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SCC Decision: November 21, 2008

Canadian National Railway Co. v. Royal and Sun Alliance Insurance Co. of Canada, 2008 SCC 66
Click here to link to the full judgment. 
(Insurance / "All risk" insurance)
An insurance policy for a complex tunnel project covered all risks of direct physical loss or damage, but excluded faulty or improper design.  The project required a tunnel boring machine to be specially designed and built to dig the tunnel.  Despite meticulous preparation, the machine became contaminated, and added significantly to the length and cost of the project.  The insurers denied coverage based on the faulty or improper design exclusion.  The Court found that since the risk described in the insurance was broadly defined, and the engineers addressed that risk with diligence and state-of-the-art expertise, the faulty or improper design exclusion did not apply.  Failure is not the same thing as fault or impropriety.
Majority/Dissent: 4/3

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