Business disruption connected to COVID-19 pandemic closures has driven a spate of hefty business interruption insurance class actions and individual claims against insurers, with litigation set to continue through 2024.
Canadian judges have so far largely found in insurers’ favour, but with cases still snaking their way through the courts, a subset of policyholders may be hoping that there is still all to play for into 2024 and beyond.
“At the end of the day, it’s always going to be based on the policy wording, the fact pattern, and whether or not coverage is going to be allowed for that particular policy,” said Rory Love (pictured), lawyer at Strigberger Brown Armstrong (SBA). “Yet, the cases are still coming in – there are the class actions, which are the bigger ones, but there are certainly a number of separate actions that aren’t part of any classes that may result in in some favourable decisions for the plaintiffs.”
Workman Optometry v Certas Home and Auto Insurance is among big class actions to watch this year, with a group of small and medium sized businesses having sought to claim against 14 insurers and certain underwriters at Lloyd’s.
The Ontario Superior Court of Justice found last year that COVID-19 could not be said to have caused physical loss or damage to property, meaning the businesses would not be covered under the business interruption aspect of their policies.
The businesses will this year have their chance to argue for the overturning of this decision at an appeal, slated for June 12.
Should the Workman appeal go insurers’ way, this may not stem the tide of further litigation.
“As each policy will have its own wording and verbiage, I do not think Workman will stop other policyholders advancing actions,” Love, who spoke during an Insurance Business interview on COVID-related business interruption claims, said.
Further, other facets of the Workman class action are still potentially set to play out.
“The Workman decision only touched on the business interruption aspect of that case,” Love said. “It didn’t touch on the bad faith, breach of contract, Competition Act aspects of that, so there’s still a number of lawsuits that potentially will result from these class actions.”
Nordik Windows’ $300 million class action against Aviva is also ongoing. The case hit delays when, in 2021, Justice Edward Belobaba recused himself due to bias perceptions.
The Aviva-focused class action was re-certified last March, with three new representative plaintiffs – Cash and Carry, Hangar9 Studios and Real Food for Real Kids – added to the roster.
More than 44,000 policies were in place in March 2020, when the World Health Organization (WHO) declared COVID-19 a pandemic, Aviva confirmed to the court in January. Nordik Windows class action contact collection and mailing efforts are expected to take a matter of months, according to court documents.
Aviva also faces class actions from 625 Royal Canadian Legion branches, which have collectively sought around $20 million, and around 250 Ontario denturists.
In Quebec, nine class actions sprung up against various insurers in 2020 from groups of dentists and restaurants, though some have since been kiboshed by the courts, stayed or withdrawn.
Meanwhile, individual lawsuits are still making their way through the system.
“Anticipate COVID-19 related lawsuits to continue to flow through the courts for the foreseeable future,” Love said.
SIR Corp, which operates around 60 restaurants, had its appeal quashed by the Ontario Court of Appeal last December.
The restaurant group had sought to claim on its Aviva policy for damage to food and beer stock in addition to business losses, having argued that COVID was tantamount to a “catastrophe”.
The insurer had previously paid out for a SIR Corp St John’s restaurant’s food spoilage and loss claim following a 2020 state of emergency declaration amid hurricane-force winds and snowfall and therefore should do so for the COVID claim, the policyholder had sought to argue.
“[The SIR Corp decision] continues to emphasize the Canadian courts’ position that unless there is direct and physical loss in the property, the courts aren’t going to confirm any payments for business interruption,” Love said.
Daycare group Helping Hands’ case against Northbridge has proved an exception. The daycare group had a specific pandemic coverage provision, which was triggered. Northbridge had contended that the group was entitled to $50,000 for pandemic business loss in aggregate for all its locations, but the Ontario appeals court confirmed that this was the limit per location in a 2022 judgment.
“[Helping Hands] was distinguishable because of the verbiage in the policy – in that particular case, it did have wording as it relates to pandemics,” Love said.
Insurers have set out that direct physical loss or damage must have occurred to property for the business interruption aspect of all-risks policies to pay out, and this is a key reason behind many claims having been denied.
They have further argued that policies were never intended to respond to pandemics.
For policyholders without specific pandemic provisions, much had hinged on the 2021 appeal surrounding MDS’ claim against Factory Mutual Insurance Company (FM Global), a case that involved nuclear disruption rather than COVID.
MDS unsuccessfully sought to claim under an all-risks policy for loss of profits following a radioactive water leak caused by unexpected corrosion at a nuclear reactor owned by supplier business Atomic Energy of Canada (AECL), with the Ontario appeals court backing the insurer.
“There was a huge amount of concern amongst insurers that there was going to be floodgates of those decisions,” Love said. “However, that decision was appealed and it was deemed that [there was no] direct physical loss or damage – as such, they kind of nipped that in the bud.”
Will the courts continue to back insurers on COVID business interruption insurance claims into 2024? Share your predictions in the comments.
