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HomeBusinessExclusive: SNC-Lavalin sues insurance companies to recoup Evergreen Line delay losses

Exclusive: SNC-Lavalin sues insurance companies to recoup Evergreen Line delay losses

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Bob Mackin

An SNC-Lavalin company is suing a consortium of major insurers after suffering almost $29 million in losses from the sinkholes and tunnel boring machine stoppages that delayed opening of the Evergreen Line SkyTrain extension.

The $1.43 billion-budgeted, 11-kilometre Millennium Line extension in the Tri-Cities opened six months late in December 2016 and includes a 2 km bored tunnel between Burquitlam and Port Moody.

Additional Evergreen Line work to fix sinkholes by Seaview in Port Moody in October 2015. (Mackin)

Evergreen Rapid Transit Holdings Inc. filed a statement of claim on Nov. 1 in B.C. Supreme Court. The filing names divisions of Liberty Mutual, Lloyd’s, Zurich, Axa, Sun Alliance and AIG Canada. They underwrote the project and issued a builders all risk insurance policy from December 2010 to December 2016. The court document says the policy insures against all risks of direct physical loss or damage to property insured. SNC-Lavalin’s EGRT Construction consortium is the first named insured; SNC-Lavalin and others are additional insureds.

The first of three major sinkholes that delayed the project happened in late 2014 during scheduled maintenance work under Chateau Place. Two other sinkholes occurred in April 2015 and June 2015. There was also damage in March 2015 to the tunnel boring machine, which was nicknamed Alice, for Canada’s first female geologist Alice Wilson.

In August 2015, SNC-Lavalin disclosed to investors that it had experienced a $27 million engineering and construction division loss. The company blamed “challenging soil conditions relating to the tunnel portion of a mass transit project.” In early 2016, SNC-Lavalin and the Ministry of Transportation were in mediation about construction costs.

When SNC-Lavalin was contracted by the Ministry of Transportation and Infrastructure in 2012, it agreed to take the geotechnical risk under the $889 million fixed-price contract. A report by Golder Associates in 2011 warned of variable soil conditions, clay, minerals, boulders and groundwater on the tunnel route. 

Evergreen Line’s Alice the tunnel boring machine on the Nov. 27, 2015 breakthrough day (Mackin)

EGRT notified the insurers of the claims in July 2015. The lawsuit says meetings and correspondence between the parties happened periodically through the end of October 2019, but the company could not convince the insurers to pay under the policy. The insurers, the court filing said, deemed the company eligible for partial coverage on the tunnel boring machine damage, but they denied coverage for the sinkholes.

The statement of claim, filed by lawyer David Miachika of Borden Ladner Gervais, said: “EGRT provided prompt notice of the TBM damage and excavation face failures, delivered interim proofs of loss requesting coverage for its losses, submitted all requested and supporting documents, and met with the adjuster and its consultants on several occasions to explain the claims under the policy for the insured loss. The insurers have acknowledged there is coverage for the TBM damage and for portion fo the insured loss; however, to date, the insurers have not made any payments or interim payments to EGRT.”

EGRT is claiming $28.6 million in damages. It also wants a judge to declare it is entitled to coverage under the insurance policy, without having to pay the deductible. 

None of the claims has been proven in court and the insurers have yet to file their response.

SNC-Lavalin, which is facing a corruption and bribery trial in Quebec, withdrew in July from bidding on the $2.83 billion Broadway Subway. 

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