



COURT OF APPEAL FOR ONTARIO

CITATION: 202135 Ontario Inc. v. Northbridge
    General Insurance Corporation, 2022 ONCA 304

DATE: 20220419

DOCKET: C69643

Feldman, Pepall and Favreau JJ.A.

BETWEEN

202135
    Ontario Inc. cob Helping Hands Daycare,

841986 Ontario Limited and
    2433845 Ontario Inc.

Applicants (Respondents)

and

Northbridge General Insurance
    Corporation

Respondent (Appellant)

Andrew A. Evangelista, Jennifer L. Kent
    and Nikki Dehnashi, for the appellant

Danielle Muise, for the respondents

Heard: March 16, 2022 by video conference

On appeal from the order of Justice Susan
    Vella of the Superior Court of Justice, dated June 14, 2021.

Feldman J.A.:

Overview

[1]

The respondents operate seven daycare centres
    called Helping Hands outside the Toronto area. Their business at the seven
    locations was insured through a Business Choice Policy from the appellant
    Northbridge from February 2020 to February 2021. The policy included a special
    endorsement to cover business losses arising from a pandemic. As the seven
    locations were closed as a result of the COVID-19 pandemic from March 17, 2020
    to June 22, 2020, the respondents made a claim for business losses under the
    pandemic coverage provision.

[2]

The issue on the application and on this appeal
    is the proper interpretation of the $50,000 per policy period limit of
    liability clause in the endorsement, and whether it applies as a global total
    for the seven locations, or whether it means $50,000 per location, for a total
    exposure of $350,000.

[3]

The application judge found the limit of
    liability clause to be ambiguous, but determined that the ambiguity was
    resolved when read in the context of the policy as a whole. Properly
    interpreted, she concluded that the limit of liability clause provides coverage
    of $50,000 on a per location basis. In my view, the limit of liability clause
    is not ambiguous. However, I agree with the application judges conclusion
    regarding its meaning. Therefore, based on the analysis set out in the
    following reasons, I would dismiss the appeal.

Facts

[4]

The respondents seven daycare centre locations
    in the region around Toronto were insured for property and business losses under
    a policy from the appellant Northbridge for the period from February 3, 2020 to
    February 3, 2021.

[5]

The business loss portion of the original
    insuring agreement is contained in Part II of the policy, and originally did
    not include coverage in the case of a pandemic. That coverage was added by a
    special endorsement titled the A.D.C.O. Program Endorsement, which amended the
    Part I  Property Insured, Part II  Business Income, and Part III  Commercial
    General Liability coverages.

[6]

The indemnity agreement in the original policy
    provides:

1. INDEMNITY AGREEMENT

We will pay for your loss of business
    income, your incurred necessary extra expense, or loss of rental value
    during the Period of Indemnity resulting from covered direct physical loss
    subject to the provisions and limitations as applicable to the coverage specified
    on the schedule in this Part. The covered direct physical loss must occur
    at a scheduled risk location that has a limit specified on the schedule.

[7]

The limit of liability provision in the original
    policy had been revised in previous policy years and read as follows during the
    relevant year:

1.
Part II Section 2. Limit of Liability is deleted and replaced with
    the following:

The most we will pay under this Part is your
    Actual Loss Sustained of business income.
[1]

[8]

The schedule that is referred to in the
    indemnity agreement is attached to the declaration page of the policy. It is
    called the Part I & II Coverage Schedule. There is a separate schedule page
    for each of the respondents seven locations. 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. An example for the daycare
    centre location at 743 Kingston Road in Pickering is reproduced below:



Coverage

Aggregate Liability Limit

Deductible

Annual Premium



Business Personal Property

Breakdown of Business Personal
          Property:

