Court upholds insurer's duty to defend in Quebec construction defect case.
Northbridge General Insurance lost its bid to avoid defending a contractor in a concrete slab defect case, Quebec's appeal court ruled on April 17, 2026.
The decision in Northbridge General Insurance Corporation c. Construction YGC, 2026 QCCA 512, is a sharp reminder for insurers: the duty to defend kicks in at a low bar, and shaking it off is harder than it looks.
The case goes back to a construction project in Quebec. Construction Y.G.C. was hired to expand an industrial building owned by Immeubles LCL inc., where Industrie Sainox inc. and Groupe Plombaction inc. were tenants. After Y.G.C. poured a new concrete slab, it began delaminating shortly after. An expert investigation pointed to either excess air in the concrete - supplied by Ciment Taschereau inc. - or premature finishing as the cause.
Y.G.C. agreed to redo the slab. Northbridge, which had issued both a builder's risk policy and a commercial general liability policy to Y.G.C., picked up the tab for the repair under the builder's risk coverage. No dispute there.
The fight started when the building owner and its tenants sued Y.G.C. for loss of use of the building during reconstruction. Northbridge took the position that this claim fell outside the commercial general liability policy - referred to in the decision as the "ARCE" - and refused to defend.
Y.G.C. responded with what Quebec law calls a Wellington application - essentially a court order compelling an insurer to honour its defense obligation under article 2503 of the Civil Code of Quebec before the underlying lawsuit goes to trial. The Superior Court granted it. Northbridge appealed.
Northbridge put forward several arguments. It said the loss-of-use claim amounted to purely economic damages, not covered "material damage" under the policy. It argued the slab issue arose during construction, before the work was completed, placing the claim outside the policy's reach. It characterized the dispute as one over a performance guarantee, not an insured event. And it pointed to four policy exclusions - paragraphs 2(b), (h), (k), and (l) - that it said should bar coverage.
The Court of Appeal disagreed on all fronts. Drawing on the Supreme Court of Canada's Progressive Homes decision, it found that whether the slab was "completed" or "put into service" at the time of delamination was still an open factual question - one that only a trial could resolve. At this stage, the mere possibility that the claim fell within coverage was enough to trigger the insurer's duty to defend. The lower court had also found that, given the multifactorial nature of the delamination and reconstruction delays, the claim could amount to a loss of use covered under Clause 11 a) of the policy.
As for the exclusions, the court held that Northbridge had not demonstrated - clearly and without ambiguity - that any of them applied. That was its burden to meet, and it fell short.
The appeal was dismissed with costs. Whether the claim is ultimately covered remains to be decided at trial.
