An Ontario manufacturer shuts down its factory for several weeks in the early stages of the COVID-19 pandemic. Factory managers re-configure the facility to allow workers to socially distance. Can that manufacturer get business insurance coverage if its policy wording covers loss of income ‘by order of civil authority resulting from’ a disease outbreak?
This is one question before the Ontario Superior Court of Justice in a class-action lawsuit against Aviva Canada.
In Nordik Windows v. Aviva, released Sept. 10 by the Ontario Superior Court of Justice, Justice Edward Belobaba ruled that four Ontario firms involved in business interruption claims disputes with Aviva Canada are suitable representative plaintiffs in a class-action lawsuit.
Allegations that Aviva has breached insurance contracts, by denying business interruption claims during the pandemic, have not been proven in court.
The Sept 10 ruling is not on the merits of the lawsuit. Instead, it simply allows the lawsuit to proceed through the courts. But Aviva has lost its argument that Nordik Windows (along with Hangar9 Studios Inc., Cash and Carry Inc. and Real Food for Real Kids Inc.) are not suitable class representatives in the lawsuit.
So as a result of the Sept. 10 ruling, the case is “fully certified” as a class proceeding.
The four claimants filed claims with Aviva in 2020 after COVID-19 was declared a pandemic.
Unlike many BI claimants, the four in the Aviva class action did not have an insurance policy that required an actual property loss (such as wind, fire or water damage) in order to claim loss of income.
Instead, their policy wording with Aviva covers loss of income “caused by the interruption of the ‘business’ at the ‘premises’ when ingress to or egress from the ‘premises’ is restricted in whole or in part …by order of civil authority resulting from … an outbreak of a contagious or infectious disease that is required by law to be reported to government authorities.”
In the case of Nordik Windows, it shut down for six weeks, in the spring of 2020, to reconfigure the equipment and work-stations in its manufacturing facility and achieve the recommended six-foot physical distancing.
But Nordik Windows fell into the category of an “essential” business, meaning it was not actually mandated, by the Ontario government, to shut down its manufacturing operation.
Aviva Canada argues that advice or a recommendation, of a public health authority, is not the same thing as “an order of civil authority” which is covered in the Aviva policy language.
The definitive meaning of “an order of civil authority” will be determined at a later stage of the class-action lawsuit, Justice Belobaba said in his Sept. 10, 2021 ruling. What Justice Belobaba ruled was that at this point, there is at least some evidence that some portion of the business interruption losses sustained by Nordik Windows were caused by an “order of civil authority.”
In March of 2020, the opening words of the Ontario government’s closure order said in part:
And Whereas the temporary closure of places of non-essential business is necessary to help protect the health and safety of the people of Ontario in response to the declared emergency;
And Whereas the supply chain with respect to essential goods, services and resources should continue to function to the full extent possible, subject to the advice and recommendations of public health officials, including their recommendations about the importance of physical distancing.
Nordik Windows says when it shut down in the early stages of the pandemic, it had to unbolt equipment, which then had to be moved by heavy rollers and forklifts to new locations on the factory floor.
“Four employees spent about a month and a half on the reconfiguration,” Justice Belobaba wrote. “There is evidence that otherwise the [claimant’s] employees ‘were basically on top of each other’ in some areas of the manufacturing facility.”