Proving Coverage for Stock Spoilage and Business Interruption is No Piece of Cake (It’s a Bakery…)La Rose Bakery 2000 Inc. v. Intact Insurance Company, 2019 ONCA 850 (CanLII)
Keywords: Bakery; insurance; stock spoilage; business interruption
The Appellant operates a commercial bakery located in a shopping plaza. Following a power outage in 2013, the Appellant claims under its policy of insurance to recover losses relating to stock spoilage and business interruption. The Appellant’s insurance company defends the claim; and relies on exclusions in the policy. The Appellant also sues its insurance brokerage for failing to ensure the bakery was properly insured. The brokerage then cross-claims against the Appellant’s insurer for contribution and indemnity.
The Appellant’s insurer moves for summary judgment. The insurance brokerage takes no position. It does not appear at the motion, having agreed with the insurer that, should that motion be successful, the brokerage would withdraw its cross-claim against the insurer.
The motion judge grants summary judgment in favour of the insurer; determines exclusionary clauses governing stock spoilage and business interruption effectively preclude coverage in this case. The motion judge is not informed about the insurance brokerage’s agreement with the Appellant’s insurer. Nonetheless, the Court of Appeal determines summary judgment was appropriate and that the motion judge’s findings are “unassailable” in the circumstances. The Appeal is dismissed.
On appeal, the Appellant cited Butera v. Chown, Cairns LLP, 2017 ONCA 783 (CanLII) and argued the motion judge failed to apply the principles of partial summary judgment – in other words, they wanted to preserve some recourse to continue suing their insurance brokerage. The Court of Appeal disagreed with this submission for a number of reasons, including:
- the brokerage had been served and was bound by outcome of the motion;
- there was no risk of duplicative proceedings/inconsistent factual findings; and
- the brokerage had agreed to consent to a dismissal of its cross-claim based on the outcome of the motion. (See para. 10).
The Court of Appeal noted that the latter point was “not before the motion judge”, but declined to entertain the idea that the absence of this information had any significant effect on the outcome. For the Court of Appeal, summary judgment “…was appropriate in these circumstances”. (See para. 10).
On the issue of whether exclusion clauses precluded coverage, the Court of Appeal noted “…coverage did not cover loss or damage resulting from partial or total interruption to the supply of electricity, arising from loss or damage to any electrical transmission lines or distribution lines or their supporting structures, except for those located on the ‘premises’”. (See para. 12).
The Appellant argued the motion judge erred in interpreting the insurance policy in the absence of expert evidence. The Court of Appeal disagreed, stating it was the Appellant’s responsibility to “put its best foot forward” – to demonstrate that the loss or damage occurred on its premises and not, as the insurer contended, that any damage was to “electrical transmission lines or distribution lines or their supporting structures.” (See para. 12).
This Court of Appeal decision therefore signals to future litigants that expert evidence may be required to prove an interpretation of an insurance policy, even on a summary judgment motion: “The motion judge did not err in interpreting the policy without the benefit of expert evidence.” (See para. 12).
Counsel for the Appellant: Mauro Marchioni Concord
Counsel for the Respondent, Intact Insurance Company: Jeffrey Goit (Agro Zaffiro LLP, Hamilton)
Counsel for the Respondent, Unity Realty & Insurance Inc.: Lesley Albert (Stieber Berlach LLP, Toronto)