



COURT OF APPEAL FOR ONTARIO

CITATION:
    Le Treport Wedding & Convention Centre Ltd. v. Co-operators General
    Insurance Company, 2020 ONCA 487

DATE:
    20200729

DOCKET:
    C67088

Feldman,
    Lauwers and Huscroft JJ.A.

BETWEEN

Le
    Treport Wedding & Convention Centre Ltd.

Plaintiff
    (Appellant)

and

Co-operators
    General Insurance Company

Defendant
    (Respondent)

Emily Stock and Brandon Cook, for the
    appellant

Robert W. Dowhan and Matthew McMahon,
    for the respondent

Heard: in writing, with questions by
    teleconference on May 19, 2020

On appeal from the order of Justice Douglas
    K. Gray of the Superior Court of Justice, dated May 17, 2019, with reasons
    reported at 2019 ONSC 3041.

Lauwers
    J.A.:

I.

Overview

[1]

The trial judge accepted this description of the
    catastrophic rainstorm event in the Greater Toronto Area that underpins this
    case:

On July 8, 2013, the GTA experienced a rain
    event unparalleled in its recorded history. Environment Canada measured in
    excess of 90 mm of rain in less than two hours at Pearson International
    Airport. That is the highest amount of measured rainfall in that short a period
    of time since such data tracking began. As a result, flooding was widespread
    across the GTA. The storm of July 8, 2013 also produced the highest single day
    rainfall total in recorded history for the GTA.

[2]

The entry of water into the banquet hall facility
    operated by the appellant, Le Treport Wedding & Convention Centre Ltd.,
    caused significant damage.

[3]

The appellant was insured under an all-risks
    policy by the respondent insurer, Co-operators General Insurance Company. It is
    common ground that the trial judge did not err in finding that the Sewer Back Up
    Endorsement applied and that the policy limit of $500,000 was fully paid out to
    the appellant by the insurer.

[4]

The appellant argues that the trial judge erred
    in finding that the flood endorsement does not apply on the facts, and in
    refusing to require payment under several other coverages.

[5]

For the reasons that follow, I would allow the
    appeal in part.

II.

The Factual Context

[6]

Representatives of the parties met on July 15,
    2013, a week after the storm. The next day, the insurer sent a letter to the
    appellant advising of the necessary steps to take in order to mitigate losses,
    including shutting down to complete repairs. The appellant got a quotation for emergency
    repairs on July 19, 2013 for $46,396.32, excluding tax, which the insurer paid.
    On September 26, 2013, the insurer sent the appellant a quote, provided by the
    insurers contractor, indicating that the full replacement cost to be paid
    after the repairs were completed was $105,533.94.

[7]

The appellant was dissatisfied with the quote,
    believing it to be insufficient and so low that it would not justify shutting
    down the business to effect the repairs. Many months later, on April 21, 2014,
    the insurer told the appellant that the actual cash value of the repairs,
    quoted in the September 2013 letter, was $79,150.45, which it paid.

[8]

According to the trial judge, the appellant
    later got a quote estimating the repair cost at $681,869.99.

[9]

Because there was such a wide gap between the
    estimates of losses and costs, the appellant triggered the appraisal process
    provided under Statutory Condition 11 of the policy and s. 128 of the
Insurance
    Act
, R.S.O. 1990, c. I.8. The appraisal award, released on March 21, 2016,
    set the value of the damage to the building at a replacement cost of $591,552, with
    an actual cash value of $561,974.40. The value of the contents/equipment loss
    was set at a replacement cost of $337,777.18, with an actual cash value of
    $253,332.89.

[10]

The insurer delayed the payment of the claim
    under the Sewer Back Up Endorsement. The
April 2014 payment brought the total
    amount paid to about $124,000. The insurers next payment came five years after
    the loss, in November 2018, when it paid the remaining balance up to the $500,000
    limit of the Sewer Back Up Endorsement.

[11]

The insurer denied the appellants claim for
    indemnity for business interruption under the Profits Endorsement Form coverage
    of the insurance policy because the appellant continued to operate after the
    rainstorm.

[12]

The appellant sued the insurer for the balance of
    payments it alleged were owed exceeding the
$500,000 limit of the Sewer Back Up Endorsement
, including for claims under the Flood Endorsement, for losses
    associated with business interruption, and for extra-contractual damages.

