Court ruling expands Northbridge’s pandemic coverage by $300K

A Toronto daycare with seven locations will have a pandemic coverage sublimit of $50,000 apply to each of its seven locations, thereby costing the insurer Northbridge $350,000, Ontario Appeal Court has decided.

Northbridge General Insurance argued the $50,000 pandemic sublimit was supposed to apply in the aggregate to all seven of the daycare’s locations.

A lower court judge ruled the pandemic endorsement’s $50,000 limit of liability was ambiguous but was clear when read in the context of the insurance policy as a whole. On appeal by Northbridge, the Appeal Court disagreed the language in the endorsement’s limit of liability was ambiguous but reached the same conclusion as the trial judge – the $50,000 sublimit applied to each one of the daycare’s seven locations.

Helping Hands operates seven daycare centres outside of Toronto, Ont. Their business at the seven locations was insured through a Business Choice Policy from Northbridge covering from February 2020 to February 2021. The policy included a special endorsement to cover business losses arising from a pandemic.

The seven locations were closed as a result of the COVID-19 pandemic from Mar. 17, 2020, to June 22, 2020. Helping Hands made a claim for business losses under the pandemic coverage provision.

The pandemic endorsement in the policy reads: “We agree to extend the insurance provided by Part II – Business Income to apply to your loss of ‘business income’ including incurred necessary ‘extra expense’ resulting from interruption of or interference to your business operations at your ‘scheduled risk location’ directly as a result of: (1) a ‘pandemic outbreak’ declared by Civil Authority or ‘public health authority.’

The sublimit clause reads: “The most that we will pay under this Extension of Coverage in any one policy period is $25,000 or as otherwise indicated on the ‘schedule.’” (Both parties agreed the sublimit was $50,000 and not $25,000, which was an error).

The operative words above relate to “the schedule,” or “your scheduled risk location,” both of which are singular. The “schedule” referenced in the indemnity agreement is attached to the declaration page of the policy.

“There is a separate schedule page for each of the respondents’ seven locations,” the Court of Appeal notes. “Each schedule page lists each of the types of coverage that are contained in the policy, together with the ‘aggregate liability limit’ for each head of coverage, the ‘deductible’ for each one, and the ‘annual premium’ for each one.”

Northbridge argued the meaning of “scheduled risk location” appears in the Definitions section of the policy, which states: “‘Scheduled risk location’ means: risk location(s) specified on the ‘schedule.’”

Since the definition uses the singular to include the plural – i.e. “risk location(s)” is included in the definition — the terms are therefore interchangeable, Northbridge argued. Thus, $50,000 was an aggregate limit intended to apply to all seven of the locations listed in the schedule.

But the Court of Appeal for Ontario found that since the policy wording alluded to only one “schedule,” which was made up of seven different locations, the pandemic endorsement clearly referred to each of the seven locations contained in the one schedule.

“There is no ambiguity in the language used,” the Appeal Court found. “The singular reference to ‘scheduled risk location’ indicates that the indemnity is for losses at the location listed on the schedule. In this case, there are seven separate schedules, one for each risk location. It is not necessary to read in the word ‘each’ because the use of the singular performs the same function.”

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