Equipment                                
          $23,390

Office Contents                        
          $327,500

Tenants/Owners Improvements $25,000

$375,890

$1,000

Included



Equipment Breakdown

$375,890

$1,000

Included



Business Income  Actual Loss
          Sustained

Period of Indemnity: 12 Months





Included



Outdoor trees, shrubs, plants

$25,000

$1,000

Included



Debris Removal

$100,000

$1,000

Included



Professional Fees

$50,000

$1,000

Included



Sewer Backup



$2,500

Included



Outdoor Property

$100,000

$1,000

Included



Master Key

$25,000

$1,000

Included



Cyber Event Expense

$30,000

$1,000

Included



EDP Equipment, Data and Media
          Breakdown

$50,000

$1,000

Included



CBC 100 Earthquake



3% $100,000

Included



CBC 101 Flood



$10,000

Included



CBC 106 Stated Amount Co-Insurance
          Clause

Expiry February 3, 2021

$375,890



Included



BI-Off Premises Heat, Power, Gas,
          Water

Waiting period: 24 Hours

$100,000



Included



CBC 215 Actual Loss Sustained





Included



[9]

The
A.D.C.O.
    Program Endorsement deletes certain sections of the Part II  Business Income
    section of the policy that excluded coverage for a pandemic. The endorsement
    adds that coverage as part of an extension of coverage for Outbreak &
    Negative Publicity. The relevant portion of the endorsement, including the
    limit of liability clause, provides:

1. DELETED EXTENSIONS OF COVERAGE

Part II Section 6. Extensions of Coverage
    (j) Negative Publicity
and
(k) Outbreak Extra
    Expense
are deleted in their entirety.

2. ADDITIONAL
    EXTENSIONS OF COVERAGE

The following Extensions of Coverage are added
    to
Part II Section 6. EXTENSIONS OF COVERAGE:

(l) Outbreak & Negative Publicity

(i) Indemnity Agreement:

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;



(iv) Limit of Liability:

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
.

[10]

The parties agree that the stated limit of
    $25,000 is an error and that the actual limit of liability was $50,000.

[11]

Due to the COVID-19 pandemic, all seven of the
    respondents locations were closed from March 17, 2020 to June 22, 2020. The
    respondents claimed coverage of $50,000 for the pandemic business loss coverage
    for each of their seven insured locations, for a total of $350,000. The
    appellant insurer responded that the limit of liability was $50,000 in
    aggregate for all insured locations. The respondents therefore commenced the
    application under appeal for a determination of the proper interpretation of
    the limit of liability clause for the extended coverage for pandemic business
    income loss.

The Findings of the Application Judge

[12]

The application judge first summarized the
    principles of insurance contract interpretation articulated by the Supreme
    Court of Canada in its decisions in
Ledcor Construction Ltd. v. Northbridge
    Indemnity Insurance Co.
, 2016 SCC 37, [2016] 2 S.C.R. 23,
Consolidated-Bathurst
    v. Mutual Boiler
, [1980] 1 S.C.R. 888,
Reid Crowther & Partners
    Ltd. v. Simcoe & Erie General Insurance Co.
, [1993] 1 S.C.R. 252, and
Progressive
    Homes Ltd. v. Lombard General Insurance Co. of Canada
, 2010 SCC 33, [2010]
    2 S.C.R. 245. She then turned to the provisions of the policy and determined
    that the limit of liability clause under the extended coverage for pandemic
    loss is ambiguous, and could apply either to each location separately, or as an
    aggregate for all locations. Reading the contract as a whole and referring to
    other clauses in the contract, the application judge resolved the ambiguity in
    favour of the respondent insured. She also added that if she was incorrect, then
    the
contra proferentem
rule should be applied against the appellant insurer.
    In the result, she found that the $50,000 limit of liability for pandemic
    business losses applied to each business location separately.

Standard of Review on Appeal

[13]

The parties both submit that the standard of
    review is correctness, on the basis that the insurance policy is a standard
    form policy:
Ledcor
, at para. 4. To clarify, the insurance policy under
    review is clearly a bespoke policy that includes and excludes defined coverages
    for specified amounts in respect of each of the respondents seven business
    locations. However, what is urged upon the court is that the clauses within the
    policy are standard, unmodified clauses that are also offered to similar
    businesses. In that way, they are in a standard form, and their interpretation
    will apply to the same clauses as they may appear in other policies and have
    precedential value. In addition, there is no meaningful factual matrix that is
    specific to the parties to assist the interpretation process. On this basis, I
    accept that it is appropriate to apply the correctness standard of review.