[13]

The trial judge found that the Sewer Back Up Endorsement
    applied; the insurer had paid out the policy limit of $500,000 and owed nothing
    more. He dismissed the appellants other claims.

III.

The Issues

[14]

The appellant asserts that the trial judge erred
    in finding that it was not entitled to:

(1)

coverage under the Flood Endorsement Form;

(2)

coverage for business losses under the Profits
    Endorsement Form;

(3)

extra-contractual damages on the basis that the insurer
    delayed making payments; and

(4)

compensation for professional fees incurred to
    establish the quantum of the business interruption loss under the Commercial
    Plus Endorsement Form.

[15]

These asserted errors form the issues in this
    appeal.

IV.

The Analysis

[16]

Before considering the issues in this appeal, I
    set out the applicable standard of review and the principles of interpretation
    for insurance contracts.

[17]

The standard of appellate review on the
    interpretation of the standard form insurance contract language is correctness:
Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co.
, 2016
    SCC 37, [2016] 2 S.C.R. 23, at para. 46;

MacDonald v. Chicago Title
    Insurance Company of Canada
,

2015 ONCA 842, 127 O.R. (3d) 663,
    leave to appeal refused, [2016] S.C.C.A. No. 39. Courts should strive to construe
    similar insurance policies similarly:
Progressive Homes Ltd. v. Lombard
    General Insurance Co. of Canada
,
2010 SCC
    33
,
[2010] 2 S.C.R. 245
, at para.
    23.

[18]

Questions of mixed fact and law are subject to
    the standard of palpable and overriding error, except for any extricable errors
    of law, which are subject to the correctness standard:
Canada (Minister of
    Citizenship and Immigration) v. Vavilov
, 2019 SCC 65, 441 D.L.R. (4th) 1, at
    para. 37;
Housen v. Nikolaisen
, 2002 SCC 33, [2002] 2 S.C.R. 235, at
    paras. 8, 10.

[19]

The principles of interpretation for insurance
    policies bear repeating. In
Sams Auto Wrecking Co. Ltd. (Wentworth Metal)
    v. Lombard General Insurance Company of Canada
, 2013 ONCA 186, 114 O.R.
    (3d) 730, Laskin J.A. gave a short statement of the general law on interpreting
    insurance contracts, at para. 37:

The principles for interpreting insurance
    policies, and in particular exclusion clauses, are well-established. The policy
    should be interpreted to promote a reasonable commercial result; provisions
    granting coverage ought to be construed broadly; provisions excluding coverage
    ought to be construed narrowly; in the case of ambiguity, the interpretation most
    favourable to the insured should be adopted; and even a clear and unambiguous
    clause should not be given effect if to do so would nullify the coverage
    provided by the policy.

In addition, the court must strive to
    interpret the contract according to the whole of the contract and any relevant
    surrounding circumstances in a way that promotes the true intent and
    reasonable expectations of the parties at the time of entry into the contract
    and avoids either a windfall to the insurer or an unanticipated recovery to
    the insured:
MacDonald v. Chicago Title Insurance
, 2015 ONCA 842, 127
    O.R. (3d) 663, at para. 66,

per
Hourigan J.A.

[20]

I turn now to the issues.

(1)

Issue One: Does the Flood Endorsement apply on
    the facts?

[21]

The appellant argues that the Flood Endorsement
    applies on the facts. If that submission is correct, then it is common ground
    that there is no policy limit on the amount the appellant can recover under the
    Flood Endorsement, and the prospect of compensation on the basis of the
    appraisal award arises.

[22]

The trial judge found that the Flood Endorsement
    did not apply for two reasons: first, because the Surface Water exclusion
    operated; and second, because the event did not meet the definition of a flood
    in the Endorsement. I have separated these reasons for analytical
    purposes, but it is not clear to me that the trial judge saw them as completely
    distinct. I address each in turn after setting out the relevant provisions of
    the policy.

a)

The Policy Language

[23]

To summarize the insurance, the Commercial Broad
    Form policy excluded coverage for flood including flood by surface water, so
    the appellant purchased coverage under the Flood Endorsement, which excluded
    coverage for sewer back ups. To address that risk, the appellant purchased the
    Sewer Back Up Endorsement.

