Manufacturers Are Not Covered Under Construction Wrap Up Policies

In the decision of Owners, Strata Plan BCS 3206 v KBK No. 11 Ventures Ltd., 2022 BCSC 766, the Court was tasked with assessing whether or not manufacturers were unnamed insureds pursuant to a construction wrap up policy.

The underlying claim is for construction defects at the Shangri-La condominiums in Vancouver, with a particular focus on the curtain wall windows.  Honeywell was a manufacturer of a desiccant that was used in the window units and was a third party to the underlying litigation on the basis. 

The Policy contained the following under the definition of insureds:

4.  “Contractors” and “sub-contractors” include all persons or organizations who perform any part of the work under the Insured Project but do not include:

a.  Suppliers whose only function is to supply materials, machinery or other supplies to the project and who do not carry out any installation, construction, or supervisory work on the Insured Project;

Honeywell argued that the wrap up insurer had a duty to defend it because it was a manufacturer not a mere supplier. Even under a duty to defend analysis, this argument failed. Honeywell was not involved on site.  Further it would be anomalous to provide coverage to manufacturers who are further removed from the project but not to a supplier who delivers materials to the site.