IN THE SUPREME COURT OF BRITISH COLUMBIA
Progressive Homes Ltd. v. Lombard General Insurance Company of Canada,
2007 BCSC 439
Progressive Homes Ltd.
Lombard General Insurance Company of Canada
Before: The Honourable Mr. Justice Cohen
Reasons for Judgment
Counsel for the plaintiff
G.G. Hilliker, Q.C.
Counsel for the defendants, Lombard General Insurance Company of Canada
Date and Place of Trial/Hearing:
February 21 – 23, 2007
I. The Application
 The petitioner, Progressive Homes Ltd. (“Progressive”), is a general contractor. The respondent, Lombard General Insurance Company of Canada (“Lombard”), is a liability insurance company.
 Lombard issued successive liability insurance policies to Progressive during the years 1987 through 2005 (the “insurance contracts”).
 In late 2004 and early 2005 four separate actions (the “Underlying Actions”) were brought against Progressive by B.C. Housing Management Commission (“BC Housing”) concerning condominium developments identified as:
(i) West Coast Community Homes;
(ii) Burlington Heights;
(iii) Hyland Park; and
(iv) Terra Nova Housing.
 BC Housing financed the construction and development of the buildings. Progressive was the general contractor. The buildings were constructed pursuant to contracts between Progressive and BC Housing Co-Op, who was given the leasehold in the lands for the building projects. BC Housing is responsible for the repairs and has an assignment of any causes of action against Progressive.
 The buildings suffer from what are colloquially referred to as “leaky condo” defects. BC Housing alleges, inter alia, that Progressive failed to supply buildings which conformed to Progressive’s contractual obligations.
 Lombard initially defended the underlying actions on behalf of Progressive without waiving its rights. Lombard later withdrew from the defence of the actions, taking the position that it was under no duty to defend because the claims in the actions were not covered under the insurance contracts.
 Progressive brings this application for an order declaring that Lombard is under a duty to defend Progressive in the underlying actions.
II. The Issue
 The sole issue for determination is whether Lombard, under the terms of the insurance contracts, is obligated to defend Progressive with respect to the underlying actions.
III. The Test
 If there is a possibility that the claims in the underlying actions may fall within the coverage afforded by the insurance contracts then Lombard is under a duty to defend: See Nichols v. American Home Assurance Co. (1990), 68 D.L.R. (4th) 321 (S.C.C.). In making this determination the Court must give the widest latitude to the pleadings in the underlying actions. Any doubt as to whether the pleadings bring the incident within the coverage of the insurance contracts ought to weigh in favour of Progressive: See Opron Maritimes Construction Ltd. v. Canadian Indemnity Co.,  N.B.J. No. 111 (C.A.).
IV. The Pleadings
 Each claim in the underlying actions is in relation to a different building. However, as the pleadings are similar, I will set out, as an example, the material allegations against Progressive in the action relating to Burlington Heights, BCSC Action No. S045955:
16. Progressive entered into a contract with the Co-Op on or about November 8, 1993 (the “Construction Contract”) to construct the Development (the “Work”) in accordance with the plans and specifications and in accordance with applicable building codes, bylaws, regulations and standards.
17. Pursuant to the Construction Contract, Progressive undertook responsibilities including, among other things:
(a) to protect the Work and the Co-Op’s property from damage and to be responsible for any damage which may arise as the result of or in connection with Progressive’s operations under the Construction Contract;
(b) to have control of the Work and to effectively direct and supervise the Work so as to ensure conformity with the Construction Contract and all drawings, specification and directions issued thereunder;
(c) to be responsible for the construction means, methods, techniques, sequences and procedures used in the Work and for coordinating the various parts of the Work under the Construction Contract; and
(d) to be responsible for making good any damage to the Work, at its own expense, if Progressive, in the performance of the Construction Contract and the Work, damaged the Work, and to remedy any deficiencies in the Work.
18. Progressive owed a duty of care to the Plaintiffs to ensure that the Development was constructed using all reasonable care, skill, diligence and competence, and without construction deficiencies and design defects.
19. Progressive knew or ought to have known that the Plaintiffs were relying on it to exercise reasonable skill, care and diligence in performing the Work and to construct the Development in accordance with the Construction Contract, construction drawings and specifications and in accordance with applicable statutes, building codes, regulations, bylaws and building standards.
20. The Plaintiffs relied on Progressive’s professional advice that the building envelope system used for the Development was appropriate.
21. Progressive knew or ought to have known that the Plaintiffs relied on its judgment, and knew or ought to have known that the building envelope system would allow water ingress but no or insufficient egress which would cause damage to the Development.
22. Progressive knew or ought to have known that the Co-Op had no or little experience with the building envelope system selected for the Development and that it intended to maintain the Development without the assistance of further professional advice.
23. Progressive breached its contract with the Co-Op and/or breached the duty of care it owed to the Plaintiffs, and was negligent in the construction of the Development, particulars of which include:
(a) failing to ensure that the Development was constructed in compliance with all applicable building codes, bylaws, regulations other statutory requirements and industry standards;
(b) failing to ensure that the Development was built in compliance with all plans and specifications;
(c) failing to ensure that the Development would be constructed in a good and workmanlike manner;
(d) failing to ensure that the Development would be free from construction defects;
(e) failing to ensure that the Development would be protected, by adequate waterproofing systems, against all water damage;
(f) failing to ensure that the Development would be adequately inspected during and after construction;
(g) failing to warn or adequately warn the Plaintiffs of the special maintenance and inspection requirements of the building envelope system, and specifically the danger of water ingress; and
(h) failing in its duty to provide clear instructions, including precautions to be taken to reduce damage from water ingress.
29. As a result of the breaches of contract by Progressive and the negligence of the Defendants and others, and all of them, the Development has sustained since the date of construction and continues to sustain defects and ongoing damage including the following:
water leaking through the exterior walls;
(b) improper and incomplete installation and construction of framing, stucco walls, vinyl siding, windows, sheathing paper, flashings, ventilation, walkway membranes, flashing membranes, eaves troughs, downspouts, gutters, drains, balcony decks, pedestrian walkways, railings, roofs, and patio doors;
(c) insufficient venting and drainage of wall systems;
(d) inadequate exhaust ventilation system;
(e) water leaking through the windows;
(f) improper use of caulking;
poorly assembled and installed windows;
(h) deterioration of the building components resulting from water ingress and infiltration
all of which are collectively referred to as the “Defects” and were caused by the Defendants and all of which constitute further breaches of the terms of the agreements referenced above.
30. As a reasonably foreseeable consequence of Defects and particulars outlined above, significant portions of the Development have suffered since the date of construction and continue to suffer considerable moisture penetration, resultant rot and infestation which has caused the Development to be unsafe and hazardous and to pose a substantial physical danger to the health and safety of the occupants.
33. As a result of the Defects and of the negligence and breaches of contract by the Defendants the Plaintiffs have suffered damages including but not limited to the following:
(a) inspection and professional advice concerning the Defects,
(b) cost to date of remedial work, both permanent and temporary;
(c) cost of relocation and alternate housing of tenants during remediation work and other tenant expenses;
(d) diminution in value of the Development; and
(e) expense, inconvenience and hardship caused by the construction and design deficiencies and their repair.
V. The Insurance Contracts
 Under successive insurance contracts issued by Lombard, Progressive has had liability coverage in place at all times material to the underlying actions. In particular, coverage was in place before the first building was commenced, continued in place through the construction of each building, and has remained in place up to the present time.
