IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:	B.C. Master Blasters Inc. v. Aviva,
	2006 BCSC 1488

Date: 20060922
Docket: S055063
Registry: Vancouver

Between:

B.C. Master Blasters Inc.

Plaintiff

And:

Aviva Insurance Company of Canada

Defendant

Before: The Honourable Mr. Justice Groberman

Oral Reasons for Judgment

In Chambers
September 22, 2006

Counsel for Plaintiff	D. Twining
Counsel for Defendant	N. Kent
Date and Place of Hearing:	September 21, 2006
	Vancouver, B.C.

[1]                THE COURT:  In June of 2004, employees of B.C. Master Blasters Inc. (“Master Blasters”) inadvertently damaged pipes in a recovery boiler at the Weyerhaeuser Kamloops mill while doing work in the boiler.  Weyerhaeuser has advanced a very sizable claim for damages.  The question in this action is whether Master Blasters is entitled to be defended and indemnified in respect of that claim under a commercial general liability policy issued to it by Aviva Insurance.

[2]                The parties agree that the matter is amenable to determination on this summary trial application, I concur with that assessment.

Background Facts

[3]                The Weyerhaeuser mill in Kamloops includes a very large boiler.  It is approximately 180 feet high and 38 feet square.  The walls of the boiler consist of vertical steel pipes 2 to 3 inches in diameter that are welded together.  The ceiling, similarly, consists of steel pipes.  The floor of the boiler is made up of steel pipes linked together with what has been described in the evidence as a "steel membrane."  These various pipes carry water and steam, which is used to power the mill.

[4]                The pulp making process involves a variety of chemicals, and a substance known as "black liquor" is produced as a by-product.  The black liquor is used as the fuel for the recovery boiler.  Over time, residue forms on the walls, ceiling and floor of the boiler.  A large part of the residue is in the form of "smelt," a concrete-like material that gathers on the pipes.

[5]                Approximately every year to 18 months, the mill is shut down for maintenance and the boiler is cleaned and inspected.  Master Blasters has, for many years, provided the industrial power washing services used to clean the boiler and remove the smelt.  In general, it has done so by power washing the ceiling and walls.  The floor has been cleaned in the process, as warm water used for blasting the ceiling and walls collects on the floor and dissolves the smelt.

[6]                In June 2004, Master Blasters tried a new technique for power washing the walls and ceilings, which technique was expected to be more efficient than that used previously.  Although this new method succeeded in cleaning the ceiling and walls, it did not dissolve all of the smelt on the floor.  Once the ceiling and walls had been cleaned, it was no longer possible to power wash the floor, as this would have interfered with ongoing inspection of the pipes forming the walls and ceiling of the boiler.

[7]                Smelt still had to be removed from parts of the floor so that the floor pipes could also be properly inspected.  In the areas that needed to be inspected, the layer of smelt was between 6 and 18 inches deep.  Weyerhaeuser engaged Master Blasters to remove smelt from the floor.  Master Blasters characterizes this as a separate contract from the power washing contract, while Aviva says it was part of the same contract.  In my view, nothing turns on which characterization is preferred.

[8]                It is apparent that Weyerhaeuser was very concerned that the removal of smelt from the floor be conducted carefully so as not to damage the pipes.  It instructed Master Blasters to remove the smelt by hand, with the aid of shovels.  While the evidence is not entirely clear on the point, it appears that Weyerhaeuser also specifically stated that no sledge hammers, crowbars, chisels or power tools were to be used.  It was apparent to everyone that the reason that the material was to be removed by hand, using only shovels, was that the pipes underneath the smelt could be easily damaged if more powerful tools were used.

[9]                Weyerhaeuser recognized that it was unlikely that all of the smelt that had to be removed could be removed by hand and with shovels and instructed Master Blasters to remove what it could from the specified area and to leave the rest.  It was apparently anticipated that the inspection company would complete any final removal of smelt and cleaning of the pipes that was necessary in order to properly conduct its inspections.

[10]            Master Blasters' labourers entered the boiler on the night of June 4th, 2005, and commenced trying to remove the smelt from the areas of the floor that were to be inspected.  They found that they were unable to remove very much smelt using only their hands and shovels.  It appears that, in their frustration, they began first to use other hand tools and ultimately an air tool known as a "rivet buster" which resembles a jackhammer but is smaller and less powerful.

