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A Reminder Of The Basic Differences Between A Builder’s Risk Policy And A Liability Policy – Insurance Laws and Products



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In the recent case of Bridor inc. c. 90784497
Québec inc.
2022 QCCS 2496, the Superior Court ruled on the
fundamental distinctions between a Builder’s Risk policy and
a liability insurance policy.

Bridor inc. [Bridor] had retained the services
of Construction Milkado [Mikado] as a construction
manager to oversee the expansion of its plant. In the main claim,
Bridor alleged that Mikado had committed three faults in its
management of the construction, one of which consisted of damages
caused to architectural panels that made up the outside walls of
the expansion. The project and the parties were insured under two
policies issued by Starr Insurance & Reinsurance Limited
[Starr]: a Wrap-Up liability insurance policy and
a Builder’s Risk insurance policy.

In a Wellington type application, Mikado asked the Court to
order Starr to take up its interest, and defend it for the damage
caused to the panels in virtue of the Builder’s Risk
policy

The Court first noted that the Civil Code of
Québec
 provides for two types of damage insurance:
liability, and property. Justice Andres C. Garin observed that the
legal obligation to take up an insured’s defence, expressed
in article 2503 CCQ, is in subdivision III.3 of the
chapter of the Code that applies exclusively to
liability insurance.

Justice Garin then observed that Builder’s Risk policies
are usually property insurance policies . After examining
Starr’s policy, the Court concluded that it was in fact a
property insurance policy that did not provide for the
insurer’s obligation to take up its insured’s interest
in case of a claim or lawsuit.

Since Mikado was only raising the Builder’s Risk policy,
the Wellington application was dismissed.

Takeaway

  • Builder’s Risk policies are generally property
    insurance.

  • The object of the insurance must be determined through an
    analysis of the warranty clause, that defines the scope and nature
    of the protection provided;

  • In all cases, it is essential to examine all of the clauses in
    the policy since its designation may sometimes fail to reflect
    accurately all the coverage that it in fact provides;

  • An insurer is not required to take up its insured’s
    interest under a Builder’s Risk insurance.

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.

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