



COURT OF APPEAL FOR ONTARIO

CITATION: Marvelous Mario's Inc. v. St. Paul Fire and Marine
    Insurance Co., 2019 ONCA 635

DATE: 20190731

DOCKET: C65382 and C65383

Hourigan, Paciocco and Fairburn JJ.A.

C65382

BETWEEN

Marvelous Marios Inc., Snack Crafters
    International Inc., 788986 Ontario Inc., 601552 Ontario Ltd. and Mario
    Parravano

Plaintiffs (Appellants)

and

St. Paul Fire and Marine Insurance Co.

Defendant (Respondent)

C65383

AND BETWEEN

Sweet-Ease Inc., Bakemates International Inc.
    formerly 1317613 Ontario Ltd., Confectionately Yours Bakeries Inc., Marmac
    Holdings Inc., formerly 1309411 Ontario Ltd., 788986 Ontario Limited, Mario
    Parravano and Marvelous Marios Inc.

Plaintiffs (Appellants)

and

St. Paul Fire & Marine Insurance Company

Defendants (Respondents)

R. Donald Rollo and Dean Melamed, for the appellants

David A. Tompkins and Trevor J. Buckley, for the
    respondent

Heard: June 27, 2019

On appeal from the judgment of Justice Jasmine T. Akbarali
    of the Superior Court of Justice, dated April 24, 2018, with reasons reported
    at 2018 ONSC 1365.

Hourigan J.A
.:


I.

Introduction

[1]

The appellants commenced two actions claiming insurance coverage under a
    commercial insurance policy issued by the respondent. That policy covers
    direct loss from any Peril, including business interruption loss and loss of
    property due to theft or wrongful handling. The first action seeks indemnification
    for lost rental income and a bonus of $950,000 alleged to be owing to the
    appellant Mario Parravano (the First Action). The second action seeks
    indemnification for the alleged theft or wrongful handling of certain equipment
    and related business interruption losses (the Second Action).

[2]

The two actions were tried together in a bifurcated, coverage-only
    trial. The trial judge dismissed the First Action in its entirety. In the Second
    Action, the trial judge dismissed the property claim, but permitted the
    business interruption claim to proceed in part. The appellants appeal the
    dismissal of the First Action and their property claim (as well as part of
    their business interruption claim) in the Second Action. The respondent
    cross-appeals the decision of the trial judge permitting the business interruption
    claim to proceed in part.

[3]

These reasons explain why I would dismiss the appeal and allow the
    cross-appeal. In summary, the trial judge made no error in dismissing the First
    Action because she correctly found that the claims were not for direct losses
    covered by the policy. The trial judge was also correct in dismissing the
    property claim in the Second Action as time-barred by the terms of the policy. However,
    the cross-appeal must be allowed because the trial judge erred in finding that
    the business interruption claim was subject to a rolling limitation period.


II.

Facts

[4]

Mr. Parravano and his
    non-party wife own all the corporate appellants directly or indirectly.
In
    October 1999, a plant operated by a corporation affiliated with the appellants
that produced baked goods and cereal bars
suffered an Indian meal moth infestation.
This infestation affected the production of cereal bars.

[5]

On September 29, 2000, Sweet-Ease Inc., Bakemates International Inc.,
    Confectionately Yours, Inc., Confectionately Yours Bakeries Inc., and Marmac
    Holdings Inc. (collectively, the Bakemates Group of Companies) commenced an
    action under the respondents policy seeking indemnity for business
    interruption and property losses consequent to the infestation (the Original
    Action).

[6]

Apparently by order of

Justice
Spence dated October 3, 2000, KPMG Inc. (KPMG) was
    appointed the receiver-manager of the
Bakemates Group of Companies
.
[1]


[7]

On October 13, 2000,
    the Bakemates Group of Companies, along with 788986 Ontario Limited, Mr.
    Parravano, and Marvelous Marios Inc. commenced the First Action. The First
    Action includes the same claims as the preceding Original Action. However, the
    additional plaintiffs in the First Action
assert that they too have
    valid claims under the policy. The claims made by
Marvelous Marios Inc. and 788986 Ontario Limited
relate to the loss of leasing income for space and equipment they say was
    provided to the Bakemates Group of Companies and for which the Bakemates Group
    of Companies could not pay because they were suffering losses arising out of the
    infestation. In addition, in this action Mr. Parravano claims a $950,000 bonus
    he says he received from and then loaned to one of the Bakemates Group of
    Companies and for which he never received repayment.

[8]

A proposed sale of the assets of the
Bakemates Group of Companies to Amore Sweets was approved by
    order of Farley J. dated December 21, 2000. The transaction closed on December
    28, 2000.

[9]

On November 26, 2002, Mr.
    Parravano, Marvelous Marios Inc., Snack Crafters International Inc., 601552
    Ontario Ltd., and 788986 Ontario Inc. commenced the Second Action. The gravamen
    of that action was the allegation that the receiver committed theft of insured
    equipment and assets by either retaining the items or wrongfully transferring them
    to the subsequent purchaser and that as a consequence of these acts the
    plaintiffs in the Second Action suffered business interruption losses.