[11]            The foreman instructed the crew to use the rivet buster at an oblique angle to the floor to avoid pounding too deeply into the smelt and damaging the pipes.  It seems likely that this instruction was not always heeded.

[12]            With the use of the rivet buster, most of the smelt was removed from the areas to be inspected, with only a fairly thin residue of smelt left on the pipes.  The rivet buster proved an inapt tool for the job, however, puncturing one of the pipes, and denting and damaging others.

[13]            Weyerhaeuser has made a claim against Master Blasters for damage occasioned to the boiler.  Master Blasters has sought to be defended and indemnified under the commercial general liability policy issued to it by Aviva.  Aviva, however, has denied coverage.

[14]            Aviva puts forward two bases for denying coverage.  It says, first, that the damage is not within the risks covered by the policy because the damage was not the result of an “accident”.  Second, it says that the “Work Performed/Business Risk” exclusion causes in the insurance contract exclude coverage for the sort of damage at issue in this case.

Was the Damage Caused by “Accident”

[15]            The insurance policy provides that Aviva:

will pay those sums the insured becomes legally obligated to pay as compensatory damages because of ... "property damage" to which this insurance applies ....  The ... "property damage" must be caused by an "occurrence."

[16]            "Property damage" is defined in the policy as including “physical injury to tangible property, including all resulting loss of use of that property.”  It is common ground that the damage to the boiler is “property damage” within the meaning of the policy.

[17]            "Occurrence" is defined as meaning "an accident ...."   Aviva claims that the damage in this case was not caused by an accident, but rather by activity so risky and reckless that it should be treated as akin to deliberate damage.

[18]            In support of the proposition that deliberately engaging in risky activity can result in damage being characterized as other than accidental, Aviva relies on Crisp v. Delta Tile & Terrazzo Co., [1961] O.W.N. 278, [1961] O.J. No. 170, and also on the more recent case of Martin v. American International Assurance Life Co., 2003 SCC 16, [2003] 1 S.C.R. 158.

[19]            In Crisp, a contractor performed terrazzo work in the basement of a house, causing damage from terrazzo dust in other areas of the residence.  The Ontario Court of Appeal (at O.W.N. 279) found that the damage was not covered by the policy of insurance because the damage

was the natural, foreseeable and probable consequence of the defendant's acts.  The defendant should have foreseen that such natural and probable consequences would ensue because the defendant and defendant’s workmen, on the evidence, had actual knowledge of what would happen if the precautions, which they failed to take, were not taken.

[20]            A variety of language is used by the court in the course of its brief judgment in Crisp, some which suggests that insurance policies covering accidents will not apply when the insured has deliberately taken a known risk.  The weight of case authority supports a much narrower reading of Crisp.

[21]            In Canadian Indemnity Co. v. Walkem Machinery & Equipment Ltd., [1976] 1 S.C.R. 309, the Supreme Court of Canada rejected the idea that the mere fact that a party has engaged in risky activity, and foreseeable damage has resulted will prevent the damage from being characterized as “accidental” for the purposes of a comprehensive business liability policy.  At p. 514, Pigeon J., for the majority, commented adversely on the idea that where a party takes a calculated risk, any damage is not the result of an "accident:"

With respect, this is a wholly erroneous view of the meaning of the word "accident" in a comprehensive business liability insurance policy.  On that basis, the insured would be denied recovery if the occurrence is the result of a calculated risk or of a dangerous operation.  Such a construction of the word "accident" is contrary to the very principle of insurance which is to protect against mishaps, risks and dangers.  While it is true that the word "accident" is sometimes used to describe unanticipated or unavoidable occurrences, no dictionary need be cited to show that in every day use, the word is applied ... to any unlooked for mishap or occurrence.

[22]            In Cansulex Ltd. v. Reed Stenhouse Ltd. (1986), 70 B.C.L.R. 273, McEachern C.J.S.C. (as he then was) specifically declined to apply Crisp finding that it unduly narrowed the definition of "accident."