[24]

The trial judge noted that the general part of
    the Commercial Broad Form policy, Form No. B-1, excluded certain perils, including
    loss or damage caused by flood. Form No. B-1 provides:

1. INSURED
PROPERTY

A. This Form insures the following items for
    which a
limit of insurance is specified in the
    Declarations and only while at the Premises:

BUILDING, EQUIPMENT, STOCK, CONTENTS,
    ALL PROPERTY



4. INSURED PERILS

This Form, except as otherwise provided,
    insures against
all risks for direct physical loss of or damage to the
    insured property
.

5. EXCLUSIONS



B. EXCLUDED PERILS

This Form does not insure against loss or
    damage caused directly or indirectly:



b.
in whole or in part by flood, including
    Surface Water, waves, tides, tidal waves, tsunamis, or the breaking out or
    overflow of any natural or artificial body of water
.



17. DEFINITIONS

Wherever used in this Form [Commercial Broad
    Form policy, Form No. B-1]



J.

Surface Water
means water or natural precipitation temporarily diffused over the
    surface of the ground.
[Emphasis added.]

[25]

In this case, in addition to the general
    coverage, the appellant also purchased the Flood Endorsement, Form No. AB-100,
    which provides:

FLOOD ENDORSEMENT

This Policy is extended to include, only if
    indicated in the Declarations, loss or damage caused directly by the peril of
    flood subject to the following conditions:

1. FLOOD

For the purpose of this endorsement, flood
    shall mean the rising of, the breaking out or the overflow of any body of
    water, whether natural or man-made and includes waves, tides, tidal waves and
    tsunamis.



3. EXCLUSIONS

This endorsement does not cover loss or damage
    caused directly or indirectly by:

a. water which backs up through
    sewers, sumps,  septic tanks or drains;



All other terms and conditions of this Policy
    remain unchanged. [Emphasis added.]

[26]

The appellant also
    purchased the Sewer Back Up Endorsement, Form No. B-1(J), which stipulates:

SEWER BACK UP ENDORSEMENT

The coverage provided by this Policy is
    extended to include loss or damage caused directly by the backing up of sewers,
    sumps, septic tanks or drains subject to the following [limits].

[27]

I now turn to the trial judges first reason for
    excluding coverage for the flood.

b)

Does the Surface Water Exclusion apply?

[28]

The trial judges
    decision on the application of the Flood Endorsement, in light of the Surface
    Water exclusion, is brief. He found that the Surface Water exclusion applied
    to exclude coverage for the flood, explaining at paras. 233, 234 and 237:

The definition of flood in the endorsement
    is as follows:

For the purpose of
    this endorsement, flood shall mean the rising of, the breaking out or the
    overflow of any body of water, whether natural or man-made and includes waves,
    tides, tidal waves and tsunamis.

It is to be noted that the words Surface
    Water, as defined in the policy, are not included within the term flood in
    the endorsement.



In the case before me, it is clear, from the
    evidence, that damage to the property was caused by an influx of water
    resulting from the extraordinary rain storm that accumulated on the ground, and
    in this case, on the roof of the building.
It clearly constituted Surface
    Water as defined in the policy, and which is excluded from coverage and is not
    included within the definition of flood.
[Emphasis added.]

[29]

The trial judge concluded, at para. 242:

The damage to the [appellants] property was
    not caused by a flood as defined in the policy.
The term Surface Water
    is not included in the definition of flood, while it is a specific exclusion in
    the policy itself.
In my view, the case is even stronger than was the case
    before Charney J. [
Parker Pad & Printing Ltd. v. Gore Mutual Insurance
    Company
,
2017
    ONSC 3894
,
138 O.R. (3d) 620]
that
    there is no coverage for what occurred through the Flood Endorsement. [Emphasis
    added.]

[30]

In my view, the trial judge erred in giving any
    effect to the definition of Surface Water in the Commercial Broad Form policy
    when he interpreted the Flood Endorsement, for two reasons.

[31]

First, the trial judges use of the exclusion language
    misapprehends the relationship between the Commercial Broad Form policy and the
    Flood Endorsement. An endorsement is not a standalone insurance policy. It is
    linked to the policy to which it is attached and with which it is purchased:
Pilot
    Insurance Co. v. Sutherland
,
2007 ONCA
    492
,
86 O.R. (3d) 789
.

