BC Housing pursues Progressive Homes for building leaky rotten social housing; Court upholds insurance company's refusal to defend




Progressive Homes Ltd. v.  Lombard General Insurance Company of Canada,


2007 BCSC 439

Date: 20070329
Docket: S066185
Registry: Vancouver


Progressive Homes Ltd.



Lombard General Insurance Company of Canada


Before: The Honourable Mr. Justice Cohen

Reasons for Judgment

Counsel for the plaintiff

G.G. Hilliker, Q.C.
A.N. Epstein

Counsel for the defendants, Lombard General Insurance Company of Canada

W.K. Branch
C.A. Rhone

Date and Place of Trial/Hearing:

February 21 – 23, 2007


Vancouver, B.C.

I.          The Application

[1]                The petitioner, Progressive Homes Ltd. (“Progressive”), is a general contractor.  The respondent, Lombard General Insurance Company of Canada (“Lombard”), is a liability insurance company.

[2]                Lombard issued successive liability insurance policies to Progressive during the years 1987 through 2005 (the “insurance contracts”). 

[3]                In late 2004 and early 2005 four separate actions (the “Underlying Actions”) were brought against Progressive by B.C. Housing Management Commission (“BC Housing”) concerning condominium developments identified as:

(i)         West Coast Community Homes;

(ii)        Burlington Heights;

(iii)       Hyland Park; and

(iv)       Terra Nova Housing. 

[4]                BC Housing financed the construction and development of the buildings.  Progressive was the general contractor.  The buildings were constructed pursuant to contracts between Progressive and BC Housing Co-Op, who was given the leasehold in the lands for the building projects.  BC Housing is responsible for the repairs and has an assignment of any causes of action against Progressive.

[5]                The buildings suffer from what are colloquially referred to as “leaky condo” defects.  BC Housing alleges, inter alia, that Progressive failed to supply buildings which conformed to Progressive’s contractual obligations.  

[6]                Lombard initially defended the underlying actions on behalf of Progressive without waiving its rights.  Lombard later withdrew from the defence of the actions, taking the position that it was under no duty to defend because the claims in the actions were not covered under the insurance contracts.

[7]                Progressive brings this application for an order declaring that Lombard is under a duty to defend Progressive in the underlying actions.

II.         The Issue

[8]                The sole issue for determination is whether Lombard, under the terms of the insurance contracts, is obligated to defend Progressive with respect to the underlying actions.

III.        The Test

[9]                If there is a possibility that the claims in the underlying actions may fall within the coverage afforded by the insurance contracts then Lombard is under a duty to defend: See Nichols v. American Home Assurance Co. (1990), 68 D.L.R. (4th) 321 (S.C.C.).  In making this determination the Court must give the widest latitude to the pleadings in the underlying actions.  Any doubt as to whether the pleadings bring the incident within the coverage of the insurance contracts ought to weigh in favour of Progressive: See Opron Maritimes Construction Ltd. v. Canadian Indemnity Co., [1986] N.B.J. No. 111 (C.A.).

IV.        The Pleadings

[10]            Each claim in the underlying actions is in relation to a different building.  However, as the pleadings are similar, I will set out, as an example, the material allegations against Progressive in the action relating to Burlington Heights, BCSC Action No. S045955:


16.       Progressive entered into a contract with the Co-Op on or about November 8, 1993 (the “Construction Contract”) to construct the Development (the “Work”) in accordance with the plans and specifications and in accordance with applicable building codes, bylaws, regulations and standards.

17.       Pursuant to the Construction Contract, Progressive undertook responsibilities including, among other things:

(a)        to protect the Work and the Co-Op’s property from damage and to be responsible for any damage which may arise as the result of or in connection with Progressive’s operations under the Construction Contract;

(b)        to have control of the Work and to effectively direct and supervise the Work so as to ensure conformity with the Construction Contract and all drawings, specification and directions issued thereunder;

(c)        to be responsible for the construction means, methods, techniques, sequences and procedures used in the Work and for coordinating the various parts of the Work under the Construction Contract; and

(d)        to be responsible for making good any damage to the Work, at its own expense, if Progressive, in the performance of the Construction Contract and the Work, damaged the Work, and to remedy any deficiencies in the Work.