[10]

Eventually, KPMG and the respondent settled
    the property and business interruption loss claims made by the
Bakemates
    Group of Companies in the Original Action (and reasserted in the First Action)
for a total payment of $1,848,527.
Justice Ground approved
the
    settlement as well as the activities of KPMG in its receivership role by order
    dated August 6, 2003. Mr. Parravano and his wife unsuccessfully appealed that
    order to this court on the ground that the settlement amount was too low.


III.

Decision Below RELATING TO THE CURRENT APPEAL

[11]

At
    the coverage trial, the First Action was dismissed in its entirety. The trial
    judge found that the infestation was the covered peril and that the losses
    claimed were indirect losses and therefore not covered by the policy. She also
    concluded that the receivership of the Bakemates Group of Companies was not a
    fortuitous event because it was caused or materially contributed to by the
    deliberate acts of the Bakemates Group of Companies that were contrary to their
    obligations to their creditors. Even if the bankruptcy was a fortuitous event,
    the trial judge found that it was not a risk that could be economically
    transferred to the respondent.

[12]

With
    respect to the Second Action, the trial judge concluded that the appellants
    knew or had the means of knowing they had a claim at the time of the sale of
    the assets, being December 28, 2000. Under the terms of the policy, there was a
    one-year limitation period. The action was not commenced until almost two years
    after the sale and thus the claim related to the loss of the equipment was
    time-barred. However, the trial judge determined that the claim for business
    interruption losses was an on-going claim and therefore subject to a rolling
    limitation period. Accordingly, she concluded that only the claims for business
    interruption losses predating one year before the commencement of the Second
    Action were barred due to the contractual limitation period. The claim for
    business interruption losses having occurred within the one-year period before
    commencement of the action was not barred and could proceed.


IV.

Analysis

(i)

First Action: Appeal

[13]

The
    appellants submit that the trial judge erred in law in determining that the
    losses claimed in the First Action were not direct losses under the policy. In
    addition, they assert that the trial judge further erred in applying a damages
    law principle in a coverage-only trial. I reject both submissions.

(a)

Direct Losses

[14]

In
    Rider No. 4 of the policy, the respondent agreed to provide insurance coverage
    for direct loss resulting from any Peril, except those perils specifically
    excluded. The appellants submit that the trial judge erred because she found
    that there could only be one proximate cause for a given direct loss. This
    analysis, they argue, ignores Supreme Court of Canada jurisprudence holding
    that there may be multiple proximate causes.

[15]

I
    am not persuaded by this submission. It is not a fair reading of the trial
    judges reasons to conclude that she considered that there could be only one
    proximate cause. Indeed, the trial judge specifically cited case law wherein
    concurrent causes of damages were considered:
Ford Motor Company of Canada
    Ltd. v. Prudential Assurance Co. Ltd.

(1958),

14 DLR (2d) 7,
    affirmed [1959] S.C.R. 539;
Sherwin-Williams Co. v. Boiler Inspection &
    Insurance Co.
, [1950] S.C.R. 187. Relying on
Ford
, she stated at
    para. 30 that, the cause of the loss or damage covered by the contracts must
    be
a
proximate cause (emphasis added). Clearly, the trial judge
    understood that there could be more than one proximate cause of a direct loss.

[16]

The
    appellants also argue that it is irrelevant that other insured parties received
    insurance monies because under the policy they have a right to be treated
    severally and not jointly. In the appellants submission, the infestation,
    which was a covered peril, led to the eventual bankruptcy of the Bakemates
    Group of Companies. Due to the bankruptcy, they argue, those parties were
    unable to meet their financial obligations and the appellants therefore
    suffered direct losses.

[17]

The
    trial judge correctly rejected this argument and found that the losses alleged
    to have been suffered were the result of the failure of Bakemates Group of
    Companies to meet their financial obligations and not the infestation. This
    finding was amply supported by the record, including evidence that the
    Bakemates Group of Companies sales actually increased after the infestation. I
    would therefore not give effect to this argument.

(b)

Damages Principle

[18]

In
    analyzing the issue of whether the claims were direct losses, the trial judge
    referenced the fact that the Bakemates Group of Companies have already
    recovered their business interruption losses. She stated that to permit the
    appellants to also recover for business interruption losses would amount to a double
    recovery. The appellants seize upon this statement and argue that the trial judge
    erred in law by considering a damages principle in a coverage-only trial.

[19]

I
    reject this submission. Read fairly, the trial judges reference to double
    recovery was part of a proper analysis to ensure that her interpretation of the
    policy does 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 contracted:

Ledcor Construction Ltd. v. Northbridge
    Indemnity Insurance Co.
, 2016 SCC 37, [2016] 2 SCR 23, at para. 50.