Issue on Appeal

[14]

The issue on this appeal is whether the
    application judge erred in law in her interpretation of the limit of liability
    clause contained in the Outbreak & Negative Publicity coverage extension
    for business losses suffered during a pandemic.

Analysis

[15]

The appellant acknowledges that the application
    judge identified and applied the correct legal principles of insurance contract
    interpretation from the case law.

[16]

The application judge summarized the rules of
    interpretation of insurance policies from the case law in the following way:

a)

The court must first determine whether the language of the insurance
    policy is unambiguous, within the contract as a whole. If there is no
    ambiguity, effect must be given to that clear language.

b)

However, if the policy language at issue is ambiguous, the court
    must apply the general principles of contractual interpretation to resolve that
    ambiguity. This framework includes the principles that: the interpretation
    should be consistent with the reasonable expectations of the parties so long as
    that interpretation is supported by the language of the policy; the
    interpretation should not give rise to results that are unrealistic or that the
    parties would not have contemplated in the commercial atmosphere in which the
    insurance policy was entered into; and the interpretation should be consistent
    with the interpretation of similar insurance policies;

c)

If the ambiguity is unresolved after the application of the general principles
    of contractual interpretation, then the court should apply the doctrine of
contra
    proferentem
to construe the policy against the insurer. This is a course
    of last resort. The corollary of this rule is that coverage provisions in
    insurance policies are to be interpreted broadly, whereas exclusion or limiting
    clauses are to be interpreted narrowly.

[17]

She also added that: 1) the interpretive
    principles should not be used to create an ambiguity; 2) some imprecise
    language does not necessarily mean there is ambiguity when the contract is read
    as a whole; and 3) an ambiguity requires two reasonable meanings that each make
    sense within the policy read as a whole:
Progressive Homes
, at paras.
    22-23;
Surespan Structures Ltd. v. Lloyds Underwriters
, 2021 BCCA 65,
    at para. 88;
Sabean v. Portage La Prairie Mutual Insurance Co.
, 2017
    SCC 7, [2017] 1 S.C.R. 121, at para. 42.

[18]

The appellant submits that the application judge
    erred in law by finding that the limit of liability clause is ambiguous and by
    resolving that ambiguity in favour of the respondents. Its further position is
    that the limit of liability clause is clear and unambiguous when read on its
    own, and that it means that the total maximum coverage is $50,000 per policy
    period in aggregate for all seven locations.

[19]

The respondents agree that the clause is
    unambiguous when read in the context of the policy as a whole, but they say that
    it unambiguously provides that the limit of liability is $50,000 per location. In
    the alternative, if it is ambiguous, when read in the context of the policy as
    a whole, the ambiguity is resolved in favour of the respondent insureds
    interpretation. In the further alternative, if the clause is ambiguous, it
    should be read
contra proferentem

against
    the insurer.

[20]

I agree with both parties that the limit of
    liability clause is not ambiguous when read in the context of the policy as a
    whole. I set out again the indemnity and limit of liability provisions of the pandemic
    coverage extension contained in the A.D.C.O. Program Endorsement:

2. ADDITIONAL EXTENSIONS OF COVERAGE

The following Extensions of Coverage are added
    to
Part II Section 6. EXTENSIONS OF COVERAGE:

(l) Outbreak & Negative Publicity

(i) Indemnity Agreement:

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;



(iv) Limit of Liability:

The most that we will
    pay under this Extension of Coverage in any one policy period is [$50,000] or
    as otherwise indicated on the schedule
.