 Although the precise wording of the insurance contracts has changed from time to time, the essential features of the coverage provided have not changed since the issuance of the first insurance contract in 1987. The insurance contracts are referred to as “occurrence” policies. Under this type of policy, coverage is triggered by property damage occurring during the period of the insurance contract.
 The material parts of the insurance contracts read, as follows:
I. COVERAGE A – Bodily Injury Liability
To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury.
COVERAGE B – Property Damage Liability
To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of property damage caused by accident.
II. DEFENCE – SETTLEMENT – SUPPLEMENTARY PAYMENTS
As respects insurance afforded by this form, the Insurer shall:
(1) defend in the name and on behalf of the Insured and at the cost of the Insurer any civil action which may at any time be brought against the Insured on account of such bodily injury or property damage but the Insurer shall have the right to make such investigation, negotiation and settlement of any claim as may be deemed expedient by the Insurer;
(2) pay all premiums on bonds to release attachments for an amount not in excess of the applicable limit of liability of this endorsement, all premiums on appeal bonds required in any such defended suit, but without any obligation to apply for or furnish such bond;
(3) pay all costs taxed against the Insured in any civil action defended by the Insurer and any interest accruing after entry of judgment (or, in those jurisdictions where statute prescribes interest from some other date, from such prescribed date) upon that part of the judgment which is within the limits of the Insurer’s liability;
(4) pay expenses incurred by the Insured for such immediate medical and surgical relief to others as shall be imperative at the time of accident;
(5) pay reasonable expenses incurred by the Insured at the Insurer’s request in assisting the Insurer in the investigation or defense of any claim or suit, including actual loss of earnings not to exceed $25 per day.
The amounts so incurred except settlement of claims or suits are payable in addition to the applicable limits of liability.
“Property damage” means (1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an accident occurring during the policy period.
“Accident” includes continuous or repeated exposure to conditions which result in property damage neither expected nor intended from the standpoint of the insured.
VI. Progressive’s Position
 Progressive submits that the provisions in the insurance contracts can be conveniently analyzed as follows: Lombard is required to defend Progressive against claims alleging that Progressive is:
(i) legally obligated;
(ii) to pay damages;
(iii) because of property damage;
(iv) occurring during the insurance contracts period;
(v) caused by an accident or occurrence.
 Applying these criteria, Progressive submits that Lombard has a duty to defend because:
(i) the claims made in the underlying actions are based upon alleged legal obligations arising in tort and contract;
(ii) the claims in the underlying actions are for damages;
(iii) there is property damage arising from deterioration and rotting of building components which constitutes “physical injury to or destruction of tangible property”;
(iv) there is no issue that the triggering events took place during the period of the insurance contracts;
(v) the property damage was caused by an “accident” in that there was “continuous or repeated exposure to conditions” resulting in property damage “neither expected nor intended from the standpoint of the insured.”
 Progressive argues that there is case authority from this Court in favour of its position.
 First, in Axa Pacific Insurance Co. v. Guildford Marquis Towers Ltd., 2000 BCSC 197 (“Axa Pacific Insurance”), the Court held that the insurer was under a duty to defend a developer and a general contractor in an action alleging water ingress damage to high-rise condominium buildings in Surrey. The insurer conceded that the circumstances gave rise to an occurrence but contended that the claim was for economic loss and did not constitute “property damage”. The Court rejected the insurer’s argument. At paras. 52-53 Bauman J. set out the terms of the policy in issue and said:
 I reproduce these parts of the bulletin:
The standard industry wording excludes:
A) Property damage to work performed by or on behalf of the insured arising out of the work or any portion thereof......
Some companies will upgrade this standard exclusion to read:
B) With respect to the completed operations hazard; to property damage to work performed by the insured arising out of the work or any portion thereof …
The difference between these two clauses could be illustrated as follows:
1. - A house building contractor - Does framing, electrical and mechanical work worth $30,000 - All other portions of the job are sublet for $45,000.00. Total project value $75,000.00.
- A house fire caused by faulty wiring in the kitchen, causes a total loss fire, one year after completion.
- Damages - Building $75,000.00 - Standard Exclusion (A) would Eliminate Coverage Completely.
2. - Under Exclusion (B) Broad Form P.D. including completed operations, using the same figures as above:
- Of the $75,000.00 in damage, $30,000.00 is excluded as the Insured's work, The Balance is covered.
The Laurentian Pacific Insurance Company has gone one step further in providing (C) Broad Form Completed Operations Coverage by virtue of its Exclusion 6(B) which reads:
Work done by or on behalf of the insured where the cause of the occurrence is a defect in such work, but this exclusion shall only apply to that part of such work which is defective.
3. - As a result, using the previous examples:
- With damages of $75,000.00 where $1,000.00 of the work was wiring and this turned out to be faulty: ONLY THAT $1,000.00 OF FAULTY WIRING WOULD BE EXCLUDED
The advantages to your contractor clients will vary depending on their style of business, but this coverage would be advantageous to BOTH GENERAL CONTRACTORS and SUB-TRADES.
 From this it becomes clear that exclusion 6(b) is the relevant provision to consider in the case of the condominium towers constructed by Guildford and Metro-Can. And it seems that the insurer has adopted what might be characterized as a modified "complex structure" approach to coverage. That is, at least to this extent: one is to isolate (and exclude from coverage) only that part of the work which is defective.
 This is the interpretation that Progressive urges upon the Court in the instant case.
 In F.W. Hearn/Actes-A Joint Venture Ltd. v. Commonwealth Insurance Co., 2000 BCSC 764 (“Hearn/Actes”), a general contractor sought a declaration that the insurer was under a duty to defend it with respect to a claim by the owner of a 403-unit student residence at the University of British Columbia (“UBC”), alleging that there were deficiencies in the work. The owner’s claim was not limited to the cost of repairing the alleged faulty work, but extended to claims for resultant damage. The Court held that the insurer was under a duty to defend the general contractor.
 In his analysis, Edwards J. said that a general principle applicable to the case was that the damages claimed by UBC must not be solely costs associated with the repair or allegedly faulty work or pure economic loss but must be claims for resultant damages which are clearly within the scope of the policy. His Lordship then when on to state at paras. 10 - 11:
 In Winnipeg Condominium Corporation No. 36 v. Bird Construction Co.,  1 S.C.R. 85, Mr. Justice LaForest considered the Condominium Corporation's submission that the losses in question could, in fact, be characterized as damaged property as opposed to pure economic loss. Mr. Justice LaForest called this approach the "complex structure" theory. By this theory the claimant seeks to localize the defect in one part of the structure and to claim that the damage to the rest of the structure was caused in some manner by the defect.
 Mr. Justice LaForest accepted Lord Bridge's criticism of a complex structure theory in Murphy v. Brentwood District Council (1992), All. E.R. 908 at 928 (H.L.). Justice LaForest, referring to the reasons of Lord Bridge at 99 recognized that damage caused by the malfunction of a distinct item incorporated into a structure is not pure economic loss. His Lordship noted at 98:
Adopting this critical characterization as a convenient starting point for my analysis I observe that the losses claimed by the Condominium Corporation in the present case fall quite clearly under the category of economic loss. In their statement of claim the Condominium Corporation claim damages in excess of $1.5 million from the respondent Bird. The subcontractor, Kronovski & Keller and the architects Smith Carter, representing the cost of repairing the building subsequent to the collapse of the exterior cladding on May 8, 1989. The Condominium Corporation is not claiming that anyone was injured by the collapsing of the exterior cladding or that the collapsing cladding damaged any of its other property. Rather the claim is simply for the cost of repairing the allegedly defective masonry and putting the exterior of the building back into a safe working condition.
