An insured’s business interruption loss claim is not subject to a rolling limitation period as an insurer does not have a recurring contractual obligation in respect of this claim.

Insurance law – Commercial general liability insurance – Business interruption insurance – Limitation of actions – Exclusions

Marvelous Mario’s Inc. v. St. Paul Fire and Marine Insurance Co., [2019] O.J. No. 4005, 2019 ONCA 635, Ontario Court of Appeal, July 31, 2019, C.W. Hourigan D. Paciocco and J.M. Fairburn JJ.A.

The insureds sought coverage under a commercial insurance policy issued for losses arising out of an Indian meal moth infestation to a plant that produced baked goods and cereal bars. The insureds commenced two actions against the insurer. In the first action, the insureds sought indemnification for lost rental income and a bonus of $950,000 alleged to be owing to one of the insureds (the “First Action”). In the second action, the insureds sought indemnification for alleged theft or wrongful handling of certain equipment by the insureds’ receiver and business interruption losses as a result of this (the “Second Action”).

The Court upheld the trial judge’s dismissal of the First Action. The policy provided coverage for direct loss resulting from any peril not specifically excluded. The trial judge found that the infestation was the covered peril, but the losses claimed were indirect losses caused by a failure to meet financial obligations and not because of the infestation. The Court agreed with the trial judge and dismissed this appeal.

The Court upheld the trial judge’s dismissal of the theft or wrongful handling claim and allowed the insurer’s cross-appeal of the business interruption claim in the Second Action. The policy stipulates a one-year contractual limitation period for an insured to bring an action against the insurer for recovery of any claim. The insureds commenced the Second Action two years after the alleged theft or wrongful handling of equipment by the insureds’ receiver. The Court upheld the trial judge’s holding that this claim was time-barred by the policy’s limitation period.

The Court of Appeal agreed with the insurer that the trial judge was wrong in finding that the business interruption claim in the Second Action was subject to a rolling limitation period. The Court held a rolling limitation period did not apply to business interruption claims because the insurer did not have a recurring contractual obligation. The insurer was obliged to pay business interruption losses in their totality, subject to the policy’s limits, not to make recurring payments. The insureds knew as of the date of the alleged theft or wrongful handling of equipment that they no longer had the assets under their control and this would lead to business interruption losses. They were obliged to commence a business interruption claim within one year of this date. Therefore, the insureds’ business interruption claim was time-barred.