Clearing the Smoke on 2-5-10 Warranty Coverage for Fire Sprinklers
John G. Mendes, Partner
Phone: 604-685-4822
Email: jgm@lmlaw.ca
The Owners, Strata Plan 4249 v. Travelers Insurance, 2018 BCSC 114
2-5-10 common property warranties cover “any defect in materials and labour” for 15 months. Defects in “materials and labour supplied for … plumbing… delivery and distribution systems” are covered for 24 months. Where do fire sprinklers fit in?
The strata building in this case was completed in October 2011. The strata claimed that beginning in September 2012 it experienced leaks from cracked “Pex” fire sprinkler piping that caused damage totaling over $400,000. The strata’s 15 and 24 month coverages expired on January 19, 2013 and October 19, 2013, respectively. The strata notified Travelers Insurance of a defect in the fire sprinklers on June 20, 2013, after its 15 month coverage had lapsed but while the 24 month coverage was in effect.
Travelers responded that fire sprinklers were covered for 15 months only (until January 19, 2013), and that the strata’s June 20, 2013 defect notice was received after this deadline. Travelers further advised that the strata had failed to report the claim within a reasonable time after the first leak in September 2012, as required by section F.1.1 of its warranty:
Within a reasonable time after the discovery of a Defect and before the Expiry Date of the applicable Warranty coverage, an Owner must give [Travelers] and the Builder written notice in reasonable detail that provides particulars of any specific alleged Defects which may be covered by the Warranty.
Travelers relied on affidavits from two engineers in support of its argument that fire sprinklers are not covered for 24 months as part of a building’s plumbing systems. The engineers deposed that fire sprinklers and plumbing are considered different systems by the Building Code and by guidelines published by the Association of Professional Engineers and Geoscientists.
The Court rejected this argument. Relying on the dictionary definition of “plumbing”, Madam Justice Adair held that fire sprinklers form part of a plumbing system because the purpose of both assemblies is to distribute water. Defects in the strata’s fire sprinklers are therefore covered for 24 months, along with defects in other plumbing delivery and distribution systems. The strata had notified Travelers prior to this 24 month deadline.
The Court refused to rule on whether the strata had notified Travelers within a reasonable time after discovery of the defect, as required by the warranty. The application was for a “summary trial” of the strata’s claim, an expedited proceeding in which a Judge may decline to decide some issues on the basis that they are not suitable for a summary trial. The decision therefore leaves unanswered the question of how soon notice must be given after discovery of a defect.
The ruling that fire sprinklers are covered for 24 months is welcome news for strata corporations. But the decision highlights some concerns as well. It illustrates how warranty providers sometimes rely on technical arguments to deny coverage. The uncertainty over how a future Court will interpret the requirement to give notice within a reasonable time also highlights the wisdom of “reporting early and often”.
WHAT WE DO: Lesperance Mendes has been representing strata corporations and strata owners on building defect and warranty claims since 1997. If your strata needs legal advice on an unresolved construction defect or 2-5-10 Warranty Claim, contact John G. Mendes at 604-685-4822 or jgm@lmlaw.ca.