 At para. 14 Edwards J. referred to Bauman J. in Axa Pacific Insurance, supra, as follows:
 Bauman J. in Axa Pacific Insurance Company Ltd. v. Guildford Marquis Towers Ltd., 2000 BCSC 197,  B.C.J. No. 208 (Q.L.) at para. 19, characterized the categories of loss as follows:
i. repairing the defective parts of the buildings themselves;
ii. repairing parts of the buildings which were damaged as a result of defects in other parts: e.g. drywall damaged by the ingress of water through the defective joints or caulking; and
iii. repairing third party property damaged by the ingress of water - that is Axa's category "resultant damage".
Bauman J. goes on to say at para. 21:
... it might be argued that category (ii), analytically, is "resultant damage" - that is, the defective element in the building has led to the resulting water damage to, for example, the interior drywall of the building.
 At paras. 26 - 35 Edwards J. said:
 The respondents argue that the costs of repairing defects are "economic loss" and are not recoverable. The policy considered by Drost J. in Privest was identical to the coverage provided in the case at bar.
 In Canadian Indemnity Insurance Co. v. Andrews and George Co.,  1 S.C.R. 19 at 27 Rand J. defined "accident" as
What is meant is something out of the ordinary or the likely, something fortuitous, unusual and unexpected, not in the ordinary course guarded against.
 That a mishap might have been avoided by the exercise of greater care and diligence does not automatically take it out of the range of "accident".
 These factors, in my view, bring the allegations in the amended counterclaim within the coverage provisions of the Policy.
 The Policy contains a coverage for "Completed Operations Hazard". That coverage addresses some but not all of the allegations in the amended counterclaim. This is separate coverage and the nature of the coverage is contained in the definition to be found in clause 5 of the definition section of the Policy. The respondents place little reliance on this endorsement responding to matters in the amended counterclaim.
 In conclusion, on the issue of whether or not there is coverage on the insuring agreement, it is my view that provided the court is required to construe the coverage provisions broadly and considering the definitions of "accident", "occurrence", "property liability" and the words of Bauman J. in Axa Pacific Insurance Company, supra, the petitioner has met the first part of the test and has established that the claims are within the scope of the Policy.
 I turn now to the question of the second test: "Are the claims excluded by any policy provision".
 The respondents submit that clause 8(c) and (d), the Work/Product Exclusion, excludes coverage in the case at bar.
 The petitioner says that clause 8(c) of the Policy applies to products as opposed to services and in the absence of a definitive characterization of it, it would be a fair conclusion to draw that clause 8(c) would be treated in the same manner as that applied in Maryland Casualty Company v. George Wayne Reeder, 221 Ca. App. 3d 961 (1990). In that case, the court considered the effect of the work and product exclusion clauses. The court held that the clauses did not apply to the work of products or subcontractors whose work or products resulted in damage or products.
 Hearn/Actes paid an additional premium for Completed Operations coverage which it intended would provide coverage with respect to a separate category of risk. Accordingly, the Policy should not be interpreted in such a way as to avoid this coverage which was specifically obtained by the insured. Hearn/Actes would not have paid for something which would be of no value to it. Such an interpretation would not accord with the reasonable expectations and purpose of ordinary insureds regarding coverage. This reasoning was embraced by the Court of Appeal of California in Maryland Casualty Company, supra. The court, in rejecting the insurer's argument that the "product" exclusion eliminates coverage for any damage to the completed building (the completed building being the "product" of the insured) accepted the following reasoning at 976:
... In the opinion of the editors, that reasoning ignores the distinction between the 'completed operations hazard' and the 'named insured's products' in the policy definitions. Moreover, that reasoning precludes any possibility of recovery under the Completed Operations feature of the Broad Form Endorsement, a feature for which the insured has presumably paid an additional premium...
At best, the co-existence of the Completed Operations Hazard as defined in Clause 5 of the Definitions section of the Policy; the exception for Completed Operations coverage to the exclusion in Clause 11 of the Policy; and the Work/Product Exclusion within the same policy leads to confusion and ambiguity with respect to coverage. This was the situation in Commercial Union Assurance Cos. v. Gollan, 118 N.H. 744, 394 A. 2d 839 (1978) where an insured builder was sued for the cost of repairing a collapsed roof on a building he had constructed. He had purchased Completed Operations Insurance, however, the policy also contained a work/product exclusion. The insurer argued that the Completed Operations protection covered only damage to the property of third parties, not to the insured's own work/product. The court rejected this argument and found evidence that reasonably led the insured to believe he was obtaining protection against liability of the type in question. Such evidence included the title of the policy ("general liability insurance"), the definition of the Completed Operations Hazard, which had been included with the coverage by endorsement and payment of an additional premium, and a number of exceptions to the exclusions which existed in the policy. The court held that the message of broad protection sent by these clauses contradicted the exclusionary language of the work/product exclusion. The court emphasized the complexity of the 17 page standard policy and found that the insurer's interpretation "would require the unwary insured to understand a distinction [between the insured's work/product and the property of third persons] that the clauses do not clearly specify." The court found this interpretation unreasonable and thus found inherent ambiguity in the policy which it resolved in the insured's favour on the basis of the insured's reasonable expectation of coverage.
 Progressive insists that the facts and circumstances in Hearn/Actes, in so far as they relate to the issue of coverage and the duty to defend, are identical to those in the case at bar and that Edwards J. analysis and conclusion should be applied to grant Progressive the relief it seeks in this application.
VII. Lombard’s Position
 Lombard submits that it has no duty to defend Progressive because the claims made in the underlying actions do not fall within the initial coverage grant under the insurance contracts. Lombard relies on two very recent decisions of this Court which Lombard insists settle the law on the issue before the Court in the instant action.
 In Swagger Construction Ltd. v. ING Insurance Company of Canada, 2005 BCSC 1269 (“Swagger”), N. Smith J. dealt with an application by Swagger for a declaration that ING was obligated to defend and indemnify Swagger in its action against UBC. Swagger was hired by UBC to construct a building and thereafter commenced an action against UBC for damages resulting from extra work and delays. UBC counterclaimed for breach of contract and damages arising from defective materials, faulty design and faulty workmanship. UBC argued that the deficiencies constituted a danger to the public and caused damages to other parts of the building. The ING policy obligated it to defend Swagger in any lawsuit for damages for personal injuries or damage to property caused by an occurrence.
 N. Smith J. dismissed Swagger’s application. The Court held that any damage to other parts of the building resulting from Swagger’s defective workmanship was not covered by the policy.
 At paras. 4 - 5 N. Smith J. stated:
 The leading authority in this Court on the duty to defend under insurance policies of the type at issue here is Privest Properties Ltd. v. Foundation Co. of Canada. Ltd. (1991), 57 B.C.L.R. (2d) 88, 6 C.C.L.I. (2d) 23 [Privest]. Drost J., at ¶208, adopted American authority describing the general purpose of CGL policies:
Comprehensive general liability policies … are intended to protect the insured from liability for injury or damage to the persons or property of others; they are not intended to pay the costs associated with repairing or replacing the insured’s defective work and products….
Citing Ohio Casualty Insurance Co. v. Bazzi Construction Co. Inc., 815 F. (2d) 1146 (C.A. 7th circ. 1987), at ¶209 Drost J. added:
There is a policy reason for this. If the insurance proceeds could be used to pay for the repairing or replacing of defective work and products, a contractor or subcontractor could receive initial payment for its work and then receive further payment from the insurer to repair or replace it. Equally repugnant on policy grounds is the notion that the presence of insurance obviates the obligation to perform the job initially in a good and workmanlike manner: see Centex Homes Corp. v. Prestressed Systems Inc., 444 So. (2d) 66 (Fla. App. 3 Dist., 1984).
