The Progressive Homes^[1] judgment has had major repercussions on the damage insurance industry, especially for the holders and issuers of commercial general liability insurance, also known as CGL policies. The Supreme Court in fact broadened the scope of the notions of “accident” (occurrence) and “material damages.” Although some observers have believed seeing here an almost unlimited broadening of the notion of “occurrence,” some recent judgments have identified certain limits.

The issue was first addressed in the Couverture Montréal-Nord judgment rendered by the Superior Court of Quebec on July 6, 2016^[2]. In this case, the insured had proceeded to repair a roof, and the work proved to be defective. As a result, the owner had to replace the roof a few years later, and claimed the cost from the insured. Given the insurer’s refusal to defend, the insured filed a Wellington motion in an effort to force the insurer to take up his defence. The Court dismissed this claim, finding that it fell outside the scope of the insurance policy. In fact, the Court concluded that the costs associated with redoing the work were not covered by a CGL insurance policy. Although the reasons for the decision were not explicit, the Court indicated that no occurrence had occurred, concurring with the reasons for a judgment that had found there had been no occurrence in a similar case, even though it had been rendered prior to the Progressive Homes judgment.

The same reasoning was again applied by the Superior Court of Quebec in the Syndicats Lofts Wilson^[3] judgment rendered December 6, 2017. In this case, the insured had acted as a general contractor in the context of renovating a building and converting it into a divided co-ownership property. After the work was completed, an inspection revealed a series of deficiencies that would require corrective work. The client went on to take legal action against the insured for more than $1.2 million, representing the cost of correcting the building’s deficiencies and non-comformities. The insured maintained that completing this work would inevitably damage the building, notably due to the requirement to open up the walls. It is within this framework that it asked its insurer to take up its defence, a request which the insurer denied. The Court accepted the insurer’s arguments, finding that the policy did not cover work to remedy poor workmanship. Indeed, the Court found that there had been no occurrence. The Court specifically stated that the corrective work arising from poor workmanship could not give rise to a claim in the absence of an occurrence.

The same reasoning applies to residential insurance policies. In fact, despite the Progressive Homes judgment, the Quebec courts have continued to find that the presence of a latent defect is not sufficient to trigger application of the insurance coverage in the absence of an occurrence^[4].

Accordingly, despite the broad interpretation of the notion of occurrence advocated by the Supreme Court, recent case law suggests that it would not be sufficient to establish that the insured could neither have intended nor foreseen a situation that would make it an occurrence. In fact, the situation also needs to correspond to the very definition of an occurrence, which was the case in Progressive Homes, where, it is important to remember, the alleged deficiencies had caused water infiltrations.