Insured not entitled to business interruption coverage for losses sustained during pandemic

Insurance law – Property insurance – All-risk insurance – Excess coverage – Interpretation of policy; Insured – peril; Practice – Appeal.

SIR Corp. v. Aviva Insurance Co. of Canada, [2023] O.J. No. 5208, Ontario Court of Appeal, November 22, 2023, A. Hoy, M.L. Benotto and L.G. Favreau JJ.A.

The insured owned and operated about 60 restaurants. For a period of time during the pandemic, provincial health orders prevented the insured from offering in-person dining at its restaurants. The insured sought coverage under an insurance policy for damage to its food and beer stock and for business losses allegedly suffered as a result of the orders. The insured brought an application for a declaration of coverage. The application judge found that the policy did not cover the losses allegedly sustained. The insured appealed to the Ontario Court of Appeal.

The policy of insurance was a commercial property policy. The insured relied on a clause of the policy which provided coverage for loss sustained as a result of damage caused by order of civil or military authority to retard or prevent a conflagration or other catastrophe. The insured also relied on a clause of the policy which included losses sustained during the period of time when as a result of a peril insured or threat thereof, ingress to or egress from any part of premises of the insured is prevented or impaired, including prevention or impairment of such access by any civil or military authority.

The insured argued that the orders caused damage to its food and beer stock, the pandemic was a “catastrophe” and the orders were an “order of civil … authority to retard or prevent a … catastrophe.” The insured also argued that the orders were a “peril insured” and because ingress to or egress from its restaurants by the public was prevented or impaired, it was entitled to coverage at each of its restaurants for an eight-week period.

The Ontario Court of Appeal disagreed with the insured’s interpretation of the policy and dismissed the appeal. This case was digested by Cameron B. Elder and edited by Steven W. Abramson of Harper Grey LLP 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 feel free to contact them directly at [email protected] or [email protected].