 This principle has been sometimes summarized by saying a CGL policy is not a performance bond. However, that general principle is always subject to the specific terms of the policy at issue. In Westridge Construction Ltd. v. Zurich Insurance Co., 2005 SKCA 81 [Westridge Construction], the Saskatchewan Court of Appeal said:
In the concluding paragraphs of his reasons for decision,(¶s  to  the trial judge found that the claims against Westridge did not fall within the insuring agreements. In doing so, he made no reference to the terms of the policies themselves, but appears to have relied on what he termed to be a fundamental principle of insurance law that a Comprehensive General Liability Policy is not intended to be a means for a contractor to cover the expenses to cover its own defective workmanship or materials, or to be a performance bond (paragraphs  to ).
While the statement of principle is sound, this was an erroneous approach, as the judge was obliged to decide the issue not upon general insurance principles, nor upon the general nature of the policies, but upon the exact terms of the insurance policies themselves. (¶33 to 34)
 At para. 22 N. Smith J. stated:
 Giving the pleadings their broadest possible interpretation, the counterclaim against Swagger contains the following basic elements:
a) a claim that Swagger was in breach of its obligations under the construction contract;
b) a claim that Swagger was negligent in performing its contractual obligations;
c) a claim that Swagger’s breach of contract and negligence resulted in construction deficiencies;
d) a claim that UBC has had to repair the construction deficiencies;
e) a claim that the construction deficiencies have caused additional damage, including damage to other parts of the building that were not in themselves defective. This claim and includes failure of the building envelope and resulting leaks; and
f) a claim that as a result of the construction deficiencies, resultant damage and dangerous defects, UBC has suffered a loss of use of the property.
It is important to emphasize that the damage alleged is damage to the very building that Swagger contracted to build. There is no allegation of personal injury to anyone, or any allegation of damage to property other than the Forest Science Centre.
 Lombard relies heavily on the above quote arguing that the same point applies to the case at bar. Lombard asserts that the claims in the underlying actions do not engage coverage under the insurance contracts in that they do not relate to a claim for personal injury or damage to third party property outside of the building. Thus, Lombard submits that the same result should follow for Progressive’s application.
 At para. 33 N. Smith J. stated:
 In Winnipeg Condominium Corporation No. 36 v. Bird Construction Co.,  1 S.C.R. 85, 121 D.L.R. (4th) 193 [Winnipeg Condominium], the plaintiff claimed the cost of removing and replacing a building’s defective exterior cladding. The plaintiff advanced an argument similar to Swagger’s second category of damages. It argued that one element of a structure should be regarded as distinct from another, so that damage to one part of the structure caused by a defect in another could qualify as damage to “other property”. The assertion of this “complex structure theory” relied on dicta by Lord Bridge in D & F Estates Ltd. v. Church Commissioners for England,  2 All E.R. 992 (H.L.). The Supreme Court of Canada has rejected the theory, and noted that Lord Bridge had later rejected it in Murphy v. Brentwood District Council,  2 All E.R. 908 (H.L.): Winnipeg Condominium at ¶15. LaForest J. summarized the law relating to the “complex structure” theory at ¶s 14 and 15:
… Counsel for the Condominium Corporation argued that the collapse of the cladding may have been attributable to the negligent installation of certain metal ties. Following the logic suggested by Lord Bridge, counsel argued that the loss suffered was not, in fact, economic loss but, rather, damage to “other property” and the recoverable under the principles established in Donoghue v. Stevenson,  A.C. 562 (H.L.). In other words, he sought to localize the defect in one part of the structure and to claim that the damage to the rest of the structure was “caused” in some manner by the defect.
I note at the outset that I do not find the Condominium Corporation’s argument on this subsidiary point persuasive. In Murphy, supra, at pp. 926-8, Lord Bridge reconsidered and rejected the “complex structure” theory he had suggested in D & F Estates, criticizing the theory on the following basis (at p. 928):
The reality is that the structural elements in any building form a single indivisible unit of which the different parts are essentially interdependent. To the extent that there is any defect in one part of the structure it must to a greater or lesser degree necessarily affect all other parts of the structure. Therefore any defect in the structure is a defect in the quality of the whole and it is quite artificial, in order to impose a legal liability which the law would not otherwise impose, to treat a defect in an integral structure, so far as it weakens the structure, as a dangerous defect liable to cause damage to ‘other property’.
A critical distinction must be drawn here between some part of a complex structure which is said to be a ‘danger’ only because it does not perform its proper function in sustaining the other parts and some distinct item incorporated in the structure which positively malfunctions so as to inflict positive damage on the structure in which it is incorporated. Thus, if a defective central heating boiler explodes and damages a house or a defective electrical insulation malfunctions and sets the house on fire, I see no reason to doubt that the owner of the house, if he can prove that the damage was due to the negligence of the boiler manufacturer in the one case or the electrical contractor in the other, can recover damages in tort on Donoghue v. Stevenson principles.
 Lombard heavily relies on the principle expressed in the above quote that “any defect in the structure is a defect in the quality of the whole…it is quite artificial…to treat a defect in an integral structure, so far as it weakens the structure, as a dangerous defect liable to cause damage to ‘other property’”.
 At paras. 35 - 36 and 43 - 46 N. Smith J. states:
 After the Supreme Court of Canada’s decision in Winnipeg Condominium, the defendant contractor sought an order that its insurer defend the claim. In Bird Construction Co. v. Allstate Insurance Co. of Canada,  7 W.W.R. 609 [Bird Construction], the Manitoba Court of Appeal said the insurer had no duty to defend and made clear (at ¶s 11 and 12) that the Supreme Court of Canada’s rejection of the “complex structure” theory for tort purposes, also applied to insurance law:
The claim is obviously not one for “damages because of bodily injury.” Nor is it one for “damages because of property damage” as those latter words are defined in the policy. As LaForest J. remarked in Winnipeg Condominium Corporation No. 36 v. Bird Construction Co. Ltd., supra, at p. 98:
I observe that the losses claimed by the Condominium Corporation in the present case fall quite clearly under the category of economic loss.
The only damage to property alleged in the claim against the policy holder is damage to the building itself. But this is not damage in the sense defined in the policy which expressly excludes coverage for damage to the work performed by or on behalf of the policy holder (Exclusion (k)(4)). Nor can it be argued that the defect in part of the building caused damage to the rest of the building. This argument, known as the “complex structure” theory, was rejected by the Supreme Court of Canada in Winnipeg Condominium Corporation No. 36 v. Bird Construction Co. Ltd., supra, at p. 100.
 The basic principle set out in Privest and the authorities on which it is based is that for the purpose of CGL policies, damage to “tangible property” does not include the cost of remedying defects in the insured’s own work. Drost J. also said that a general contractor’s “work” is the project for which the contractor was engaged (¶238). The effect of Winnipeg Condominium and Bird Construction is that, subject to one possible exception that I will discuss below, this basic principle can not be avoided by an artificial division of the insured’s work into component parts.
 This language suggests there may be a distinction between structural and non-structural elements of a building. That possibility arises directly from Winnipeg Condominium, which suggests a distinction between a part of a structure that “does not perform its proper function in sustaining the other parts and some distinct item incorporated in the structure which positively malfunctions.” The Court used the example of a defective central heating boiler exploding and damaging the structure. That distinction must also work in the other direction. A defect in the structure may lead to damage to parts of the building that have no structural function and do not form part of an indivisible unit of structural elements. For example, a failure of the building envelope, such as is alleged in this case, may cause water damage to building elements that have an aesthetic or functional purpose but no structural significance. Carpeting and perhaps drywall could fall within this category. Although still part of the contractor’s work, it might be said that the property damaged is so far removed from the defective portion, both in function and the specific construction steps taken in relation to it, that it would arguably be called “other property”.
