Executive Summary: Key Legal and Evidentiary Issues

• Summary judgment was appropriate for determining an insurance coverage dispute involving policy exclusion clause interpretation despite differing expert opinions on the cause of loss.
• The "frost or freezing" exclusion clause under subparagraph 6B(e) of the Builder's Risk Policy clearly applied to the roof collapse, as expert evidence established frost heaving as the cause.
• Conflicting expert reports do not automatically preclude summary judgment when one expert's opinion is uncontested, detailed, and sworn, while the other lacks comparable rigour and offers no substantive rebuttal.
• Policy exclusions for specific perils do not constitute illusory coverage or grounds for invoking the doctrine of nullification when other covered perils remain available under the policy.
• Appellate courts must defer to a motion judge's assessment of expert evidence and findings of fact made at summary judgment unless the judge has erred in principle.
• The doctrine of nullification cannot override clear exclusion clauses that are consistent with the overall structure and purpose of the insurance contract.

Background and the Loss

On approximately April 1, 2020, a building located at Duncan Avenue South in Kirkland Lake, Ontario sustained significant damage when its roof collapsed. The property was insured under a Builder's Risk Policy issued by Lloyd's Underwriters to 2689686 Ontario Inc. Following the loss, a dispute arose regarding whether the policy afforded coverage for the damage. Lloyd's Underwriters contended that the loss fell within an excluded peril and therefore was not covered, while the appellant disagreed and commenced legal proceedings seeking coverage under the policy.

The Policy and Exclusion Clause

The Builder's Risk Policy issued by Lloyd's Underwriters provided coverage for direct physical loss or damage to the property, subject to certain specified risks and exclusions set out in the policy terms. Critically, the policy excluded coverage for losses arising from "frost or freezing" under subparagraph 6B(e). The policy did provide coverage for other perils including fire, vandalism, wind, and various other named risks. This structure meant that while the policy was not all-encompassing, it offered meaningful protection against a range of common building perils, with specific exclusions for others deemed high-risk or uninsurable by the underwriter.

Expert Evidence on the Cause of Loss

Central to the coverage dispute was the determination of what actually caused the roof to collapse. The parties retained structural engineers to investigate and provide expert opinions on this critical factual matter. The expert retained by the appellant provided a report stating that he "did not notice any noticeable frost up heave damage" and reported that he had been informed the roof collapsed due to historically high snowfall loading. Notably, this expert did not present his evidence in the form of a sworn affidavit and offered no detailed analysis or alternative explanation for why the expert on the other side's conclusions were incorrect.

In contrast, the engineer retained by Lloyd's Underwriters prepared two comprehensive reports and swore an affidavit dated September 1, 2023. This expert concluded that the roof collapsed as a result of frost heaving in the basement area. She provided detailed reasoning for her conclusion and specifically addressed the alternative explanation that the collapse was caused by heavy snowfall, explaining why the evidence did not support that theory.

Motion Judge's Decision

Lloyd's Underwriters brought a motion for summary judgment after pleadings had closed and examinations for discovery were complete. The motion judge determined that an insurance coverage dispute involving the interpretation of a policy exclusion clause was amenable to resolution through summary judgment, provided there was sufficient material and no genuine issue requiring trial. The motion judge found that he could properly assess the evidence before him and determine the cause of the roof collapse based on the expert reports available.

Applying the applicable rules of civil procedure, the motion judge noted that he had authority to weigh evidence, make credibility findings, and draw reasonable inferences. He found that Lloyd's expert's opinion was "uncontested" in the sense that the appellant's expert had not meaningfully responded to or challenged her specific conclusions and had not been cross-examined. The appellant's expert also failed to offer any substantive alternative explanation for the damage observed. The motion judge preferred the evidence of Lloyd's expert and found on the evidence that the roof collapse was due to frost heaving. Since frost and freezing were excluded under the policy, the motion judge concluded that Lloyd's Underwriters had no obligation to provide coverage for this loss and granted summary judgment in favour of Lloyd's.

The Appellate Decision

The appellant appealed the motion judge's decision to the Court of Appeal for Ontario, advancing three arguments: first, that summary judgment was not appropriate given the diverging expert opinions; second, that the frost or freezing exclusion did not actually apply to the loss; and third, that the doctrine of nullification should prevent enforcement of the exclusion clause.

The Court of Appeal rejected each argument. On the summary judgment issue, the court found that insurance coverage disputes involving exclusion clauses are appropriate for summary judgment determination and that the motion judge had properly weighed the expert evidence and made credible findings. The court noted that the fact that experts arrive at different conclusions does not automatically preclude summary judgment; rather, the court must assess the quality, detail, and persuasiveness of the evidence presented. Here, Lloyd's expert had presented sworn, detailed evidence explaining her conclusions and addressing alternative theories, while the appellant's expert offered equivocal opinions without detailed reasoning or cross-examination.

Regarding the applicability of the frost or freezing exclusion, the court agreed with the motion judge that the evidence supported a finding that frost heaving caused the roof collapse, and therefore the exclusion unambiguously applied to prevent coverage.

On the doctrine of nullification, the court clarified the proper scope of this legal principle. The doctrine provides that an exclusion clause should not be interpreted in a way that is repugnant to or inconsistent with the main purpose of the insurance coverage, and courts should not enforce an exemption clause when doing so would defeat the main object of the contract or virtually nullify the coverage sought. However, the court found this doctrine did not apply in this case. The Builder's Risk Policy was not rendered illusory by enforcing the frost and freezing exclusion. The policy contained meaningful coverage for direct physical loss or damage from fire, vandalism, wind, and other perils. The fact that one specific peril was excluded did not negate the overall protection afforded by the policy. The court therefore upheld the motion judge's decision to enforce the exclusion clause.

Outcome and Award

The appeal was dismissed in its entirety. The Court of Appeal upheld the motion judge's grant of summary judgment in favour of Lloyd's Underwriters. Lloyd's Underwriters, as the successful party on appeal, was awarded costs in the agreed upon amount of $12,900 all inclusive.