[23]            In my view, the more recent case of Martin v. American International Assurance Life Co. is of considerable assistance in giving definition to the word "accident" in an insurance policy such as the present one.  That case concerned a life insurance policy rather than a commercial general liability policy, but the principle, it seems to me, does not differ.  McLachlin C.J.C., for a unanimous court, said as follows at paras. 19 through 21:

What constitutes death by "accidental means"?  As Spence J. pointed out in Mutual of Omaha Insurance Co. v. Stats, [1978] 2 S.C.R. 1153, at p. 1164, the word "accident" is "an ordinary word to be interpreted in the ordinary language of the people".  Hence, as the British Columbia Court of Appeal emphasized in the case at bar, we must focus on the ordinary person's understanding of the phrase, and on "whether in ordinary and popular language the event as it happened would be described as an accident".  Only in this way can the reasonable expectations of both the insured and insurer be protected.  We must therefore inquire how the phrase "death by accidental means" is used in ordinary language.

As a starting point, we note that the accidental nature of a particular means of death depends, in ordinary parlance, on the consequences that the insured had or did not have in mind.  When we speak of an “accidental” means of death, we normally have in mind a situation in which someone’s action has had results that this person did not intend or expect.  Unintentional or unexpected death is seen as accidental; intentional or expected death as non-accidental.  In Canadian Indemnity Co. v. Walkem Machinery & Equipment Ltd., [1976] 1 S.C.R. 309, at pp. 315-16, Pigeon J. explained the term “accident” with reference to Halsbury (vol. 22, 3rd ed.) as “any unlooked for mishap or occurrence” (emphasis in original).  Similarly, in Stats, supra, at p. 1164, this Court, per Spence J. quoted Lord Macnaghten’s comment in Fenton v. J. Thorley & Co., [1903] A.C. 443 at p. 448, that “the expression ‘accident’ is used in the popular and ordinary sense of the word as denoting an unlooked-for mishap or an untoward event which is not expected or designed”.  It follows that death is not non-accidental merely because the insured could have prevented death by taking greater care, or that a mishap was reasonably foreseeable in the sense used in tort law.  Nor does a death that is unintended become “non-accidental” merely because that person was engaged in a dangerous or risky activity.  As this Court emphasized in Canadian Indemnity, supra, at p. 316, the jurisprudence assigns a generous meaning to “accidental”, in the absence of language to the contrary in the insurance policy.

The pivotal question is whether the insured expected to die.

[24]            At paragraph 23, the court deals with the question of whether inordinate risk taking by the deceased renders his or her death non-accidental.  The court says:

However, the decision to “court the risk” of death, as Spence J. phrased it in Stats, supra, at p. 1162, becomes at some point equivalent to an intention to die.  Thus, when someone takes a risk that most people would expect to cause death, it is common to say of the death “That was no accident”.  To say this is not to speak metaphorically, but to express a common view of where the category of accidents ends.  The test does not change for cases involving conduct that brings with it a high risk of death; the test remains whether the death was designed or expected.  The first question is always “What did the insured, in fact, expect?”  If we cannot be sure, as is often the case, then we may ask what a reasonable person endowed with the factual beliefs of the insured and placed in the circumstances of the insured would have expected.

[25]            I take from these cases the proposition that property damage will generally be found to be “accidental” where the person causing the damage does not intend to cause it.  Of course, a person is normally presumed to intend the natural and probable consequences of his or her acts, and this presumption may, in the absence of rebutting evidence, serve to show that property damage is not accidental.

[26]            In the case at bar, I cannot find the damage to be other than accidental.  While the use of a rivet buster on the smelt was risky and unwise, it is apparent that the workers believed that they could remove the smelt without damaging the pipes.  They had no intention of doing damage to the pipes, and the evidence satisfies me that they believed that with sufficient care, they would be able to avoid such damage.  I have no doubt that they would not have proceeded to use the rivet buster if they had thought that they would, in the process, puncture a pipe.  I find that the damage was accidental and therefore the result of an "occurrence" for the purposes of the policy.

[27]            Even if I had found the damage to be a result of a deliberate act of the workers, it appears to me that the law of province would compel me to find that the damage was “accidental” insofar as Master Blasters is concerned.  In Bluebird Cabs v. Guardian Insurance Co. Of Canada, 1999 BCCA 195, 173 D.L.R. (4th) 318, it was held that an intentional tort committed by the plaintiff's employees, though it might attract vicarious liability for the plaintiff, was an "accident" for the purpose of determining coverage for the corporation under the corporation's insurance policy.  While counsel for Aviva argues with some force that the case is wrongly decided, he does concede that it is binding on me.

Exclusion Clauses

[28]            I will turn, then, to the issue of the exclusion clauses.  The clauses relied on by Aviva are as follows:

2.         This insurance does not apply to

…

i.    “Property damage” to:

...