[32]

In
Pilot
, this court affirmed that an
    endorsement does not have an independent existence from the policy: at para.
    21. In that case, the insurer disputed whether coverage was available to an
    insured injured in an accident that occurred in Jamaica. The automobile
    insurance policy was territorially limited to Canada and the United States. Attached
    to the policy was the Ontario Policy Change Form 44R Endorsement for Family
    Protection Coverage, which did not include a territorial limitation. This court
    held that the territorial limit in the policy applied to the endorsement. Lang
    J.A. observed, at para. 21:

An endorsement changes or varies or amends the
    underlying policy.
While it may be comprehensive on the subject of the
    particular coverage provided in the endorsement
, it is built on the
    foundation of the policy and does not have an independent existence. [Emphasis
    added.]

[33]

In other words, the policy and the endorsement
    must be read together. This principle also applies to property damage claims:
Cabell
    v. The Personal Insurance Company
, 2011 ONCA 105, 104 O.R. (3d) 709, at
    paras. 14-17,
per

Rosenberg J.A.

[34]

The second reason why the trial judge erred in importing
    the exclusion of Surface Water flooding into the Flood Endorsement is that
    doing so would effectively nullify flood coverage, not only in this case but in
    almost all cases, because few buildings stand right on the edge of a body of
    water. The appellants facility is on land located some distance away from
    water. How could the Flood Endorsement ever be engaged if it excluded a flood
    via surface water?

[35]

The insurer effectively concedes this point,
    explaining:

If water breaks the banks of a body of water
    and then has to flow across a surface before entering a premise and causing a
    loss, it will still be deemed a Flood under the Policy. Surface Water is
    excluded from the Policy unless there is a Flood, as defined by the Policy
.

[36]

This concession is appropriate.

[37]

In my view, the Flood Endorsement should be read
    as entirely displacing the flood exclusion in the Commercial Broad Form policy.
    It is, in the words of Lang J.A. in
Pilot
, comprehensive on the
    subject of the particular coverage provided in the endorsement: at para. 21.
The Endorsement must be read without giving the Surface Water
    exclusion
in the Commercial Broad Form policy any
    weight
.
Because the Flood
    Endorsement extends coverage, it falls within the interpretative principle that
    provisions granting coverage ought to be construed broadly:
Sams Auto
    Wrecking
, at para. 37.

[38]

This leaves for determination the more basic
    question: Did the trial judge err in finding that there was not a flood within
    the meaning of the Flood Endorsement?

c)

Did the flood trigger coverage under the Flood Endorsement?

[39]

The Flood Endorsement provides that the policy
    includes loss or damage caused directly by the peril of flood. To repeat for
    convenience, it defines flood: For the purpose of this endorsement, flood
    shall mean the rising of, the breaking out or the overflow of any body of
    water, whether natural or man-made and includes waves, tides, tidal waves and
    tsunamis.

(i)

The Trial Judges Interpretation

[40]

The trial judge relied on the decision of
    Charney J. in
Parker Pad
to bolster his interpretation that the Flood
    Endorsement did not apply. In that case, as the result of a rainstorm, water
    pooled next to the foundation of the plaintiffs building. It eventually seeped
    through the wall and into the building. The definition of flood in the
    insurance policy was the same as in this case, and Charney J. denied coverage. He
    observed: There is no question that the ordinary meaning of the word flood
    would include the pooling of water resulting from a rainstorm: at para. 46.
    But he held that the very specific and restricted definition in both the Insurance
    Policy and the Flood Endorsement governed: at para. 47.

[41]

In the view of Charney J., the ordinary meaning
    of the phrase the rising of, the breaking out or the overflow of any body of
    water whether natural or man-made is limited to pre-existing bodies of water:
    at para. 53. This language does not include pooling of rain water in a location
    where no body of water previously existed: at para. 53. He concluded that: The
    pool of water did not exist before the rain, and cannot be said to rise, break
    out or overflow because it has no pre-determined boundary or level from which
    it can rise, break out or overflow: at para. 53. The damage was caused by
    seepage through the foundation, which was excluded from the policy: at para.
    55.

