The Insured operator of a towing facility (“Diamond Auto”) was not entitled to recover damages for business interruption loss after a fire where the evidence was insufficient to support this claim

Diamond Auto Collision Inc. v. Economical Insurance Group, [2005] O.J. No. 2858, Ontario Superior Court of Justice

Diamond Auto operated a towing facility in Bolton, Ontario. On October 5, 2000, a fire occurred at Diamond Auto and two trailers used to store automobile and truck parts, tools and towing equipment were destroyed. Diamond Auto was insured under a policy issued by the Economical Insurance Group (“Economical”) and the policy included coverage for business interruption. Diamond Auto and Economical were able to reach a settlement on the value of the claim for the loss of the two trailers and their contents. However, they were unable to settle on the value of the business interruption/loss of income claim. Diamond Auto commenced an action against Economical to recover these damages.

By the time the matter reached trial, it was undisputed that the fire was a result of arson. A disgruntled customer started the fire. No one from Economical involved in the investigation of the loss suggested that Diamond Auto or its employees were involved in starting the fire.

The stated basis for Diamond Auto’s claim for entitlement to coverage for loss of business income was that the allegations of arson and rumours that spread within the towing industry that Diamond Auto was involved in the arson caused a significant interruption in the flow of business. Diamond Auto claimed that this interruption was a direct result of the fire.

The court reviewed the evidence and noted that Diamond Auto was considered one of the industry’s leaders. Diamond Auto conceded that by the time of the trial, the business had made a full recovery. The court reviewed the economic reports put forward on behalf of Diamond Auto and found that there was no credible evidence from either Diamond Auto, its employees or its experts to establish that there was any economic loss during the indemnity period of one year from the date of the fire. In fact, the information submitted indicated that the combined sales figures of Diamond Auto during the period demonstrated remarkable growth. The court held that Diamond Auto had not proven on a balance of probabilities that they had sustained any business interruption loss and the action was dismissed.

To stay current with the new case law and emerging legal issues in this area, subscribe here.