(5)        That particular part of real property on which you or any contractor or subcontractor working directly or indirectly on your behalf is performing operations if the property damage arises out of those operations; or

(6)        That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.

These exclusions do not apply to what are called “products completed operations hazards”, but there is no suggestion that this particular limitation on the exclusion operates in this case.

[29]            The general principles to be applied in interpreting insurance contracts and, in particular, exclusion clauses, are well known.  In Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co. [1993], 1 S.C.R. 252 at 268 to 269, McLachlin J. (as she then was) outlined some of these principles:

In each case the courts must examine the provisions of the particular policy at issue (and the surrounding circumstances) to determine if the events in question fall within the terms of coverage of that particular policy.  This is not to say that there are no principles governing this type of analysis.  Far from it.  In each case, the courts must interpret the provisions of the policy at issue in light of general principles of interpretation of insurance policies, including, but not limited to:

(1)        the contra proferentum rule;

(2)        the principle that coverage provisions should be construed broadly and exclusion clauses narrowly; and

(3)        the desirability, at least where the policy is ambiguous, of giving effect to the reasonable expectations of the parties.

[30]            In interpreting the exclusion clauses in this case, the question of what "particular part of property" Master Blasters was working on is the critical one.  Aviva says it was the pipes or, more broadly, the boiler.  As damage was occasioned to those pieces of property as a result of the work, the exclusion clauses, it says, are applicable.  Master Blasters, on the other hand, says that it was working on the smelt and that, as the claims against it do not relate to damage to the smelt or the need to do additional work on the smelt, the exclusion clauses have no application.

[31]            While I fully understand that, in cases of ambiguity, the contra proferentem rule and the more general principle that exclusion clauses are to be construed narrowly will apply, I do not think that the current case is one where there is real ambiguity.

[32]            The exclusion clauses that we are dealing with are generally referred to as the "own work" or “business risk” exclusions.  They are designed to restrict coverage so that defects in the very work that the contractor is employed to do is not covered by the insurance policy.

[33]            In Privest Properties Ltd. v. Foundation Co. of Canada Ltd. (1991), 57 B.C.L.R. (2d) 88, Drost J. summarized the cases by saying that "the work product is the project for which the contract was engaged."  Thus, he found that in the construction of a building, a contractor engaged to build the foundation's “work product” was limited to the foundation.  Damage to the balance of the building attributed to defects in the foundation were not excluded from the foundation contractor's insurance.  Similarly, where a contractor was engaged to build an addition to a house, damage to the original structure resulting from poor workmanship was not excluded from the insurance coverage, because the original structure was not the contractor's “work product”.

[34]            A number of cases cited by the plaintiff illustrate the point that work or property that is outside the scope of the contract is not caught by the exclusion clauses.  For example, the plaintiff cites Danric Construction Ltd. v. Canadian Surety Co./Compagnie d'Assurances Canadian Surety, 2002 BCSC 1663, 50 C.C.L.I. (3d) 201; Kildonan Tree Service Ltd. v. Sovereign General Insurance Co., [1997] M.J. No. 586, 122 Man.R. (2d) 312; and Rotating Equipment Services Inc. v. Continental Insurance Co., 2004 ABQB 703, 20 C.C.L.I. (4th) 75.

[35]            In discussing the work product exclusion in Privest, Drost J. refers to Knutson Construction Co. v. St. Paul Fire & Marine Insurance Co., 396 N.W. 2d 229 (1986), in which the Supreme Court of Minnesota refers to G.H. Tinker, "Comprehensive General Liability Insurance - Prospective and Overview" (1975), 25 Fed. of Ins. Council Q. 217 at 224:

"Business risks" then, are those risks which management can and should control or reduce to manageable proportions; risks which management cannot effectively avoid because of the nature of the business operations; and risks which relate to the repair or replacement of faulty work or products.  These risks are a normal, foreseeable and expected incident of doing business and should be reflected in the price of the product or service rather than as a cost of insurance to be shared by others.

While it would be a mistake to apply this rationale too broadly, it does represent a principled basis for the “own work” exclusions generally found in commercial general liability insurance, and may be of some assistance in assessing the reasonable expectations of the parties.