(1)

The internal wording of the limit of liability
    clause is unambiguous

[21]

First, looking only at the words of the limit of
    liability clause itself, the maximum amount is stated to be or as otherwise
    indicated on the schedule. As in this policy there are seven separate
    schedules, one for each scheduled risk location, the reference to the schedule
    can only mean to each individual schedule for each risk location.

[22]

As a result, the maximum limit amount can be
    altered in each schedule separately. More significantly, the clause
    contemplates an individual maximum that could be referenced in each schedule.

[23]

As set out in para. 8 above, the only reference
    in the schedules to a limit of liability for business losses is the Actual
    Loss Sustained, which applies to the business losses not referred to in the
    extended endorsement.
[2]

[24]

Thus, the internal wording of the limit of
    liability clause does not support the meaning suggested by the appellant
    insurer, that the maximum liability amount of $50,000 in the policy period is
    an aggregate amount for all locations. The appellant is effectively asking the
    court to read out or ignore the words or as otherwise indicated on the
    schedule that follow $25,000 (or $50,000, as the parties agree the clause
    should state), in order to substantiate its submission on the meaning of the
    clause.

(2)

The wording of the indemnity provision that the
    limit of liability clause applies to provides further support

[25]

The respondent insureds interpretation is
    reinforced by the language of the indemnity agreement for pandemic loss coverage
    in the A.D.C.O. Program Endorsement. In accordance with the interpretive
    principles from the governing case law, as both the indemnity agreement and the
    limit of liability clause are subclauses of the Outbreak & Negative
    Publicity extension of coverage, they are to be read together. While said in
    the context of an exclusion clause, Rothstein J.s statement in
Progressive
    Homes
, at para. 27 is relevant here: Exclusions do not create coverage 
    they preclude coverage when the claim otherwise falls within the initial grant
    of coverage. Exclusions, however, should be read in light of their initial
    grant of coverage.

The appellant submitted the opposite: that the
    clauses must be read separately. However, counsel provided no case law to
    support that proposition.

[26]

The indemnity agreement provides coverage for
    loss of business income as a result of a pandemic outbreak at your scheduled
    risk location. The respondents submit that because the indemnity agreement
    refers to scheduled risk location in the singular rather than the plural, it is
    referring to each single scheduled risk location (i.e., each of the seven
    daycare centres). Therefore, the limit of liability, which refers to and
    imposes a limit on the indemnity obligation, also applies to each single scheduled
    risk location. Had the policy used the plural, scheduled risk locations, then
    it would be arguable that the limit of liability could be interpreted to apply
    to all risk locations in the aggregate.

[27]

In response to this argument, the appellant relies
    on the definition of scheduled risk location in the Definitions section of
    the Policy, and specifically s. 16(x), which provides: Scheduled risk
    location means: risk location(s) specified on the schedule.

[28]

The appellant submits that the definition
    defines the singular to include the plural, that they are therefore
    interchangeable, and that accordingly, no significance can be attributed to the
    use of the singular in the indemnity agreement policy language.

[29]

I would not accept this submission or the appellants
    interpretation of the definition. The definition merely explains that one looks
    to the schedule to find the scheduled risk location or locations, whichever may
    be applicable. It does not mean that the singular and plural forms of
    scheduled risk location are to be interpreted interchangeably when used in
    the policy and related endorsements.

(3)

This interpretation does not require the
    inclusion of the word each

[30]

The appellant also argues that the court is
    reading the word each into the reference to business losses at your
    scheduled risk location, and that without reading in the extra word, the
    singular reference cannot be given that meaning.

[31]

I would reject this submission. There is no
    ambiguity in the language used. 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.

[32]

Similarly, the appellant noted two coverage
    extensions that do use the word each in the limit of liability wording. It
    submits that this language is what is required to extend coverage to each risk
    location on an individual basis. The limit of liability clauses in the two
    extensions state as follows:

(c) Personal Effects (including Volunteers)
amended limit:

The most that we will pay under this Extension
    of Coverage in respect of any one officer, director, partner, employee or
    volunteer workers is $10,000 for any one occurrence.

