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The Aviva contagious disease policy wording at issue in class action BI coverage dispute


July 8, 2020   by Greg Meckbach


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The question of whether non-essential businesses that closed during the pandemic are entitled to claim insurance – specifically, for cover arising as a direct result of an outbreak of contagious or infectious disease within 25 kilometres that is required by law to be reported to the authorities – is headed before a Canadian judge.

Nordik Windows Inc. is the representative plaintiff in a proposed $100-million class action lawsuit against Aviva Insurance Company of Canada announced this week.

The client’s law firm, Thomson Rogers, provided the statement of claim late Tuesday to Canadian Underwriter. Allegations that Aviva is in breach of an insurance contract by denying coverage have not been proven in court. Canadian Underwriter reached out to Aviva Canada Monday seeking comment but has not heard back yet.

[Editor’s Note: This is a developing story and we will update as we receive more information.]

The lawsuit proposes to represent businesses that suffered business interruption during the pandemic and were covered under very specific Aviva Canada policies. One policy referenced in the statement of claim is Aviva’s “enterprise insurance” policy, which includes business income under Form 912000-01 or other forms containing “negative publicity” and/or “restricted access” coverage, according to Thomson Rogers’s court filing.

Among the policy wordings at issue in that coverage dispute is insurance for loss of business income as a “direct result” of “an outbreak of contagious or infectious disease within 25 kilometres of the ‘premises’ that is required by law to be reported by government authorities.”

Other policy wording includes loss of business income “when ingress or egress .. is restricted whole or in part … by order of civil authority .. [by] an outbreak of a contagious or infectious disease that is required by law to be reported to government authorities.”

When a court is hearing a coverage dispute over business interruption arising from COVID-19, the specifics of that client’s policy wording will be critical in determining whether the client is entitled to coverage, insurance defence lawyers have told Canadian Underwriter.

Nordik windows Inc. has three locations in the Ottawa area – two in Ontario and another in Aylmer, on the Quebec side of the Ottawa River.

The World Health Organization declared COVID-19 a pandemic Mar. 11. Later that month, the Ontario government ordered all businesses to close unless they were on a list of “essential” workplaces. Essential workplaces included insurance companies and brokerages, supermarkets, convenience stores, and collision repair centres.

Nordik Windows’ workplaces were not considered essential, the firm said in its statement of claim against Aviva.

The lawsuit is one of several business interruption coverage disputes filed so far in Canada.

In Britain, the Financial Conduct Authority recently filed a test case with the High Court of England and Wales. FCA is scheduled to serve arguments July 10.

The court’s ruling in that test case will be binding in Britain on the insurers that are parties to that test case in respect of the policy wordings considered by the court. It will not necessarily be binding outside of Britain but could set a precedent for Canadian courts, said Eric Charleston, Toronto-based associate with Miller Thomson LLP, in an earlier interview with Canadian Underwriter.

Among the 17 policy wordings the British test case will consider are:

  • any occurrence of a notifiable human disease within a radius of 25 miles of the premises
  • your inability to use the insured premises due to restrictions imposed by a … public authority during the period of insurance following …an occurrence of any human infectious or human contagious disease, an outbreak of which must be notified to the local authority.

Feature image via iStock.com/Marc Bruxelle