An Insurance Clause Does Not Necessarily Bar A Claim By The Owner

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When does an insurance clause in a construction contract bar a claim by the owner against the contractor? Is it barred if the contract requires that the contractor obtain insurnace and that the owner is to be named as an additional insured and that subrogation is waived against the owner? That was the issue in the recent decision of the British Columbia Court of Appeal in Lafarge Canada Inc. v. JJM Construction Ltd.

This case tells us that the insurance clause and the insurance itself is not sufficient, at least so far as claims against the party which agrees to take out the insurance. What is sufficient? Must the contract provide that the insurance is the sole remedy of either party? Is there any other way to create that "water-tight" regime so far as claims against the party taking out the insurance? This case will have owners and contractors scratching their heads to come up with an answer.

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Thomas Heintzman
Arbitration Place

Thomas G. Heintzman specializes in arbitration and mediation at Arbitration Place in Toronto. His... View Profile »


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