 In AXA Pacific, Bauman J. did not have to decide whether that distinction was relevant because he relied on the specific policy language to find that the duty to defend existed for both the cost of repairing defects and any “resultant damage to other parts of the building. The policy in that case defined property damage as “injury to or destruction” of property (¶32). Bauman J. noted that the wording was the same as the policy wording that gave rise to a duty to defend in Privest because it could include “infringement of intangible property or incorporeal right.” (¶36).
 The policy in this case refers to “tangible property”, which is the language that Privest said does not give rise to a duty to defend. On its result, AXA Pacific is distinguishable from this case simply on the basis of what was found in Privest to be a significant difference in the wording of the policy. It certainly does not suggest any departure from the law stated in Privest, which has been adopted by courts across Canada.
 However, AXA Pacific does leave open the question of whether the policies in this case could be interpreted as having application in the limited sense of resulting damage to non-structural portions of the plaintiff’s work. Can, for example, a failure of the building envelope be considered property damage to the extent that it damages features like carpeting and interior drywall? If that can be considered property damage, it would appear to form a very small part of UBC’s counterclaim.
 Lombard argues that its position in this lawsuit fits with the analysis set out above and that there cannot be a finding of property damage in the case at bar.
 The issue then arises whether I am bound by the analysis and result in Swagger, or whether it is open to me to apply the analysis and result found in Hearn/Actes. In this respect, N. Smith J. considered Hearn/Actes, and had the following to say at paras. 59 - 66:
 I confess, with respect, that I have difficulty understanding how the Court in Hearn/Actes reached the decision it did in light of the applicable authorities. One problem is that the pleadings are not described except in very general terms. They are said to allege construction deficiencies, including resultant damage.
 The Court refers to Winnipeg Condominium. It does not refer to Bird Construction. However, it refers to AXA Pacific, which does refer to Bird Construction. If Bird Construction was argued in Hearn/Actes, there is no explanation of why a different result was reached. In reference to Winnipeg Condominium, the Court said:
In Winnipeg Condominium, supra, Mr. Justice LaForest used the potential of danger to back away from a previously unshaken characterization of this type of loss as pure economic loss.
The claims for “economic loss” fall within the liberal interpretation of “damage to property”, now specifically adopted by our courts (¶s 12 and 13).
 The Court then stated at ¶s 26 to 29:
The respondents argue that the costs of repairing defects are “economic loss” and are not recoverable. The policy considered by Drost J. in Privest was identical to the coverage provided in the case at bar.
In Canadian Indemnity Insurance Co. v. Andrews and George Co.,  1 S.C.R. 19 at 27 Rand J. defined “accident” as
What is meant is something out of the ordinary or the likely, something fortuitous, unusual and unexpected, not of the range of “accident”.
That a mishap might have been avoided by the exercise of greater care and diligence does not automatically take it out of the range of “accident”.
These factors, in my view, bring the allegations in the amended counterclaim within the coverage provisions of the Policy.
The policy in Hearn/Actes was identical to one category of policy considered in Privest. However, this was the category that Drost J. held did not give rise to a duty to defend. In relation to the finding that there was an occurrence, the Court was apparently not referred to the discussion of that issue in Harbour Marine, and, of course, could not have had the benefit of subsequent authorities such as Celestica and A.R.G. Construction.
 The conclusion reached in Hearn/Actes was stated as follows:
In conclusion, on the issue of whether or not there is coverage on the insuring agreement, it is my view that provided the court is required to construe the coverage provisions broadly and considering the definitions of “accident”, “occurrence”, “property liability” and the words of Bauman J. in AXA Pacific Insurance Company, supra, the petitioner has met the first part of the test and has established that the claims are within the scope of the Policy (¶31).
I have already noted that the AXA Pacific case relied upon in that paragraph, is based on language established by previous authority to be significantly different from what was before the court in Hearn/Actes, and from what is before the court in this case.
 Having said that, Hearn/Actes is a considered decision of this Court on facts that, as far as can be determined, appear to be very similar to the case at bar. I am bound to follow it except in the specific circumstances set out in Re Hansard Spruce Mills Ltd.,  4 D.L.R. 590 (B.C.S.C.) [Hansard Spruce Mills]. Those circumstances were described by Wilson J. as occurring when:
(a) subsequent decisions have affected the validity of the impugned judgment;
(b) it is demonstrated that some binding authority in case law, or some relevant statute was not considered;
(c) the judgment was unconsidered, a nisi prius judgment given in circumstances familiar to all trial Judges, where the exigencies of the trial require an immediate decision without opportunity to fully consult authority. (p. 592),
 That passage was recently considered by Goepel J. in McCready v. Nanaimo (City), 2005 BCSC 762 at ¶s 47 and 48. Goepel J. also considered the case of Cairney v. Queen Charlotte Airlines Ltd. et al. (No. 2) (1954), 12 W.W.R. (N.S.) 459 (B.C.S.C), which is referred to in Hansard Spruce Mills:
In Hansard Spruce Mills, Wilson J. reiterates what he said in Cairney and refers to it, but he omits specific reference to one of the conditions he mentioned in Cairney at p. 460:
No suggestion has been made to me that the authorities bearing on the question were not considered by Fisher J. There is no subsequent judgment by any member of this court or by any higher court which would suggest that Fisher J. reached a wrong conclusion. There is no suggestion that his judgment is palpably wrong in that it displays a patent error as to law or as to the facts upon which his statement of law is based.
A patent error of law or fact is a ground on which I may refuse to follow an earlier judgment of this court: Leischner et al. v. West Kootenay Power & Light Co. Ltd. et al., 150 D.L.R. (3d) 242 (B.C.S.C.), varied (1983), 24 D.L.R. (4th) 641 (B.C.C.A.).
 In dealing with an issue of interpretation of a statutory provision, Goepel J. found that a previous decision of this court was “palpably wrong” and declined to follow it.
 It will be apparent from my previous review of Hearn/Actes that I believe the first two of the three conditions set out in Hansard Spruce Mills apply. The Court was not referred to a binding authority on the definition of occurrence — a subject which has also been considered by subsequent authorities. It may be that there were specific allegations in the pleadings that supported the result in Hearn/Actes. However, in the absence of such information, I am unable to see how the result could have been reached on a proper application of the law set out in Privest, Winnipeg Condominium, Bird Construction and the other cases to which I have referred. I therefore must conclude, with great respect, that I am not bound to follow Hearn/Actes.
 Lombard’s position is that I am bound to follow Swagger based on the result in GCAN Insurance Company v. Concord Pacific Group Inc., 2007 BCSC 241 (“GCAN”). In that application, GCAN applied for a declaration that it had no duty to defend the respondents pursuant to policies of liability insurance with respect to claims brought in actions against the respondents by two strata corporations for defective workmanship and resultant damage. The allegations were that construction deficiencies caused damage to the exterior and interior of the building components including water ingress causing water damage and deterioration of the building envelope and to the structural components of the wall assemblies and deterioration of the interior finishes of the building. The respondents insisted that their own work was covered by the policy language.