[42]

In this case, the trial judge noted: In the
    case before me, it is clear, from the evidence, that damage to the property was
    caused by an influx of water resulting from the extraordinary rain storm that
    accumulated on the ground, and in this case, on the roof of the building: at
    para. 237. The factual finding made by the trial judge is set out in the
    decision, at para. 238:

On the evidence, I am not persuaded that the [appellant]
    has proven, on a balance of probabilities, that any of the water that invaded
    the [appellants] property came as the result of the breaking out or the
    overflow of a body of water. A practical view of the evidence must be taken,
    and the only evidence of any possibility of water breaking out of or from the
    overflow of any body of water was given by Mr. Coluccio, who saw water coming
    from the ditch known as Tonelli Creek. No other evidence, particularly expert
    evidence, was tendered. Tonelli Creek is 600 metres away from the [appellants]
    premises, and the evidence is that there were several inches of rain that
    covered the ground in all directions over a large area. In the scheme of
    things, I am not convinced that any of this water would have materially added to
    the volume of water that covered the ground and the roadways and that
    eventually found its way onto the [appellants] property. The [appellant] has
    not satisfied me on the balance of probabilities that that is so.

[43]

The appellant argues that the trial judge made a
    palpable and overriding error of fact in this determination because, on any
    reasonable view of the facts, this event was a flood.

(ii)

The Evidence

[44]

To set the scene, the evidence was that the
    appellants facility is large, at approximately 32,000 square feet, and is
    located at 1075 The Queensway East in Mississauga. The facility is part of a
    plaza. It has a large parking lot in front, between the building and The
    Queensway. Between the parking lot and The Queensway, there is a shallow ditch,
    which is approximately three or four feet wide. At the entrance to the building
    is a six-inch curb and then a four-inch lip. Tonelli Creek is about 600 metres
    east of the facility and runs from a point north of The Queensway. From there,
    the creek goes underground in a southerly direction.

[45]

The trial judge set out the testimony of John
    Cipressi, the appellants principal, at paras. 17-20, which I now paraphrase.
    Shortly after 5:00 p.m. the rain came pouring down in massive amounts and
    caused considerable flooding on The Queensway. After about half an hour of rain,
    water came flowing down from The Queensway across the ditch, into the parking
    lot, and ultimately into the building. Mr. Cipressi testified that water was
    entering through the doors and was falling from the ceilings. Water was also
    coming up into the building from floor drains. There was water, varying between
    two inches and at least ankle deep, in the front lobby, in the washrooms, and
    in the large event rooms. This is what the appellant characterizes as the
    flood.

[46]

The trial judge also recounted the evidence of a
    witness, Rocco Coluccio, a school principal. In particular, the trial judge
    noted that Mr. Coluccio testified that as he drove west on The Queensway and
    passed Tonelli Creek, the force of the water turned his vehicle into another
    lane because of the water gushing from the stream: at para. 75. The flow from
    the creek was towards the facility.

[47]

Mr. Cipressis evidence was that in addition to
    Tonelli Creek, there are a number of other bodies of water in the area around
    the appellants facility, including the Cooksville Creek (to the northwest) and
    the Applewood Creek, Etobicoke Creek and Little Etobicoke Creek (to the east). He
    confirmed on cross-examination that, during the rainstorm, the water covering
    The Queensway was coming from everywhere.

(iii)

Discussion

[48]

In my view, the influx of water into the
    appellants facility was a flood within the meaning of the Flood Endorsement. I
    say this for the following reasons.

[49]

First, there is no question that the ordinary
    meaning of the word flood would include the massive, forceful, and fast-moving
    flow of water into the facility on this occasion. It was quite unlike the
    situation in
Parker Pad
, where the stormwater pooled and then seeped
    into the building.

[50]

Second, there was a catastrophic failure of all
    the water channelling features in the vicinity, both natural and man-made. Had
    the creeks and the stormwater management system been able to handle the volume
    of water, there would be no case, but they were not. Tonelli Creek contributed
    its water from upstream to the flood instead of channelling it away. In my view,
    this scenario falls well within the words of the Flood Endorsement: the rising
    of, the breaking out or the overflow of any body of water, whether natural or
    man-made.

[51]

Drainage channels, stormwater management
    facilities, ditches, and even creeks can be dry on occasion. How then does the
    body of water concept in the Flood Endorsement apply? In my view, the focus
    of the Endorsement is on the flood, that is 
the rising of, the breaking out
    or the overflow of
any body of water, whether natural or man-made
    (emphasis added). There is a strong sense of unexpected and significant water
    movement communicated by these words. Just before a creek or a drainage ditch
    overflows, it constitutes a body of water, even though it might have been dry
    several hours earlier. This is true for man-made channels like the drainage
    ditch between the facility and The Queensway. There is no sense in which the
    Endorsement requires the body of water to have a permanent existence.