[36]            Recently in Swagger Construction Ltd. v. ING Insurance Co. of Canada, 2005 BCSC 1269, N. Smith J. summarized the principle at para. 36:

The basic principle set out in Privest and the authorities on which it is based is that for the purpose of CGL policies, damage to “tangible property” does not include the cost of remedying defects in the insured’s own work.  Drost J. also said that a general contractor’s “work” is the project for which the contractor was engaged ....  The effect of Winnipeg Condominium [Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., [1995] 1 S.C.R. 85] and Bird Construction [Bird Construction Co. v. Allstate Insurance Co. of Canada, [1996] 7 W.W.R. 609 (Man. C.A.)] is that, subject to one possible exception that I will discuss below, this basic principle can not be avoided by an artificial division of the insured’s work into component parts.

The “possible exception” referred to is not applicable to the case at bar.

[37]            Aviva cites cases illustrating the principle that it is not appropriate to parse too finely the work of a contractor for the purpose defining the limits to the “own work” exclusions.  In particular, it relies on Continental Stress Relieving Services Ltd. v. CGU Insurance Co. of Canada, 2002 ABQB 943 and Jet Line Services Inc. v. America Employers Insurance Company 537 N.E.2d 107 (Mass. 1989).

[38]            Jet Line concerned a contractor engaged in cleaning a tank.  Owing to its negligence, the tank exploded and was destroyed.  The Massachusetts Supreme Court held that the property on which the work was being done should be considered to be the entire tank and not just the bottom portion of it that was being cleaned.

[39]            Counsel for Master Blasters notes that the decision in Jet Line was questioned in obiter dicta in Ultramar Ltd. v. Rancur Petroleum Services Ltd., 2005 NLTD 59, 246 Nfld. & P.E.I.R. 106.  At para. 60 of that decision, Dunn J. stated:

The strength of [the insurer]'s argument before me is found, primarily, in the similarity between the present fact situation and a number of American authorities, most particularly the Jet Line Services case which involved damage to an entire tank being cleaned by Jet Line personnel.  The Massachusetts Court found in favour of the insurer and excluded coverage.  No Canadian case has been decided in respect of a similar fact situation.  I believe, however, there is an argument to be made that the proper approach to adopt is consideration of the work product versus damage to a structure, the work product being the cleaning process itself as separate and distinct from the tank.  When considered in conjunction with the main coverage provision, the possibility of [the insurer] being found to have a positive duty to indemnify cannot be discounted.

[40]            While the suggestion of Dunn J. is a sensible one, it does not seem to me that this is of much assistance to Master Blasters.  The damage at issue in this case was a direct result of the work being performed, the removal of smelt from pipes.  While it may be the damage to other parts of the boiler might arguably fall outside the “own work” exclusion, it does not appear to me that it can be said that the work product in this case did not involve the pipes on the floor of the boiler.

[41]            While I do not disagree with the proposition that it is possible to say that Master Blasters was working on the smelt, I think to do so is artificial.  It ignores the entire purpose of their work as well as the fact that the entire way in which the work was structured and performed was governed by the fact that the smelt was covering the pipes.  It is apparent to me that, in ordinary language, Master Blasters was working on the boiler and in particular on the floor of the boiler and the pipes that made up that floor.  They were clearing the pipes of smelt so that inspections of the pipes could take place.  While it is true that they were not required to remove all smelt down to the bare metal of the pipes, this does not justify the view that they were working on the smelt as opposed to the pipes.

[42]            The parties to this hearing have placed a number of analogies before me in the hope of clarifying the situation.  I found these to be quite helpful.  To my mind, the one that is the closest approximation to the case at bar is a situation in which a party is clearing snow from a road or driveway.  It seems clear to me that any damage occasioned to the road or driveway in the course of such an operation would fall squarely within the exclusion clauses we are considering.  That would be so even if the contractor had been told that it was not necessary to clear all snow down to the road's surface.  Snow clearing work is performed on a road.  While it is possible to say the work is done on the snow rather than on the road, the distinction is an artificial one.

[43]            In the result, I find that the property damage in issue in this case was to "that particular part of real property on which Master Blasters was performing operations."  It was also to property that "must be restored, repaired or replaced because Master Blasters' work was incorrectly performed on it."

[44]            Accordingly, I find that the insurance policy excludes the damage claimed to have been suffered by Weyerhaeuser as a result of Master Blasters' work.  The plaintiff's action is dismissed, with costs on Scale 3.

“H. Groberman, J.”
The Honourable Mr. Justice H. Groberman