Limit of liability for business losses applies to each business location

Insurance law – Business interruption insurance – Extensions – Interpretation of policy – Contra proferentum rule – Practice – Appeals – Standard of review

202135 Ontario Inc. (c.o.b. Helping Hands Daycare) v. Northbridge General Insurance Corp., [2022] O.J. No. 1844, 2022 ONCA 304, Ontario Court of Appeal, April 19, 2022, K.N. Feldman, S.E. Pepall and L.G. Favrreau JJ.A.

The insured operated seven daycare centres.  The insured procured insurance for the business which included a special endorsement to cover business losses arising from a pandemic.  All seven locations were closed between March 2020 and June 2020 due to the COVID-19 pandemic.  The insured made a claim under the policy for losses arising from the closures.

The policy contained a limit of liability of $50,000 in respect of this extension of coverage.  The issue was whether this limit of liability applied across all seven locations or in respect of each location.  The insurer’s position was that the limit of liability applied to all seven locations, thereby limiting the claim to $50,000.

The insured brought an application seeking a declaration in its favour.  The application judge held that the limit of liability was ambiguous but, when read in the context of the entire policy, supported the interpretation advanced by the insured.  The insurer appealed.

On appeal, the Ontario Court of Appeal disagreed that the limit of liability was ambiguous. The court held that the limit of liability clearly applied to each location and therefore the total amount of insurance available to the insured under this extension of coverage was $350,000.

This case was digested by Cameron B. Elder, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Cameron B. Elder at [email protected].

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