The most that we will pay under this Extension
    of Coverage at each scheduled risk location in any one policy period is
    $25,000, or as otherwise indicated on the schedule.



(z) Property of Tenants or Registered
    Guests of a Hotel or Apartment or Members, Guests and Residents of Health Care
    Facilities

The most that we will pay under this Extension
    of Coverage at each scheduled risk location per covered tenant, guest, member
    or resident is as specified on the Coverage Summary, or as otherwise indicated
    on the schedule for any one occurrence.

The most that we will pay under this Extension
    of Coverage at each scheduled risk location in any one policy period is as
    specified on the Coverage Summary, or as otherwise indicated on the schedule.

[33]

The appellant suggests that these limits clearly
    apply on a per scheduled risk location basis and that, in contrast, the limit
    of liability for pandemic business loss lacks clear language to the same
    effect. I disagree. While the use of the word each is consistent with a limit
    that applies on a per location basis, as noted above, it is not a necessary
    word. The clause could have said at a scheduled risk location or at the
    scheduled risk location or otherwise indicated the singular, and it would
    have had the same meaning: that it applies on an individual basis.

(4)

This interpretation is consistent with the
    policy read as a whole

[34]

These indemnity and limit of liability provisions
    are consistent with the structure of the entire policy, which insures each
    location for its losses, as defined precisely in the separate schedules.

[35]

For example, part of the A.D.C.O. Program
    Endorsement deals with extensions of coverage under Part I of the policy, which
    deals with insurance of property, as distinguished from insurance of business
    losses in Part II. Under Part I  Property Insured, there is an automatic
    blanket limit clause which provides:

Automatic Blanket Limit Clause

The most that we will pay under any one or a
    combination of the following
Part I  Property Insured 8. Extensions of
    Coverage
is $600,000 for any one occurrence in any one policy period. The
    Automatic Blanket Limit applies separately to each scheduled risk location.

[36]

As it indicates, the limit of liability of
    $600,000 in a policy period applies to each scheduled risk location. The word
    each is used in this provision, but it is in the limit of liability wording
    rather than in the indemnity wording. In my view, the use of the word each here
    is consistent with the operation of the policy which effectively insures the
    risk locations as separate businesses.

(5)

There are no other provisions that support the
    appellants interpretation

[37]

While the appellant pointed to other provisions
    of the policy to try to assist in interpreting the limit of liability clause at
    issue, counsel did not identify another one in the policy with identical
    wording or effect that would assist in the interpretation of the limitation of
    liability clause in issue on this appeal.

[38]

For example, the appellant notes that there are
    only two other extensions of coverage for business losses that contain a limit
    of liability clause per policy period, and that both of them provide a limit
    per occurrence. These provisions that apply per occurrence are not
    comparable and do not assist the appellant in the interpretation of the pandemic
    limit of liability clause. The first, for Emergency Vacating Expenses, uses
    the same language in the limit of liability as the clause in question apart
    from the per occurrence limitation. It provides: The most that we will pay
    under this Extension of Coverage is $50,000, or as otherwise indicated on the
    schedule for any one occurrence. Just like the clause in question, this
    limit of liability uses the singular form of the schedule and supports the
    finding that the limit applies per location. The second extension, for Tenant
    Lease Cancellation Expense, does not address scheduled risk locations at all.

[39]

The appellant also identified some extensions of
    coverage under Part I  Property Insured that contain identical or near
    identical language to the subject clause. However, there is no indication in
    those clauses that they are intended to apply on an aggregate basis. For
    example, the coverage extension for Pollutant Cleanup and Removal provides
    that [t]he most that we will pay under this Extension of Coverage in any one
    policy period is as specified on the Coverage Summary, or as otherwise
    indicated on the schedule. Again, the singular is used.