 Garson J. had to consider the applicability of Swagger. In doing so she categorized the types of defective building claims made against builders for which the builder may or may not be insured. The first is a claim for damages to repair or replace the defective work performed by the insured. Her Ladyship called this a claim for economic loss. The second is a claim for damages against an insured for damage to property of a third party which damage is resultant damage, i.e. caused by the defective work of the insured, but occurring on a different property than the defectively built one. The third is a claim against an insured builder of a building for resultant damage to multiple parts of a building caused by the insured’s own defective work, i.e., a claim against an insured for resultant damage to multiple exterior and interior structures caused by a defective building envelope. Her Ladyship also considered the “complex structure theory” and made reference to Winnipeg Condominium Corporation No. 36 v. Bird Construction Co.,  1 SCR 85 (“Winnipeg Condominium”).
 Garson J. concluded that of the three categories she mentioned only the third category was applicable to the case, noting that the builder was sued for constructing a building with a defective building envelope. At paras. 37 - 38 she stated:
 Having now defined some terms I shall endeavour to state the issues on which this case turns. Of the three categories of damage claims for which an insured may seek indemnity, it is only the third category that is applicable to this case. Here the insured seeks indemnity for claims made by the strata and owners against it for what I have called Own Work Resultant Property Damage. The builder/insured is sued for, inter alia, building a building with a defective building envelope. That defective work is alleged to have allowed water ingress which in turn has caused multiple areas of damage to the interior and exterior of the building. The Petitioner, in reliance on the Swagger decision, contends that given the Supreme Court’s rejection of the complex structure theory, the builder is not insured for Resultant Damage to a building when that builder built or was responsible for building the whole building. In other words the builder cannot artificially divide the building into different components and argue that damage to one component caused by his defective work on another component of the building is “property damage” as defined by the policy.
 For convenience, I shall sometime collectively refer to the Respondents as the insured or the builder. (Below I shall discuss the roles of the individual Respondents.) The Respondents contend that the proper interpretation of the Policies entitles the builder to indemnity for claims for Own Work Resultant Property Damage. The builder says that the judgment in Swagger is not consistent with previous binding authority, is wrongly decided, and is not binding on this court.
 Following a consideration of the facts in Swagger, Garson J. said at para. 42:
 I would interpret Swagger as authority for the proposition that a liability insurance policy covering physical injury to tangible property does not contemplate the artificial division of the work of the party responsible for that work into component parts for the purpose of establishing Resultant Damage, unless that is the clear intention of the entirety of the policy. Smith J. decided that the policies at issue in Swagger could not be interpreted as covering what I called above Own Work Resultant Property Damage, and therefore the University’s claim against Swagger was not covered by its wrap-up liability policy. Swagger is also authority for the proposition that in the context of an insurance policy covering physical injury to tangible property, defective construction is not an “accident” unless there is damage to the property of a third person.
 Lombard submits that the insurance contracts in the case at bar contain virtually the same terms as those found in Swagger and GCAN and thus, based on the words of Garson J., Progressive cannot succeed in its application. Lombard argues that as there is no allegation in the instant case of damage to property of a third person, this is a complete answer to Progressive’s application.
 Garson J. reviewed the pre-Swagger authorities relevant to the issues in her case and rejected the position of the respondents that she was bound to follow Hearn/Actes. In doing so she said at para. 56, “If a judge of this Court decides that he ought not to follow an earlier binding decision, that is his judgment. It cannot be said that he has failed to ‘consider’ that case. He has considered it, and decided it was not binding.” At para. 57 she said:
 It must be remembered that Hansard Spruce Mills permits a court to diverge from another judgment of the same court only if a previous binding authority was “not considered.” Counsel referred me to other authorities which they say should have been followed but to none that were not considered.
 Garson J. also considered whether there were subsequent decisions contrary to Swagger. At paras. 58-62 she stated:
 The Respondents say that the judgments in Bridgewood Building Corp. v. Lombard General Insurance Co. of Canada (2006), 266 D.L.R. (4th) 182 (Ont. C.A.); ING Insurance Co. of Canada v. A.M.L. Painting Ltd., 2006 NSSC 203; and B.C. Master Blasters v. Aviva Insurance Co. of Canada, 2006 BCSC 1488 are “subsequent decisions [that] have affected the validity of the impugned judgment” (Hansard Spruce Mills).
 In Bridgwood and ING, both courts affirmed that the language of the policy governed, and rejected reliance on general principles of interpretation, in determining an insurer’s duty to defend. In Bridgewood, the language of the policy, a CGL policy insuring only the general contractor, differed from the language at issue in the case at bar. Swagger was not mentioned in Bridgewood.
 ING also concerned a CGL policy, and is not therefore directly on point, nor is it binding on this Court.
 Master Blasters cites Swagger with approval, and in the result is not inconsistent with Swagger.
 I conclude that there are not subsequent binding decisions that detract from the authority of Swagger.
 Garson J. also considered whether the facts of her case were distinguishable from Swagger. At para. 71 she concluded:
 The amendment to Endorsement No. 5 of the GCAN policy deleted the words, “arising out of the work or any portion thereof…” from exclusions (i) and (j). Those deleted words were left in the policy at issue in Swagger. The Respondents argue that because insurance policies must be read in their entirety, I am not bound to follow Swagger. In other words, the Respondents say that Swagger should be distinguished on its facts because of the different exclusion clause. I do not agree. The exclusion clause is not necessarily inconsistent with the Swagger interpretation of the insuring clause for the reason I mentioned above – that is, that the policy covers those insured whose work may properly be divided into component parts. I agree with the Respondents that given the language of the exclusion clause, the interpretation of the policy is less tortuous if the non-redundant meaning is given to the insuring clause, one that permits the general contractors work to be divided into component parts, but I am bound to a different interpretation by the judgment in Swagger.
 In sum, GCAN confirms that Swagger stands for two propositions which, I think, govern the outcome of the application in the case at bar:
(1) liability insurance policies governing physical injury to tangible property do not contemplate the artificial division of work of the party responsible for that work into component parts for the purpose of establishing resultant damage, unless that is the clear intention of the entirety of the policy;
(2) defective construction is not an “accident” unless there is damage to the property of a third party.
 In my opinion, based on the analysis in GCAN, I am bound to follow Swagger unless that decision can be distinguished from the facts and circumstances in the case at bar.
VIII. Progressive’s position on GCAN
 Progressive argues that the facts in the instant case can be distinguished from Swagger and GCAN. In this regard, Progressive refers first to Exclusion (i) of the insurance contracts which provides that the insurance does not apply to:
Property damage to work performed by or on behalf of the Named Insured arising out of the work or any portion thereof, or out of materials, parts or equipment furnished in connection therewith.
 Progressive refers next to the “Broad Form Property Damage” clause (Z) which provides:
With respect to the completed operations hazard to property damage to work performed by the Named Insured arising out of the work or any portion thereof, or out of materials, parts or equipment furnished in connection therewith.
 Progressive submits that the result of the endorsement is that whereas Exclusion (i) refers to “work performed by or on behalf of a Named Insured”, Exclusion (Z) simply refers to “work performed by the Named Insured”. Progressive refers to this as the “subcontractor exception” and argues that the purpose of the Broad Form Property Damage endorsement is to ensure that there is coverage for a contractor for property damage arising out of the work performed by a subcontractor and thus the exclusion applies only to work performed by Progressive and not to a subcontractor on behalf of Progressive.
 Progressive contends that the subcontractor exception, while mentioned by Garson J. in para. 97 of GCAN, was not part of the policies before her and thus was not considered or dealt with. Moreover, although counsel for Lombard takes the position that the policy in Swagger contained this same provision, it was not mentioned by N. Smith J. in his discussion and analysis. Thus, counsel argues that it is open for me to conclude that this distinction removes the case from the application of Swagger and GCAN.
