Dylan Cox June 28 2022 Insurer faces increased exposure in pandemic coverage claim Theall Group LLP | Insurance - Canada Dylan Cox Insurance IntroductionFactsDecisionCommentIntroductionIn 202135 Ontario Inc v Northbridge General Insurance Corporation,(1) the Ontario Court of Appeal (ONCA) ruled for the insured on an issue raised by its claim for business interruption losses caused by the covid-19 pandemic. This could be the first decision by any Canadian appellate court dealing with these kinds of claims. However, it did not shed any light on the principles a court might apply to determine when covid-19 is a covered event, because the insurer did not dispute that point. The sole issue was whether the limit of liability applied per location or to all locations.FactsThe insureds operated day-care centres at seven locations. Following the outbreak of covid-19, those centres were closed for about three months. The insureds suffered a loss of income, and they made a claim with their insurer, Northbridge. The policy's indemnity agreement covered losses of "business income" resulting from interruption of operations at a "scheduled risk location", due to a "pandemic outbreak" (the "indemnity clause"). The limitation of liability clause stated that the most Northbridge would pay for pandemic coverage was C$50,000 "or as otherwise indicated on the 'schedule'" (the "limitation of liability"). The "schedule" was a series of documents attached to the policy. A separate page was issued for each of the seven locations, listing limits of liability, deductibles and premiums. The schedule did not include a different monetary limit for business interruption losses.The insureds applied to the Ontario Superior Court of Justice (SCJ) for a determination of their rights under the policy. The sole question for the Court was whether the policy limited Northbridge's liability at C$50,000 per location or C$50,000 for all locations.DecisionThe SCJ found for the insureds, concluding that the C$50,000 limit was per location. Read on its own, the limitation of liability was ambiguous, but that ambiguity was resolved once the clause was interpreted alongside the rest of the policy.Northbridge appealed, arguing the SCJ interpreted the limitation of liability incorrectly. Northbridge claimed that the C$50,000 was an aggregate limit, meaning its liability for all losses at all day-care centre locations could never exceed C$50,000.Although the ONCA agreed that the standard of review on appeal was correctness, it found that the SCJ had interpreted the policy correctly. This policy contained seven schedules – one for each day-care centre location. Accordingly, the reference in the limitation of liability to "the schedule" (not the schedules) clearly confirmed that the C$50,000 limit was a "per location" limit.The indemnity clause also supported the SCJ's interpretation. It covered loss of income caused by a pandemic outbreak "at your 'scheduled risk location'". Although the policy did not state "each of your scheduled risk locations", the ONCA found that the word "each" was unnecessary. On its own, the reference to "location" in the singular indicated the limitation of liability and other policy terms were intended to apply separately to each location. Other policy terms, such as a blanket limit clause, also demonstrated that the policy insured each location independently. Northbridge argued that the indemnity clause and limitation of liability should be read separately. The ONCA rejected this, reiterating that insurance policies are to be read as a whole.Finally, Northbridge assessed a separate premium for each location, which again indicated that limits applied on a per-location basis.CommentIn this case, the ONCA reiterated that to interpret an insurance policy, the Court must carefully read it as a whole. The wording used and the structure of the coverage schedule (ie, separate pages and premiums for each location) meant Northbridge had not limited its obligations to C$50,000 for all locations.For further information on this topic please contact Dylan Cox at Theall Group LLP by telephone (+1 416 304 0115) or email ([email protected]). The Theall Group LLP website can be accessed at www.theallgroup.com.Endnotes(1) 2022 ONCA 304.