA and Travelers all denied a duty to defend Gervais Dubé, citing various reasons. Travelers, in particular, noted its liability policy contained a “your work” exclusion for any faulty work done by a project subcontractor. It also argued Gervais Dubé inc. “knew or should have known, when taking out this policy, that material damage had occurred in whole or in part or had begun to occur.”

Gervais Dubé launched a Wellington-style court motion aimed jointly and severally against Aviva, RSA and Travelers. Wellington-style motions call for courts to require insurance companies to defend lawsuits, presuming there is even a mere possibility a court may find coverage.

A Quebec judge granted the Wellington-style motion against Travelers, but dismissed it against Aviva and RSA, finding Aviva and RSA were not on policy at the time of the retaining wall’s collapse. That put Travelers on the hook to defend the entire claim by itself.

Traveler’s appealed the motion judge’s decision, but the province’s appeal court found there was enough uncertainty about the facts that to determine whether there was a duty to defend would require “a trial within a trial.”

“Travelers claims that ‘[t]he breakage of the stirrups and the partial collapse of the wall constitute a ‘continuation, modification or resumption’ of the progressive appearance of cracks, considering that this material damage has the same cause, namely the excessive thrusts described by LEQ in its report,” Quebec’s Appeal Court ruled. “Therefore, it argues that this material damage is not covered by the insurance policy because it ‘is deemed to have been known’ within the meaning of the [policy exclusion].

“Given the state of the case, this argument cannot be definitively decided without the risk of approaching ‘a trial within a trial,’ which must be avoided as part of a Wellington-like query. It is therefore appropriate to leave the case to the first instance in this regard.”

The court also found Travelers did not have any legal standing to cross-appeal against Aviva and RSA, because the two insurers were third parties in the Wellington-style motion brought against them by the first party, Gervais Dubé. Travelers only recourse to a cross-appeal in this instance was against the first party, Gervais Dubé, the appeal court ruled.


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