Court makes ruling on pandemic coverage

Canadian insurer appealed court's initial decision

Court makes ruling on pandemic coverage

Northbridge General Insurance Corporation has been ordered to pay $350,000 in coverage for the losses a daycare business suffered due to the pandemic lockdown restrictions.

The Ontario Court of Appeal dismissed Northbridge’s appeal following its decision in the case 202135 Ontario Inc. v. Northbridge General Insurance Corporation, 2022 ONCA 304. The court had ruled that the “limit of liability for the coverage extension” is “unambiguous when read in the context of the indemnity agreement and the policy as a whole,” and it applied to each of the daycare locations.

During the case, the court heard that the respondents operate seven daycare centres called Helping Hands, which were “insured through a Business Choice Policy” with Northbridge. Said policy would provide coverage from February 2020 to February 2021, and “included a special endorsement to cover business losses arising from a pandemic,” court documents said.

During the onset of the COVID-19 pandemic, the seven locations were closed from March to June 2020, court documents noted. It was then that the respondents made a “claim for business losses under the pandemic coverage provision,” seeking $50,000 for each of the seven locations, for a total of $350,000.

Northbridge had contested that the “limit of liability was $50,000 in aggregate for all insured locations.” This led the respondents to launch a court application for a proper interpretation of the limit of liability clause.

While the Ontario Superior Court of Justice noted that the business loss part of the original policy did not include coverage in the event of a pandemic, it did find that the coverage was added through a special endorsement called the A.D.C.O. Program Endorsement. As part of an extension of coverage for outbreak and negative publicity, the endorsement added coverage for a “‘pandemic outbreak’ declared by Civil Authority or ‘public health authority,’” the court said.

Justice Susan Vella said that limit of the liability clause under the extended coverage is “ambiguous,” and that it could apply either to each location separately or for all the locations. She ultimately concluded that the $50,000 limit applied to each location.

Northbridge appealed the case, saying that Justice Vella “erred in law by finding that the limit of liability clause is ambiguous and by resolving that ambiguity in favour of the respondents,” court documents said. The insurer also contested that “the limit of liability clause is clear and unambiguous when read on its own, and that it means that the total maximum coverage is $50,000 per policy period in aggregate for all seven locations.”

In a decision released April 19, Justice Kathryn Feldman of the Ontario Court of Appeal ruled that the internal wording of the limit of liability clause is unambiguous, The Lawyer’s Daily reported. She said that when “looking only at the words of the limit of liability clause itself, the maximum amount is stated to be ‘or as otherwise indicated on the ‘schedule’.” The policy had seven separate schedules, one for each risk location, and the reference to the schedule on the policy endorsement would mean counting each of the seven schedules, the judge ruled.

Feldman also turned down Northbridge’s interpretation that the definition “defines the singular to include the plural, that they are therefore interchangeable.”

“The definition merely explains that one looks to the schedule to find the scheduled risk location or locations, whichever may be applicable,” explained Feldman. “It does not mean that the singular and plural forms of ‘scheduled risk location’ are to be interpreted interchangeably when used in the policy and related endorsements.”

Read more: Calgary Flames sues six insurers for $125 million over pandemic damages

In March, another lawsuit was filed against Northbridge Insurance – with companies Westport Insurance, RSA, Aviva, and Can-Sure Underwriting also named as defendants. The plaintiff was none other than the professional ice hockey team Calgary Flames, which had filed a $125 million lawsuit claiming that the defendants had denied its business loss claims related to the pandemic.

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