All-Risk Policy Fails To Protect Against COVID-19 Related Losses: Ontario

• Law Firm: Alexander Holburn Beaudin + Lang LLP
• Subject Matter: Insurance, Coronavirus (COVID-19), Insurance Laws and Products, Government Measures, Insurance Claims
• Author: Johann Annisette
• Published date: 31 March 2023

Courts are continuing to deal with the novel insurance claims resulting from COVID-19 related losses. In Sir Corp v. Aviva, 2022 ONSC 6929, Justice Ramsay of the Ontario Superior Court of Justice recently considered whether an "all-risk" insurance policy, insuring against direct physical loss or damage to property, would cover the losses of a restaurant operator that suffered significant "food and beverage spoilage" due to government mandated COVID-19 regulations.

PLAINTIFF'S POSITION

The plaintiff, SIR Corp. Ltd. is a food chain operator which consists of 60 restaurants within Canada, including popular franchises such as Jack Astor's and Scaddabush. Aviva insured SIR Corp under an "all risks" policy which provided coverage of "all risks of direct physical loss or damage to property of the insured, except as excluded." In addition to the insuring agreement, the policy provided a number of extensions that plaintiff relied upon, including the following:

Extension 14 - Civil or Military Authority: This Policy insures loss, as covered herein, which is sustained by the Insured as a result of damage caused by order of civil or military authority to retard or prevent a conflagration of other catastrophe.

SIR Corp took the position that this extension should provide it with coverage for the losses it suffered from having to close down its in person dining as a result of government mandates. In particular, SIR Corp stated that the government mandates were indeed "civil authority measures" to retard or prevent a "catastrophe" - the COVID-19 pandemic - and as such, should be covered under the policy.

SIR Corp also relied on Aviva's post-conduct actions in support of its position, noting that in its policy renewal, Aviva included an explicit exclusion for contagious diseases, which had not been incorporated into the subject policy. SIR Corp argued that by incorporating this exclusion in its renewal policy, Aviva was inadvertently admitting that contagious diseases were not excluded in the subject prior policy.

Of note, SIR Corp conceded that the policy language was unambiguous.

THE INSURER'S POSITION

Aviva agreed that the policy language was unambiguous and, on that basis, submitted that it was subject to a plain language interpretation.

The subject policy was a commercial property insurance policy structured around the concept of an "insured peril", which covers the risk of direct physical loss or damage to property.

It was Aviva's position that, in order to...