Contractual interpretation is not intended to create ambiguity where none exists. It is an exercise in which the Court searches for an interpretation from the whole of the contract that advances the parties’ intentions on the date of contracting. If, and only if, this exercise yields competing interpretations, the Court may divert to established rules of construction to resolve the ambiguity, such as rejecting an interpretation or literal meaning that would render the impugned provision commercially unreasonable.
In First Condo Group Ltd. v. Lloyd’s Underwriters, Justice Perell recently applied the law of contractual interpretation in the professional liability context.
In 2013, First Condo Group Ltd. (“First Condo”), an engineering firm, prepared a report for a condominium corporation, which, among other things, addressed the safety and remaining lifespan of lampposts on the condominium’s property (the “Reserve Fund Study”). In October 2015, a hydro-electrician was severely injured when one of the condominium’s lampposts unexpectedly fell on him. The electrician’s family sued First Condo for negligently misrepresenting the lampposts’ health.
At the time of the claim, First Condo was insured by Lloyd’s Underwriters (“Lloyd’s”). The insurance policy (the “Policy”) covered professional negligence claims but excluded any such claims “…arising out of any actual or alleged incidentoccurring, in whole or in part, on or before the retroactive date [September 11, 2015].”
Lloyd’s denied coverage to First Condo because the “incident”, being First Condo’s negligence in preparing the Reserve Fund Study, occurred in 2013, which was prior to the Policy’s retroactive date of September 11, 2015. First Condo applied to the Ontario Superior Court of Justice and argued that the word “incident” referred to the date that the electrician was injured, being October 2015, which was after the Policy’s retroactive date.
The issue before the Court was whether the term “incident” referred to the date of the negligent act giving rise to the claim or the date of the injury giving rise to the claim.
Justice Perell acknowledged that, in ordinary parlance, the word “incident” could refer to a negligent act or an injurious event. However, a word in a contract is not ambiguous merely because it might support different meanings. Considering the whole of the contract and the surrounding circumstances, Justice Perell held that the insurer clearly structured the Policy to respond to claims during the Policy period, but excluded any such claims arising out of an actual or alleged act/omission that occurred prior to the Policy’s retroactive date. The parties’ intention was to create a claims-based insurance policy that excluded claims arising out of negligence that occurred prior to this period.
Upon reading the Policy as a whole, Justice Perell concluded that “incident” unambiguously referred to actual or alleged acts or omissions (i.e. negligence). Since First Condo’s alleged negligence occurred prior to the Policy’s retroactive date, the exclusion clause in the Policy applied.
A contract is not ambiguous merely because one word or provision, read in isolation, supports multiple meanings. The Court will only divert to established rules of construction, such as contra proferentem, if, after considering the whole of the contract and the surrounding circumstances, it cannot determine which amongst competing interpretations aligns with the parties’ intentions on the date of contract.
 2020 ONSC 146.