 Progressive notes that the pleadings in the underlying actions refer to subcontractors having been involved in the performance of the work, but do not particularize the extent to which the work was carried out by subcontractors. Counsel advises that the buildings were built almost entirely through the use of subcontractors. He concedes that this is not evidence, but nor is it a matter, in his view, which should affect the outcome of this application.
 Progressive submits that it has no say over how the Statements of Claim were drawn, noting that the claimants may be unaware of the identity of certain subcontractors. Progressive says this does not change the fact that Progressive used subcontractors for most of the work. Progressive asserts that at this stage it is premature for the Court to rule on the extent to which the buildings were constructed by subcontractors. That will be a matter for evidence. But, says Progressive, what is clear is that subcontractors were employed and this is sufficient to trigger the duty to defend.
 Progressive submits that the subcontractor exception can have meaning only if the insurance contracts are read so as to provide coverage to Progressive for damage to the work resulting from the actions of a subcontractor. In this regard, counsel refers to the decision in Bridgewood Building Corp. v. Lombard General Insurance Co. of Canada (2006), 266 D.L.R. (4th) 182 (Ont. C.A.) (“Bridgewood”). That decision, referred to in GCAN at para. 58, turns to some extent on the subcontractor exception. At paras. 12 - 21 Moldaver J.A. held, as follows:
 On a plain reading, clause (j) would seem to indicate that coverage will be provided if the “damaged work or the work out of which the damage arises” is performed on behalf of the insured by a subcontractor. And yet, Lombard says that that is not what it means. When asked what it did mean, counsel for Lombard initially characterized it as “sloppy drafting”. Upon further questioning, he retreated from that position and conceded, correctly in my view, that if the effect of the “general principle” was as he would have it, exclusion (j) was redundant, i.e. there would be no need to exempt faulty work performed by subcontractors if the “general principle” excluded such work from coverage in every case. And, as the respondents quite properly point out, if exclusion (j) is redundant, so too are five other exclusionary provisions in the same policy.
 Despite this anomaly, counsel for Lombard maintained his position, citing authorities to the effect that an exception to an exclusion cannot restore coverage where coverage did not exist in the first place. (See Qualls v. Country Mutual Insurance Co., 123 Ill. App. 3d 831 (1984), at 833 – 34.) I take no issue with that principle. In my view, however, it is unhelpful here because it begs the question.
 The approach suggested by Lombard is problematic for several reasons. It defies basic principles of contract interpretation – we are asked to read a host of exclusionary provisions out of the insuring agreement on the ground that they are redundant and thus meaningless. It turns the contra proferentem principle on its head – we are asked to construe ambiguities in an insurance policy against the insured. It ignores the historical evolution of clauses such as exclusion (j) and the reasonable expectation of the parties flowing from this – exclusion (j) and other like provisions are the product of a Broad Form Property Damage Endorsement (BFPD) implemented into the CGL in 1986 for the express purpose of bringing claims arising out of faulty work by subcontractors back into coverage through an exception to an exclusion. (See American Family Mut. Ins. Co. v. American Girl, Inc., 673 N.W. 2d 65 (Wis. S.C. 2004) at paras. 68 – 69; Patrick J. Wielinski, “CGL Coverage for Defective Workmanship – Current (and Ongoing Issues)” (Paper presented to the 16th Annual Construction Law Conference, State Bar of Texas, March 7, 2003); C.J. Shapiro, “Business Risk in Construction Coverage – The Business Risk Exclusions in CGL Policies,” in Insurance Coverage and Claims Institute 2005 (Chicago: Defence Research Institute, 2005), Chicago: Illinois; O’Shaughnessy v. Smuckler Corp., 543 N.W. 2d 99 (Minn. Ct. App. 1996), review denied (Minn. 1996) and Wanzek Const., Inc. v. Employers Ins. Of Wausau, 79 N.W. 2d 322 (Minn. Ct. App. 2004)).
 A concise statement of the purpose and effect of this revision of the CGL is found in American Family Mutual, supra, at para. 68:
This subcontractor exception dates to the 1986 revision of the standard CGL policy form. Prior to 1986 the CGL business risk exclusions operated collectively to preclude coverage for damage to construction projects caused by subcontractors. Many contractors were unhappy with this state of affairs, since more and more projects were being completed with the help of subcontractors. In response to this changing reality, insurers began to offer coverage for damage caused by subcontractors through an endorsement to the CGL known as the Broad Form Property Damage Endorsement, or BFPD. Introduced in 1976, the BFPD deleted several portions from the business risk exclusions and replaced them with more specific exclusions that effectively broadened coverage. Among other changes, the BFPD extended coverage to property damage caused by the work of subcontractors. In 1986 the insurance industry incorporated this aspect of the BFPD directly into the CGL itself by inserting the subcontractor exception to the “your work” exclusion. See generally 21 Eric Mills Holmes, Holmes’ Appleman on Insurance, § 132.9, 152-53.
 Paragraphs 73 and 74 of the same decision are also instructive. They rebut Lombard’s contention that the 1986 BFPD was of no consequence because clauses like the subcontractor exception in exclusion (j) could not restore coverage where none existed before:
American Family cites conflicting authorities which appear to hold that damage to an insured’s work caused by a subcontractor is not covered because of the “your work” exclusion, but these authorities are no longer controlling because the construed policies that did not include the subcontractor exception. Noting the apparent conflict between O’Shaughnessy, Kalchthaler [224 Wis 2d 387 (App. 1999)], and similar cases on the one hand, and contrary cases on the other, one commentator has pointed out that “those cases [finding no coverage] involved the older policy language while the current policy specifically provides that the ‘own work’ exclusion does not apply ‘if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.’” 2 Jeffrey W. Stempel, Law of Insurance Contract Disputes, § 14.13 [a]. 14 – 132.
This interpretation of the subcontractor exception to the business risk exclusion does not “create coverage” where none existed before, as American Family contends. There is coverage under the insuring agreement’s initial coverage grant. Coverage would be excluded by the business risk exclusionary language, except that the subcontractor exception to the business risk exclusion applies, which operates to restore the otherwise excluded coverage [emphasis added].
 Lombard’s argument against the “interpretative aid” approach centres on the policy considerations that inform the “general principle”. In short, Lombard maintains that the approach taken by the application judge converts CGL policies into performance bonds, something they were never meant to be. According to Lombard, such an approach provides general contractors, like the respondents, with a windfall. For low premiums, they are able to obtain insurance that permits and indeed encourages them to hire inexpensive subcontractors, comforted in the knowledge that they will be fully indemnified if the subcontractors do their work badly.
 While I acknowledge Lombard’s concerns, they do not alter my view that the “interpretative aid” approach is the correct one. My reasons are threefold.
 First, I find persuasive the response of the Court of Appeals of Minnesota in O’Shaughnessy v. Smuckler Corp., supra, at p. 102, to this issue:
The rationale behind the Business Risk Doctrine has been articulated as follows:
If insurance proceeds could be used to pay for the repairing and/or replacing of poorly constructed products, a contractor or subcontractor could receive initial payment for its work and then receive subsequent payment from the insurance company to repair and replace it. Equally repugnant on policy grounds is the notion that the presence of insurance obviates the obligation to perform the job initially in a workmanlike manner. Knutson Construction Co. v. St. Paul Fire & Marine Insurance Co., 396 N.W. 2d 229 at 235 (Minn. Sup. Ct. 1986) (Quoting Centex Homes Corp. v. Prestressed Systems, 444 So. 2d 66 at 66 – 67 (Fla. App. 1984)).