[52]

Third, this courts decision in
Cabell
offers support for this interpretation. In that case, the issue was whether one
    of the policys common exclusions, Common Exclusion 11, applied to Endorsement
    33b, Outdoor Inground Swimming Pool, Hot Tub, Spa and Sauna Coverage, with
    regards to damage to a swimming pool. The case turned on two points. The first
    was whether the endorsement was sufficiently clear. In holding that it was not,
    Rosenberg J.A. relied on
Wigle v. Allstate Insurance Co. of Canada
,
    where Cory J.A. stated that: Limitations on the apparent coverage in the
    endorsement that are ambiguous in the sense that they are not clearly apparent,
    should be set out in the endorsement itself: (1984), 49 O.R. (2d) 101 (C.A.),
    at p. 120.

[53]

The second point on which
Cabell
turned
    related to the concept of nullification. Rosenberg J.A. explained that the
    burden is on the insurer to demonstrate that its interpretation would not
    essentially nullify the coverage for most risks or run counter to the
    reasonable expectations of the ordinary person who purchased the coverage, at
    para. 28.

[54]

Rosenberg J.A. discussed the nullification issue
    at some length, covering the many authorities and applying the law to the facts:
    at paras. 14-17, 24-28. He added that: When counsel for the respondent insurer
    was pressed for an example that would not come within Common Exclusion 11, he
    was unable to do so: at para. 29. Counsels inability to come up with a
    realistic application of the Flood Endorsement was also true in this case.

[55]

In his oral submissions, counsel for the insurer
    acknowledged that Mr. Coluccio saw the water overflowing from the creek
    and heading to the facility but asserted that there was no evidence to take it
    to the next level, that is, that the facility is downhill from the creek. But
    this is not correct. Mr. Cipressi testified in relation to exhibit number
    seven, which depicted the gradients, that: This water flows downhill towards
    that direction, in this photo, being the direction to the facility. He then
    confirmed: That water flows down from that location. He added: And the north
    [being] higher elevation, and everything comes downward towards us. Based on
    this evidence, there is no doubt that the water flowed out of Tonelli Creek
    towards the facility, which, as Mr. Cipressi testified, lies at a lower elevation.
    The flowing water was forceful enough to redirect Mr. Coluccios automobile.

[56]

As in
Cabell
, counsel for the insurer
    struggled in oral argument to find a circumstance in which the Flood
    Endorsement would ever benefit the appellant. He posited an ice jam on the
    Credit River to the west, or an overflow from Lake Ontario to the south. Both
    are several kilometers away from the site.

[57]

Finally, in construing the Flood Endorsement,
    the trial judge departed from the principle that
provisions
    granting coverage ought to be construed broadly. His interpretation effectively
    nullified coverage for the obvious risks identified in the Endorsement and belied
    the reasonable expectations of the appellant in purchasing that coverage. He
    also made a palpable and overriding error in failing to find on the evidence
    that there was a flood within the meaning of the Flood Endorsement.

[58]

To conclude, it is difficult to imagine a
    realistic scenario that would constitute a flood within the meaning of the
    Flood Endorsement if, on the facts, this event did not satisfy that definition.
In my view, the Flood Endorsement applies and the
    appellant is entitled to compensation on that basis.

(iv)

The Consequences

[59]

Because the Flood Endorsement applies to the
    loss or damage caused by the flood, the limit of covered losses in the Sewer
    Back Up Endorsement no longer serves to limit the appellants claim. The
    available evidence on that additional loss is the appraisal award, calculated
    according to the process in Statutory Condition 11 in the policy and s. 128
    of the
Insurance Act
.

[60]

The trial judge mentioned the appraisal process
    and award in several paragraphs. The appellants appraiser was David Leblanc
    and the insurers appraiser was Thomas Carroll, who was employed by and had
    represented the insurer throughout the dealings with the appellant. The umpire
    was Pete Volaric, a Hamilton lawyer. Only Mr. Volaric and Mr. Leblanc signed
    the award. At trial, the insurer collaterally attacked the appraisal award as a
    means of challenging the credibility of witnesses, but the trial judge made no
    finding on its validity nor was that an issue before him. The purpose of an
    appraisal is valuation. It does not determine liability, which is the courts
    function.

