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Coquitlam school district takes Swiss insurer to court in troubled $50M school project

If the Swiss insurance company fails to make over $260,000 in top-up payments to the SD43, the current contractor may be forced to cease work on the project, leading to "significant losses and damages as a result,” wrote an attorney for SD43 in the petition to the court 
Centennial parents
As the finances of the Centennial school project move through the courts, parents, including Tony Oljaca and Giulio Caravatta seen here in this file photo, are upset that it's taken so long to build a neighbourhood learning centre and artificial turf field, both of which should have been built by now.

Coquitlam’s School District 43 has filed a petition to seek payments from a Swiss insurance company it claims owes more than $265,000 in top-up payments needed to keep a new contractor on the job after enduring years of shoddy and delayed work at a $50-million high school replacement project.

Initially contracting Envoy Construction Services Ltd. in 2013, the Centennial Secondary Replacement School project was to become part of SD43’s modern face, while providing space for 1,400 students. 

Around that same time, the district negotiated with Zurich Insurance Company Ltd., from which it eventually secured a performance bond, and a labour and materials payment bond, each covering half of the project.

The substantial completion date was set for May 8, 2017. But while the first phase of the construction was completed in time for the 2017-18 school year — according to a petition filed by SD43 in B.C. Supreme Court — the project was plagued with delays.

Phase two included the destruction of the old school and the building of a new neighbourhood learning centre (NLC), which is meant to house a new gym, weight room and classrooms, and was designed to double as a space for community services like a youth and immigration service hub.

But since the commencement of the project, “Envoy repeatedly failed to complete the work” in a timely manner and as laid out in the construction contract, noted the petition.

After Envoy failed to pay numerous subcontractors and material suppliers working on the project, the companies registered claims of builder’s lien against title to the lands and commenced action against Envoy and SD43, reads the court document.  

On April 2, 2019, the school board submitted a written notice to Envoy that it would terminate the contractor’s right to continue work on the project. Under the terms of the performance bond, Zurich Insurance arranged for a replacement contractor to complete the work. On Sept. 6, 2019, Carver Construction Ltd. was contracted to finish the second phase of the project, which included demolition of the old school, construction of the NLC building and the building of a new field in partnership with the city of Coquitlam.

As of January 2021, an SD43 update on the school build reported roofing work on the NLC building is continuing “as weather permits,” and windows and curtain wall frame installations “are progressing.” 

The new $3 million turf field, meanwhile, remains in the design phase, with the city slated to release detailed plans by the spring.

But even as work progressed with the new contractor into the fall, the numbers didn’t add up. On Oct. 20, 2020, the school board wrote to Carver Construction stating SD43 anticipated it wouldn’t have enough contract funds to pay for the next stage of the work. 

On Dec. 7, SD43 paid Carver Construction $349,923.33 plus GST for its work in October, but still owes another $265,147.42 plus GST to the company for past work. 

SD43 claims Zurich Insurance is obligated to pay the balance to Carver through a top-up payment, and “to advance further Top-up payments going forward,” so the construction company can continue to work on the school.

In addition, SD43 said in the court filing it is currently administering lien holdback funds on the construction project — a pool of money from a loan kept in reserve to provide security and administer claims to contractors, subcontractors, workers and suppliers — and that the insurance company would need to pay into the fund going forward.

Meanwhile, Envoy and SD43 remain locked in a legal battle after the construction company filed court action to enforce the lien and SD43 filed a counterclaim seeking damages for breaking of the construction contract and alleging various defects and deficiencies in Envoy’s work. 

On Dec. 23, Carver Construction, the new contractor, advised the school board and Zurich Insurance it needed a “clear path forward or timeline for payment of the overdue balance of the October Progress Payment and future payments by no later than Jan. 4, 2021” or it too “would consider its options to rectify the situation.”

In a letter dated Jan. 7, 2021, lawyers for the school board “again demanded payment from Zurich” or it would take the case to court. 

“Zurich has failed, refused or neglected to make the Top-Up Payment to the School Board, in part or at all, despite demands made,” write lawyers for SD43 in the court petition.

By refusing to make the top-up payment, SD43 claims the insurance company is in breach of the Completion Agreement contract and “in breach of its duty of good faith contractual performance.”

“If Zurich fails to make the Top-Up Payment to the School Board, thereby causing the Completion Contractor to cease work on the Project, the School Board will incur significant losses and damages as a result,” writes an attorney for SD43 in the petition to the court. 

A spokesperson for school district declined to comment on the case, citing advice from counsel, and a spokesperson for Zurich Insurance did not answer a request to comment on SD43’s claims.

None of SD43’s claims against Zurich Insurance have been tested in court.

— With files from Diane Strandberg