Builders' group seeks input on potential impact of 'leaky-condo' court decision
Via: The Vancouver Sun
VANCOUVER - The Greater Vancouver Home Builders' Association is keen to know how its member companies might be impacted by a precedent-setting Supreme Court of Canada decision involving the province's leaky-condo owners.
"If they [insurance companies] view this as a risk, there might be an additional cost [to contractors] for that risk," GVHBA president and CEO Peter Simpson said in an interview Monday about a survey going out to members in the association's government-relations report today. "And that aspect of it bears watching. But so far, nobody's expressed concern to me."
However, a spokesman for the insurance industry believes rates likely won't rise -at least not sharply - because the contractors are already paying for much of the legal uncertainty surrounding the leaky-condo issue.
"I don't know definitively, [but] I can't imagine it would get much more expensive than it already is, because there's already so much cost built in now because of the legal uncertainties and costs faced for quite a number of years," Lindsay Olson, the Insurance Bureau of Canada's vice-president responsible for B.C., Saskatchewan and Manitoba, said in an interview. "I can't see how there would be a dramatic change, no."
Canada's top court last month unanimously ruled that an insurance company had a duty to defend legal actions for claims of water damage to suites in four Vancouver-area housing co-ops completed in 2004 and 2005.
The ruling opens the possibility that general contractors' insurance companies will have to pay for faulty work done by subcontractors.
"This is a landmark decision," Vancouver lawyer Gordon Hilliker said at the time, adding that 30,000 leaky condo units have been repaired in B.C. and another 40,000 are expected to need repair in the future.
The ruling means people with leaky condos will be able to sue under the general contractor's insurance policy to recoup some of the cost of damages caused by defective construction by subcontractors.
The Supreme Court ruling overturned previous decisions by the B.C. Court of Appeal and the B.C. Supreme Court, which found the insurance company in question, Lombard General Insurance Co. of Canada, did not have to defend actions of breach of contract and negligence against the general contractor, Progressive Homes Ltd. Progressive took the position that the defective work done by subcontractors should be covered by the subcontractors own insurance policies.
The decision confirmed the view taken in courts in Ontario, which found that insurance policies provided coverage for claims against the general contractor for errors arising from the work of subcontractors.
When the buildings leaked, BC Housing filed four lawsuits against Progressive, claiming various construction defects which allegedly caused water to leak into suites. Most of the work was done by subcontractors.
Progressive asked Lombard to defend the legal actions, but Lombard claimed it did not have a duty to defend because the claims were not covered by the insurance policies.
Hilliker said Monday that while he doesn't know if the latest court decision will prompt insurance companies to bump up contractors' rates, he personally believes they shouldn't because their current premiums should cover it.
He said he hasn't heard of any premiums rising since the court decision, but believes it's still early because the decision was just last month.