We note that this rationale is less applicable to a claim by a general contractor for the defective work of its subcontractor. A general contractor has minimal control over the work of its subcontractors by definition, and the fact that the general contractor receives coverage will not relieve the subcontractor of ultimate liability for unworkmanlike or defective work. In such a case, an insurer will have subrogation rights against the subcontractor who performed the defective work. Presumably, the Business Risk Doctrine will preclude the subcontractor from recovering from its own insurer. Thus, the goal of the Business Risk Doctrine would still be achieved because ultimate responsibility for poor workmanship would lie with the one who performed it [emphasis added].
 Second, Lombard’s concerns fail to account for practical business realities. General contractors who make a habit of hiring incompetent subcontractors will soon find themselves out of work. The marketplace can be trusted to look after unscrupulous general contractors who, for the sake of a fast dollar, are prepared to risk their reputation by providing defective work product on a regular basis.
 Third, and most important, if insurance companies do not wish to indemnify general contractors for the shortcomings of their subcontractors, they need only say so in clear and unambiguous language in their policies. As the respondents have pointed out, standard industry endorsements designed to accomplish just that have been available since December 1, 2001. The insurance industry drafted those endorsements to remove coverage for faulty work by subcontractors. (See Wielinski, “CGL Coverage for Defective Workmanship”, supra, at pp. 53 – 54). Lombard does not challenge this. And yet, for reasons known only to itself, it has not chosen to incorporate these endorsements into its CGL policies.
 Progressive argues that I should not depart from Bridgewood, unless there is binding authority which prevents me from following that decision. Progressive submits that it is apparent that the subcontractor exception argument was not advanced in Swagger and that the exception to the work exclusion was not considered. Progressive asserts that on this basis alone the decision in Swagger is distinguishable from the case at bar. According to Progressive, the subcontractor exception should be read so as to permit a distinction to be made between the work done directly by the general contractor and that done on behalf of the general contractor by a subcontractor. Progressive asserts that damage caused to another part of the building by a subcontractor’s work is covered under the terms of the insurance contracts. For example, if a window subcontractor installs windows incorrectly and they permit water to leak into the interior components of the building and cause damage, then the general contractor is covered in respect of the damage to the interior of the building.
 While the argument advanced by Progressive is compelling, I find that I am nevertheless bound by Swagger and that based on the analysis and result in Swagger, Progressive’s application must be dismissed.
 In Swagger, N. Smith J. held that the insured had not presented a claim to the insurers which made it past the initial coverage grant because there was no “property damage” alleged in the underlying pleadings. Furthermore, he held that even if there was an iota of “property damage” alleged, it did not constitute an “occurrence” under the policy at issue.
 In Swagger, and in the case at bar, the Court’s concern relates to underlying actions in which claims are made against a building contractor for defects and damage to the very building constructed by the contractor. But the Court in Swagger held that the building represents a single integrated whole and, on the authority of Winnipeg Condominium, supra, and Bird Construction Co. v. Allstate Insurance Co. of Canada,  M.J. No. 363 (C.A.), it is improper to subdivide the work into parts. Indeed, the underlying actions in the case at bar simply allege an underlying deficient structure which, as Lombard asserts, funnels directly into the court’s reasoning in Winnipeg Condominium, supra.
 In Swagger, the Court stated the following with respect to “property damage”:
 …It is important to emphasize that the damage alleged is damage to the very building that Swagger contracted to build. There is no allegation of personal injury to anyone, or any allegation of damage to property other than the Forest Science Centre.
 …The question is whether there can be any notional division of Swagger’s work into separate parts so that a defect in one part can be said to cause property damage to another.
 …The effect of Winnipeg Condominium and Bird Construction is that, subject to one possible exception that I will discuss below, this basic principle can not be avoided by an artificial division of the insured’s work into component parts.
 In essence, then, an insured contractor’s work cannot be subdivided into component parts, on the basis of Winnipeg Condominium, supra, and Bird Construction, supra. Where a building represents one integrated whole, it is improper to look to one part as a cause of damage to another part. In the instant case, the underlying actions simply claim for the cost of remediating parts of the unified whole and not “property damage”.
 As earlier mentioned, the pleadings in Swagger simply allege “defects and ongoing damage” to the very building that the insured contractor had contracted to build. In the result, N. Smith J. refused to find the existence of an “occurrence”. Citing Harbour Machine Ltd. v. Guardian Insurance Company of Canada (1985), 60 B.C.L.R. 360 (C.A.) (“Harbour Machine Ltd.”), he explained that, “the improper installation and workmanship could not, in itself, be called either property damage or an accident or occurrence within the meaning of the insurance policy.”
A review of the pleadings in the underlying actions clearly demonstrates, as Lombard contends, that the allegations were made in the context of one entire and indivisibly defective work. I refer, for example, to the portions of the Burlington Heights pleadings, excerpted above at para. 10 of this judgment.
 In summary then, when the Court is considering a building which is an integrated whole, and where the entire structure is allegedly defective, it is entirely improper to artificially divide it and claim that one part of the work has caused damage to some other part of the work. The pleadings in the underlying actions create no division, nor can the Court create such an artificial division for insurance cover purposes. Moreover, the claims in the underlying actions seek to recover costs to remediate allegedly faulty buildings that failed to keep out the elements and such allegations do not qualify as an “occurrence” under the insurance contracts. On the basis of the analysis and result in Swagger, there has been no “accident”.
 Thus, I find that on the basis of the holding in Swagger, the allegations in the underlying actions do not allege “property damage” (or an “occurrence” or “accident”) as those terms are used in the insurance contracts. Accordingly, coverage under the insurance contracts cannot be triggered and Lombard is under no duty to defend Progressive.
 Finally, I find that it is improper to look to the exclusions and exceptions to exclusions to find coverage where none exists in the first place. This is because, as Lombard argues, the operative coverage clause in the insurance contracts acts as a condition precedent to determine coverage. The exclusion clauses then act to take coverage away where it might otherwise exist. In this regard, N. Smith J. explained, as follows:
 The court must first determine whether the claim falls within the insuring agreement contained in the policy. If it does not, that is the end of the matter. If it does, it is necessary to determine if it is excluded by any of the exclusion clauses in the policy. If not, the final question is whether there is a possibility that the claim will succeed at trial: see Ellett Industries Ltd. v. Laurentian P & C Insurance Co. (1996), 17 B.C.L.R. (3d) 201, 34 C.C.L.I. (2d) 294.
 Thus, only if Progressive’s claim falls within the operative coverage clause can the claim fall within the scope of the insurance contracts. Only then is it proper to consider exclusions and determine whether the claim is “nevertheless excluded”: See Ramsay v. Voyageur Insurance Co.,  B.C.J. No. 1187 (C.A.).
 Moreover, although I am mindful that the Court in Bridgewood did look to exclusion clauses to find coverage in circumstances which bear a similarity to the terms of the policies in Swagger and the case at bar, I note that, the Court did not refer to Swagger. In my opinion, and with great respect, I do not consider Bridgewood to settle the law on this issue in this province. Furthermore, to the extent that the result in Bridgewood turns on a consideration of redundancy, I agree with Lombard that it is doubtful whether, at least in this province, consideration of redundancy has a proper, or at best, any significant place in determining whether coverage extends under an insurance policy: See Harbour Machine Ltd., supra.
 Progressive’s application is dismissed.
“B.I. Cohen, J.”
The Honourable Mr. Justice B.I. Cohen