18.       Progressive owed a duty of care to the Plaintiffs to ensure that the Development was constructed using all reasonable care, skill, diligence and competence, and without construction deficiencies and design defects.

19.       Progressive knew or ought to have known that the Plaintiffs were relying on it to exercise reasonable skill, care and diligence in performing the Work and to construct the Development in accordance with the Construction Contract, construction drawings and specifications and in accordance with applicable statutes, building codes, regulations, bylaws and building standards.

20.       The Plaintiffs relied on Progressive’s professional advice that the building envelope system used for the Development was appropriate.

21.       Progressive knew or ought to have known that the Plaintiffs relied on its judgment, and knew or ought to have known that the building envelope system would allow water ingress but no or insufficient egress which would cause damage to the Development.

22.       Progressive knew or ought to have known that the Co-Op had no or little experience with the building envelope system selected for the Development and that it intended to maintain the Development without the assistance of further professional advice.

23.       Progressive breached its contract with the Co-Op and/or breached the duty of care it owed to the Plaintiffs, and was negligent in the construction of the Development, particulars of which include:

(a)        failing to ensure that the Development was constructed in compliance with all applicable building codes, bylaws, regulations other statutory requirements and industry standards;

(b)        failing to ensure that the Development was built in compliance with all plans and specifications;

(c)        failing to ensure that the Development would be constructed in a good and workmanlike manner;

(d)        failing to ensure that the Development would be free from construction defects;

(e)        failing to ensure that the Development would be protected, by adequate waterproofing systems, against all water damage;

(f)         failing to ensure that the Development would be adequately inspected during and after construction;

(g)        failing to warn or adequately warn the Plaintiffs of the special maintenance and inspection requirements of the building envelope system, and specifically the danger of water ingress; and

(h)        failing in its duty to provide clear instructions, including precautions to be taken to reduce damage from water ingress.


29.       As a result of the breaches of contract by Progressive and the negligence of the Defendants and others, and all of them, the Development has sustained since the date of construction and continues to sustain defects and ongoing damage including the following:

(a)       water leaking through the exterior walls;

(b)        improper and incomplete installation and construction of framing, stucco walls, vinyl siding, windows, sheathing paper, flashings, ventilation, walkway membranes, flashing membranes, eaves troughs, downspouts, gutters, drains, balcony decks, pedestrian walkways, railings, roofs, and patio doors;

(c)        insufficient venting and drainage of wall systems;

(d)        inadequate exhaust ventilation system;

(e)        water leaking through the windows;

(f)         improper use of caulking;

(g)        poorly assembled and installed windows;

(h)        deterioration of the building components resulting from water ingress and infiltration

all of which are collectively referred to as the “Defects” and were caused by the Defendants and all of which constitute further breaches of the terms of the agreements referenced above.

30.       As a reasonably foreseeable consequence of Defects and particulars outlined above, significant portions of the Development have suffered since the date of construction and continue to suffer considerable moisture penetration, resultant rot and infestation which has caused the Development to be unsafe and hazardous and to pose a substantial physical danger to the health and safety of the occupants.


33.       As a result of the Defects and of the negligence and breaches of contract by the Defendants the Plaintiffs have suffered damages including but not limited to the following:

(a)        inspection and professional advice concerning the Defects,

(b)        cost to date of remedial work, both permanent and temporary;

(c)        cost of relocation and alternate housing of tenants during remediation work and other tenant expenses;

(d)        diminution in value of the Development; and

(e)        expense, inconvenience and hardship caused by the construction and design deficiencies and their repair.


2007 BCSC 439 Progressive Homes Ltd. v. Lombard General Insurance Company of Canada