[61]

The appraisal award is binding on the parties
    and I would grant judgment to the appellant in the amount of $429,329.18, being
    the balance of the actual cash value amount awarded on the appraisal that
    exceeds the $500,000 Sewer Back Up Endorsement limit.

(2)

Issue Two: Is the appellant entitled to insurance
    coverage for Business Interruption Losses?

[62]

The trial judge dismissed the appellants claim
    for business interruption losses under Form AB-3, the Profits Endorsement Form.
    It provides:

The insurer agrees to indemnify the Insured
    against loss directly
resulting from necessary interruption of business
,
    caused by destruction or damage by the perils insured against to property at
    the Premises, up to the limit(s) of insurance stated in the Declarations
    for this Form and subject to the provisions, limitations, exclusions,
    conditions and other terms of this Policy including this Form. [Emphasis added.]

[63]

Shutting down the business in order to conduct
    the necessary repairs was a bone of contention between the appellant and the
    insurer from the outset. The trial judge noted that had the appellant shut
    down, the repairs would have been the insurers responsibility, as would the
    business interruption losses. Mr. Cipressi feared that the appellant would
    suffer a loss of reputation, did not want to disrupt already scheduled events,
    and plainly thought he could remediate sufficiently to permit the business to
    carry on. The evidence supports the trial judges finding that Mr. Cipressi did
    not want to shut the business down.

[64]

The trial judge heard from the business valuator,
    Dawson Coneybeare, on behalf of the appellant on the subject of the appellants
    business losses. The insurer led no contrary opinion evidence but relied on the
    cross-examination of Mr. Coneybeare. The absence of contrary opinion evidence
    does not oblige the trial judge to accept Mr. Coneybeares evidence, and he
    clearly did not, as he noted at para. 255:

I am not convinced that there were actually
    lost profits that have been proven. As noted earlier, in the year following the
    incident, there was no decrease in revenue. I am not convinced that any
    decrease in revenue thereafter was necessarily anything more than a reflection
    of the cyclical nature of the business, which appears to have been the case
    during the period between 2009 and 2012. Assuming, however, that the decrease
    in revenue can be said to have resulted from the incident, I am not convinced
    that it was as a result of any fault of the [insurer]. I am persuaded that the [appellant]
    made its own decision to keep operating, and the lack, or at least delay, of
    necessary remediation and repair was the more likely cause of any decrease in
    revenue.

[65]

This is a factual finding to which this court
    must defer in the absence of a palpable and overriding error. I am not
    persuaded that the trial judge made such an error. The appellant impugns as a
    legal error the trial judges statement: I am not convinced that it was as a
    result of any fault of the [insurer]. I do not take much from this statement
    because contextually it precedes and sets in contrast his finding that Mr. Cipressis
    refusal to shut the facility down to complete the repairs was the problem. He
    was, in the trial judges view, the author of his own misfortune. There is
    evidence to support this view.

[66]

Because the claim for business interruption
    losses was not made out on the evidence as found by the trial judge, this is
    not the case in which to definitively interpret the meaning of the expression necessary
    interruption of business in the Profits Endorsement Form. However, I would not
    want to be taken as necessarily agreeing with the trial judge that the
    expression requires a total cessation of business activity for a period of time
    for coverage to arise.

[67]

I make two observations. First, I do not see
    this case as substantially different from the case referred to by the trial
    judge, at para. 249:
EFP Holdings Ltd. v. Boiler Inspection and Insurance
    Co. of Canada
, 2001 BCSC 1580, 34 C.C.L.I. (3d) 212. In that case, the
    language of the policy provided coverage where a business is 
interrupted or
interfered
with
solely as a result of an [a]ccident
    (emphasis added): at para. 8. Pitfield J. read the language as disjunctive,
    noting at para. 16:

Interruption contemplates a break in the
    continuity of the business. Interference contemplates a lesser event which
    may not interrupt the business but impedes or interferes with the profit-making
    capability of the business resulting in a diminution in gross profit.

[68]

In this case, the trial judge contrasted and
    relied on the absence of the words interfered with in the Profits Endorsement
    Form in order to hold that the Form did not cover the appellants business
    interruption claim.

