A claim for damages for mental distress on behalf of officers of a corporation was plead in an action for benefits pursuant to a policy of business interruption insurance

On an application to amend the Statement of Claim of a corporate insured in an action alleging bad faith against the Defendant Insurer, the Court permitted an informal admission to be withdrawn and permitted the amendment seeking business interruptions losses since this would not cause prejudice to the Defendant Insurer. The corporate Plaintiff was also permitted to amend the Statement of Claim to seek damages for mental distress on behalf of the officers of the Plaintiff corporation despite the limited scope of coverage extended to officers and shareholders under the policy.

539091 Ontario Ltd. (c.o.b. Len’s R.V. Sales) v. Allianz Insurance Co. of Canada, [2007] O.J. No. 2428, Ontario Superior Court of Justice, H.M. Pierce J., June 14, 2007

The Plaintiff brought an application to amend its Statement of Claim seeking damages for business interruption; mental distress on behalf of the corporate directors; and punitive damages for loss of reputation and loss of business incurred by the Plaintiff corporation. In the underlying action, the Plaintiff, 539091 Ontario Ltd. (c.o.b. Len’s R.V. Sales) (“Len’s R.V. Sales”) sued its insurer, Allianz Insurance Co. of Canada (“Allianz”), alleging bad faith after a fire broke out at the corporate premises. Mr. and Mrs. Ager were the shareholders and directors of the Plaintiff Len’s R.V. Sales.

The Defendant, Allianz, opposed the amendments on the following grounds: counsel for the Plaintiff had already confirmed there would be no claim for business interruption loss which constituted an admission that should not now be withdrawn by the amendment; the corporation’s directors were not named insureds and therefore did not have any claim under the insurance policy; and a claim for punitive damages had already been pleaded in the Statement of Claim.

The first issue was whether the statement by Plaintiff’s counsel that there would be no claim for business interruption loss constituted an admission. Plaintiff’s counsel submitted the statement, contained in a letter following a request made at an examination for discovery, was not an admission as it was not made by Mr. and Mrs. Ager, the company’s shareholders. The Court found that the solicitor’s statement constituted an informal admission that was not binding on the Plaintiff who gave it. The Defendant would not suffer prejudice if the admission was withdrawn and the amendment was permitted.

The second amendment sought was to add a claim for damages for the mental distress of Mr. and Mrs. Ager caused by the nature of the claim and the handling of it by the Defendant insurer. The Defendant argued that this claim was not tenable at law because the shareholders were not named as insureds under the Policy. The Court found that Mr. and Mrs. Agers were not named insureds under the Policy. However, it could not be said that there was no contractual nexus between the Agers and the insurer given the limited scope of coverage extended to officers and shareholders. Whether it is sufficient to ground the duty of care is an issue that should be left for trial to be decided on a full evidentiary record.

 Accordingly, the Plaintiff was granted leave to amend its Statement of Claim to seek damages for mental distress on behalf of the Agers as officers of the Plaintiff corporation.

This case was originally summarized by Steve Vorbrodt and originally edited by David W. Pilley.

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