Hamel Construction Inc. v. Lombard Canada Ltd.,  N.S.J. No. 65, Nova Scotia Supreme Court
The Insured had a CGL policy with the Defendant Insurer. It was not in dispute that the policy was in effect at all relevant times. The Insured was sued by W, which alleged that the Insured had misrepresented the fact that certain caissons would not sink in the course of being towed from one location to another. One caisson did sink, however, and W was ordered by various government entities to retrieve the caisson as it constituted a hazard to navigation in its sunken state.
The Court held that the business loss exception to the CGL policy, which excluded coverage for the Insured’s own negligent or defective work, was applicable as the Insured, with knowledge of the proposed towing and installation process, represented to W that the caissons would stay afloat. However, the Court held that there might be coverage to the Insured under the “physical injury to tangible property” section of the policy in that the sunken caisson resulted a hazardous obstruction of the waterway and therefore an injury to tangible third party property, i.e. the waterway owned by the government entities which ordered the retrieval of the sunken caisson.
The Court therefore found that there was potential coverage under the policy and the Insurer was required to defend the Insured.
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