Executive Summary: Key Legal and Evidentiary Issues

• The central issue was whether the Plaintiffs were contractually entitled to cancel the Builder's Risk Policy on January 31, 2022, before the occurrence of any triggering event permitting cessation of coverage.
• Sexton's Mechanical Limited moved for summary judgment to dismiss the subrogated claim of $356,981 brought by the Plaintiffs' insurer.
• No occupancy permit had been issued by the Rama Building Department at the time of the BRP's cancellation, making occupancy or use of the premises legally impermissible.
• Six key admissions by the Plaintiffs' representative, Denis Paccagnella, established that the Plaintiffs were aware the building was not approved for occupancy when they cancelled the policy.
• Cancellation of the BRP on January 31, 2022 constituted a breach of the Plaintiffs' contractual covenant to insure Sexton, barring the subrogated action.
• Summary judgment was appropriate because no genuine issue requiring a trial existed, as all material facts were uncontradicted and required no credibility assessment.

Facts of the case

The Chippewas of Mnjikaning Rama First Nation and the Chippewas of Rama First Nation (the "Plaintiffs") were the owners of a construction project involving a new three-story office building located at 6036 Rama Road, Rama, Ontario (the "Project"). W.S. Morgan Construction Limited ("W.S. Morgan") was engaged as the general contractor, with construction scheduled to commence on October 15, 2019. On October 21, 2019, W.S. Morgan hired Sexton's Mechanical Limited ("Sexton") under a sub-contract to perform HVAC work on the Project. On August 13, 2019, responsibility for obtaining and maintaining a Builder's Risk Policy ("BRP") was transferred to the Plaintiffs, who fulfilled this obligation by adding a builder's risk broad form endorsement (the "endorsement") to their own property policy, valid from April 1, 2021 to April 1, 2022.

On January 31, 2022, the Plaintiffs cancelled the BRP without providing written notice to either Sexton or W.S. Morgan. On either February 23 or 24, 2022, a Sexton employee was commissioning and testing the cooling unit on the premises when it was mistakenly filled with water, causing it to freeze and sustain critical damage. The damage was discovered on February 28, 2022. Because the BRP had already been cancelled, the Plaintiffs' insurer covered the costs of repairs, remediation, and installation of a new cooling unit, and then exercised subrogation rights by seeking to recover the sum of $356,981 from Sexton in the present action.

Policy terms and contractual clauses at issue

The BRP, as amended by the endorsement, contained a cessation of coverage clause providing that the policy would cease to insure the project "10 days after the commencement of, use or occupancy of any part or section of the project," unless such use or occupancy was for construction purposes, office or habitational purposes, or installing, testing, or storing equipment or machinery. The policy also included a subrogation clause permitting the insurer, upon making payment, to be subrogated to all rights of recovery of the insured against any person, while expressly providing that, at the option of the insured, the insurer shall waive all rights of subrogation against any other named insured. Importantly, Sexton was added as an additional named insured under the BRP by virtue of a clause that extended coverage to all contractors and subcontractors in relation to the project site. The BRP was also designated as primary insurance over any other policy covering the same interest.

An amendment to the BRP's permissions clause — introduced to align the policy with the main contract documents — granted permission for occupancy of the insured project for habitational, office, banking, parking, or convenience store purposes, as well as for the installation, testing, and commissioning of equipment forming part of the project. This "permission to occupy" language, the court noted, contemplated that BRP coverage would remain in place even during occupancy, reinforcing that the parties intended the policy to continue until a recognized triggering event occurred.

Reasoning and analysis

Justice J.R. McCarthy found that no genuine issue requiring a trial existed, and that summary judgment was the most efficient and proportionate means of resolving the dispute. Applying the framework from the Supreme Court of Canada's decision in Hryniak v. Mauldin, 2014 SCC 7, the court confirmed that summary judgment is appropriate where the judge can make necessary findings of fact, apply the law to those facts, and do so in a proportionate, expeditious, and less expensive manner than a full trial.

The court's analysis turned on whether the Plaintiffs were legally permitted to cancel the BRP on January 31, 2022. The applicable by-laws required an occupancy permit — obtainable only after a mandatory inspection by the Rama Building Department — before any part of the building could be occupied. Six admissions made by Denis Paccagnella, the Plaintiffs' representative, at cross-examination on January 20, 2026, were found to be entirely dispositive. Paccagnella admitted that: the Plaintiffs were aware, when they cancelled the BRP, of a January 7, 2022 opinion from project engineer Steenhoff Building Services Group stating the building was still under construction and restricted until interim or final occupancy was confirmed; no confirmation of interim or final occupancy was received between January 7 and January 31, 2022; the Building Department had not yet inspected the premises for occupancy at the time of cancellation; a February 11, 2022 inspection report indicated the premises were not suitable for occupancy; the Plaintiffs were advised by the architect on or about February 18, 2022 that occupancy was conditional on Building Department approval; and the first inspection report approving occupancy was issued on March 11, 2022. Substantial performance of the work occurred on April 25, 2022.

The court concluded that on both the date of the BRP's cancellation and the date of loss, use and occupancy of the premises were legally impermissible — no occupancy permit having been issued. The triggering event that would have allowed for cessation of coverage — namely, commencement of lawful use or occupancy — had not yet occurred when the Plaintiffs unilaterally cancelled the policy. The court further found that the "permission to occupy" language in the amended BRP reinforced the parties' intention that coverage remain in place throughout the construction period.

Ruling and overall outcome

The court held that the Plaintiffs' unilateral cancellation of the BRP on January 31, 2022 was both premature and unjustified, constituting a breach of their contractual covenant to insure Sexton. Because the premises could not lawfully be occupied on either the date of cancellation or the date of loss, neither the Plaintiffs nor their insurer were entitled to maintain the subrogated action. Sexton's motion for summary judgment was granted, and the Plaintiffs' claim was dismissed in its entirety. By agreement of the parties on costs, the Plaintiffs were ordered to pay $30,000 (inclusive of HST and disbursements) to Sexton and $10,000 (inclusive of HST and disbursements) to W.S. Morgan, for a total costs award of $40,000.