Canadian courts are dealing with pandemic business interruption (BI) cases at a glacial pace compared to those in the U.K. and the United States, prompting some legal observers to call for judicial reform.
“As the pandemic extends into its third calendar year, courts throughout the United States and across the Commonwealth have made remarkable strides in addressing coverage concerns for pandemic-driven business interruption losses,” Blaney McMurtry LLP’s Anthony Gatensby and Dominic Clarke write in their article, Business Interruption Insurance and the COVID-19 Pandemic: The Canadian Experience, published in the 11th edition of Insurance & Reinsurance 2022. “While many of these processes can be described as novel and expeditious, these terms sadly do not define the Canadian experience…
“Whatever its specific difficulties, the joint adjudication motion [arising from pandemic BI class actions before the Ontario court] shows the need for creativity in a more traditional Commonwealth jurisdiction in order to have urgent matters with significant ramifications determined in an expedited manner. To date, policyholders and insurers across Canada still do not have the clarity that those in comparative jurisdictions have been afforded.”
The “joint adjudication motion” was put forth by Canadian insurers’ defence counsel to help speed up pandemic BI cases currently before the Ontario courts. The aim is also to provide clarity, by having one or few consistent judgments apply to multiple similar cases.
Basically, it’s a way to shepherd through cases related to Workman Optometry Professional Corporation et al. v. Certas Home and Auto Insurance Company, the largest COVID-19 class action process addressing BI coverage issues.
Workman Optometry is a national class action comprised of businesses alleged to have suffered business interruption losses due to COVID-19. The class action initially named 16 insurers as defendants, including Canadian-based insurers such as Economical Mutual Insurance Company and Co-operators General Insurance Company, as well as a number of Lloyd’s Syndicates.
“While thousands of claims are wrapped into the Workman Optometry class action, which are cumulatively estimated to involve billions of dollars of possible cover, not all business interruption claims have been subsumed into that process,” as Gatensby and Clarke observe.
And so, the insurer defendants brought a motion to compel parties to 81 “overlapping proceedings” — legal proceedings that are legally and factually similar to those in Workman — to participate in a joint adjudication process to determine the common issues between pandemic BI cases.
Plaintiffs’ lawyers have opposed the motion. Among other things, they would like control over their own legal processes. Also, they say it’s not fair to have one decision cover many different fact situations.
As one judge put it, the opposition to the insurer’s motion might be expected, since “one law firm had (at the time) served 17 individual statements of claim with the Ontario Superior Court of Justice against insurers with damages alleged to ‘range from $250,000 to over $3 million,’” as Gatensby and Clarke wrote.
The motion has been argued before the Ontario court, but no decision has been rendered.
In the meantime, MDS Inc. v. Factory Mutual Insurance Company — an atomic energy case on the question of whether a “loss of use” of a business property is the same as “physical damage” to the property — is headed to the Supreme Court of Canada.
At trial, a judge ruled a “loss of use” of the property due to a radioactive isotope leak was tantamount to “physical damage” to the property. The Appeal Court overturned the trial decision, and counsel for MDS are seeking leave to appeal to the Supreme Court.
MDS is of interest to insurers, because pandemic exclusions in business policies often deny coverage for losses unrelated to “physical damage.” Since COVID-19 does not physically damage the building, insurers argue, the exclusion applies.
Canada’s top court only hears cases of national import, and so lawyers for MDS are crafting their appeal in such a way as to tie the result of the case with pandemic BI cases, Gatensby and Clarke report.
“MDS [states] very clearly [to the Supreme Court] that “[t]he answer to these questions is relevant to issues affecting the Canadian public, including whether the shutdown of a business due to COVID-19 could constitute resulting ‘physical damage’ within the meaning of an ‘all-risk” policy,’” the authors write. “It is well-accepted by both policyholder and insurer counsel that the MDS decision is likely to influence the judicial approach to losses arising from the COVID-19 pandemic.”
If the Supreme Court makes pronouncements about COVID coverage in MDS, that will likely have an impact on what the court decides in Workman, as the authors note.