[69]

As useful as another case might often be to the
    task of interpretation, the focus must be on the specific language of the Profits
    Endorsement Form. I point out that the absolute meaning given by the trial
    judge to interruption is inconsistent with the text of clause 7(f) of the Endorsement,
    which states that: The Insured shall with due diligence do and concur in doing
    and permit to be done all things which may be reasonably practicable to
    minimize or check any interruption of
or interference
with the business
    or to avoid or diminish the loss (emphasis added). The implication in the use
    of the word interference is that it might suffice to trigger coverage.

[70]

Second, on appeal, the insurer argued that there
    is nothing in the trial judges decision which suggests that an interruption
    cannot be partial. The insurer put forward the example of an event that shut
    down the banquet hall but not the catering business. One could also imagine
    part of the facility being shut down but not all of it. These examples lead me
    to doubt the trial judges interpretation of the Profits Endorsement Form.

(3)

Issue Three: Extra-Contractual Damages

[71]

The amount claimed on this head is $428,000 for
    economic loss for consequential damages after the indemnity period, as
    calculated by Mr. Coneybeare. The trial judge laid any such losses at the
    feet of the appellant, as noted earlier, and denied liability.

[72]

The appellant argues that the trial judge erred
    in refusing to award extra-contractual damages because the insurer delayed
    making payments under the policy. The insurer
paid $46,396.32 for emergency services on
    August 6, 2013 and $79,150.45 in April 2014 for repair costs. The insurers
    next payment came in November 2018, when it paid out the balance of the $500,000
    policy limit of the Sewer Back Up Endorsement. This was more than two years
    after the appraisal award and five years after the loss.

[73]

I see no basis on which to set aside the trial
    judges disposition of this issue, which rests on the dual finding set out
    above that the appellant had not proven a loss of profit and revenue resulting
    from the event and that it was the author of its own misfortune.

[74]

The delay in payment was not acceptable, and the
    trial judge acceded to the appellants submission that some adjustment should
    be made to account for the delay in the costs award to the insurer by reducing
    the costs award.

(4)

Issue Four: Payment of Professional Fees

[75]

The appellant argues that the trial judge erred
    in not awarding $15,077.94 for professional fees paid to Mr. Coneybeare for his
    report, which related to establishing the quantum of loss under item K of the
    Commercial Plus Endorsement Form, Form No. B-1(8). It provides:

In the event of loss or damage by an insured
    peril, the Insurer will pay reasonable fees to auditors, accountants,
    architects, engineers or other professionals, other than public adjusters and
    the Insured
'
s own employees, for producing
    and certifying particulars or details of the Insured's business required by the
    Insurer in order to arrive at the amount of loss payable under this Policy
.

This extension applies only to fees incurred
    in establishing the quantum of a loss, liability for which is otherwise
    accepted by the Insurer. This extension may also apply to any Business Interruption
    loss covered under this Policy
.

[76]

The insurer argues that this Endorsement is
    intended to
assist an insured in quantifying a loss in
    order to determine the amount payable under the policy. In order to receive
    payment for professional fees under the policy, the fees must be submitted to
    the insurer by way of a proof of loss
.
    This was not done.

[77]

This provision, says the insurer, was not
    intended to indemnify a litigant for the costs of their expert trial witnesses
. The insurer points out that much of
Mr
.
Coneybeare
'
s report is devoted to the claim for extra-contractual damages,
    which is not within the purview of the Endorsement.

[78]

I am persuaded by the insurers argument that M
r.
Coneybeare was not
    retained for the purposes of producing and certifying particulars or details of
    the appellant's business in order to arrive at the amount of loss payable under
    the policy, but for the purposes of providing evidence at trial, as the timing
    and the content of his report shows. I would not allow the appeal of this
    issue.

V.

Disposition

[79]

I would allow the appeal in part and
I would grant judgment to the appellant in the amount of
    $429,329.18, together with prejudgment interest and costs. I would dismiss
    the rest of the appeal.

[80]

The appellant is entitled to costs on the appeal
    in the agreed amount of $20,000, plus disbursements in the amount of $7,500 all-inclusive.

[81]

If the parties are unable to agree on the
    allocation of trial costs in light of this decision, then
the court will accept written submissions no more than five pages
    in length beginning with the appellant, to be served and filed with the court
    at coa.e‑file@ontario.ca within two weeks of the release of this
    decision, followed one week later by the respondents submissions, and any
    reply within another week.

Released: July 29, 2020 (K.F.)

P.
    Lauwers J.A.

I
    agree. K. Feldman J.A.

I
    agree. Grant Huscroft J.A.