[40]

Another extension, for Furs, Fur Garments,
    Jewels, and Jewellery, uses the same language in the limit of liability clause
    but refers to any scheduled risk location in the coverage extension language
    that precedes it:

We agree to extend the insurance provided by
Part
    I Section 2. Insured Property (b) Business Personal Property
to apply to
    loss of or damage by an insured peril to furs, fur garments, jewels, jewellery,
    costume jewellery, watches, pearls, precious and semi-precious stones while
    such property is at any scheduled risk location.

The most that we will pay under this Extension
    of Coverage in any one policy period is as specified on the Coverage Summary,
    or as otherwise indicated on the schedule.

[41]

The appellant submits that this coverage
    extension applies on an aggregate basis because of the use of the word any in
    the coverage language. I disagree. Read in context, the above clauses provide
    that the most that the insurer will pay is as specified on the summary or
    schedule, as long as the loss or damage occurred while the property was at one
    of the scheduled risk locations. The language of the limit of liability clause is
    as indicated on the schedule, i.e., the same as in the pandemic loss limit of
    liability: on a per location basis. The use of the word any in the coverage
    portion of the clause does not modify this unambiguous language.

[42]

In oral argument, the appellant also pointed to
    the coverage extension for Professional Misconduct Legal Expense, under Part
    III  Commercial General Liability, as an example of a type of coverage with a
    limit of liability that applies on an aggregate basis. The limit of liability
    clause under this section states:

We will reimburse you for legal expenses up
    to a maximum of $100,000 in respect to any single hearing or defence of
    action covered by this extension, or $100,000 in the aggregate in respect of
    all hearings or defences of action instituted during the period of this
    extension.

[43]

However, the indemnity provision of this
    coverage is not location specific. Instead, it applies to expenses arising
    from any hearing or in defence of any action. In addition, it uses the words
    in the aggregate. Again, this provision does not assist the appellant in
    interpreting the pandemic business loss clause.

[44]

In sum, the appellant has not pointed this court
    to any provisions of the insurance agreement or the applicable endorsements
    that provide coverage based on losses or damage at a scheduled risk location
    where the limit of liability for such coverage applies to all locations on an
    aggregate basis, rather than on a per location basis.

[45]

As a result, the plain language of the limit of
    liability clause, as reinforced by the coverage extension and the structure of
    the policy as a whole, makes clear that the pandemic business loss coverage
    limit applies to each of the respondents seven daycare locations separately.

(6)

The premium allocation bolsters the per location
    interpretation

[46]

Finally, the respondents also rely on the fact
    that the premium they paid for the extended coverage was based on and divided
    among the seven risk locations in different amounts. I agree that this further
    supports the interpretation that it was the intention of the parties that the
    limit of liability would apply to each of the seven locations separately.

Conclusion

[47]

In my view, the limit of liability for the
    coverage extension for pandemic business losses is unambiguous when read in the
    context of the indemnity agreement and the policy as a whole, and applies to
    each scheduled risk location. As a result of my conclusion, there is no need to
    apply the
contra proferentem
rule of interpretation. While the
    application judge found ambiguity which she resolved in favour of the insured, my
    conclusion regarding the proper meaning of the clause is the same.

[48]

For these reasons, I would allow the fresh
    evidence and dismiss the appeal, with costs fixed in the agreed amount of $15,000,
    inclusive of disbursements and H.S.T.

Released: April 19, 2022 K.F.

K.
    Feldman J.A.

I
    agree. S.E. Pepall J.A.

I agree. L. Favreau J.A.





[1]

On
    appeal, the appellant brought a motion to file fresh evidence regarding which
    limit of liability provision was in effect during the relevant period. The respondents
    do not object to the fresh evidence being admitted. I accept that the relevant
    limit of liability provision was as stated in para. 7.



[2]

The
    parties did not argue that the words Actual Loss Sustained in the schedules
    should be read to modify the stated limit of liability of $50,000, as set out
    in the limit of liability clause which, again, states: The most that we will
    pay under this Extension of Coverage in any one policy period is [$50,000]
or
    as otherwise indicated on the schedule
(emphasis added).