[20]

The
    trial judge correctly found that it would be an unrealistic and commercially
    unreasonable result if one insured party was paid for its business interruption
    losses and then did not pay its obligations to a related insured party who could
    then make another claim on the same policy, thereby maximizing the groups
    total insurance recovery.

(ii)

Second Action: Appeal and Cross-Appeal

[21]

In
    the Second Action, the appellants asserted what the trial judge found to be two
    distinct claims: (i) for loss of property due to the alleged theft or wrongful
    handling by the receiver, and (ii) for business interruption losses arising
    from the alleged wrongful deprivation of the property.

[22]

The
    respondent takes the position before the trial judge and on appeal that both
    aspects of the claim are completely time-barred. In particular, the respondent
    argues in cross-appeal that the trial judge erred in holding that the business
    interruption claim was subject to a rolling limitation period such that a
    portion of it could proceed to trial. In their notice of appeal, the appellants
    submit that the trial judge erred in dismissing their loss of property claim
    and part of their business interruption claim as time-barred. However, in their
    subsequent written and oral submissions, the appellants focus on responding to
    the cross-appeal by arguing that the trial judges application of a rolling
    limitation period was not erroneous.

[23]

There
    is no dispute between the parties that the one-year contractual limitation
    period provided for in the policy is enforceable. The policy reads:

ACTION: Every action or proceeding against the insurer for the
    recovery of any claim under or by virtue of this contract is absolutely barred
    unless commenced within one year next after the loss or damage occurs.

[24]

The
    sale by the receiver of the Bakemates Group of Companies businesses as a going
    concern closed on December 28, 2000 and the Second Action was commenced on
    November 16, 2002. The trial judge found that the appellants either knew or
    had the means of acquiring the knowledge that they may have a claim under the
    policy on the closing of the sale to Amore Sweets. Accordingly, she concluded
    that the claim for coverage of the lost property was time-barred. I see no
    error in that analysis and would not interfere with the trial judges order
    dismissing the property portion of the Second Action.

[25]

The
    trial judges finding related to the claim for business interruption losses
    forms the basis for a ground of appeal and the cross-appeal. The entirety of
    her analysis on this issue is as follows:

[
60
] For the reasons set out above, the
    second claim, being the claim for business interruption losses, commenced
    latest on the day the sale to Amore Sweets closed. It was at that time that the
    plaintiffs knew or had the means of acquiring the knowledge that they had a
    claim for business interruption losses arising out of the loss of their
    property.

[
61
] However, a claim for business
    interruption losses is, by its nature, an ongoing claim. As the Saskatchewan
    Court of Appeal stated in
Treeland Motor Inn Ltd. v. Western Assurance Co.
,
1985 CarswellSask 165 (Sask C.A.)
at para. 4,
the alleged interruption of the
    plaintiffs business might have commenced with a particular event (in that
    case, a fire; in this case, the closing of the sale to Amore Sweets) but
    continued to accrue from day to day thereafter, and cannot therefore be said to
    have occurred on the day of the event which triggered it.

[
62
] In effect, the plaintiffs business
    interruption claim is subject to a rolling limitation period. A new claim
    accrues each day for the business losses sustained that day. I thus conclude
    that the plaintiffs claim for business interruption (to the extent it can be proven
    in the next phase of this trial) beginning one year before the commencement of
    the second action is not out of time - that is, the business interruption
    losses suffered commencing November 16, 2001 are not barred by reason of the
    contractual limitation period. To the extent the plaintiffs seek recovery for
    business interruption losses they suffered before November 16, 2001, those
    claims were not advanced within the contractual limitation period and are
    therefore barred.

[
63
] In conclusion on this issue, the claims
    for business interruption losses beginning one year before the commencement of
    the second action are not barred by the contractual limitation period. The
    other claims advanced in the second action are barred.

[26]

It
    is clear from the foregoing that the trial judge found that, for both property
    and business interruption claims, the appellants knew or had the means of
    knowing as of the closing of the sale that they might have a claim under the
    policy. However, because a claim for business losses is on-going in nature,
    the trial judge concluded that it is subject to a rolling limitation period. Turning
    first to the cross-appeal, the issue for determination is whether the trial
    judge erred in law in reaching that conclusion. For the following reasons, I
    conclude that she did.

[27]

I
    start my analysis of this issue with the case relied on by the trial judge,
Treeland
    Motor Inn Ltd. v. Western Assurance Co.
, 37 Sask. R. 289. It was an oral
    endorsement from the Court of Appeal for Saskatchewan consisting of five
    paragraphs, in a situation where the limitation period was missed by one day.
    The policy in issue provided: Every action or proceeding against the insurer
    for the recovery of any claim under or by virtue of this contract shall be absolutely
    barred unless commenced within one year next after the loss or damage occurs.
    The court found that the business interruption losses continued to
accrue from day to day thereafter, and cannot
    therefore be said to have occurred on the day of the event which triggered
    it, namely the day of the fire.

[28]

Treeland
has never been followed in Ontario. It was referenced briefly by Stinson J. in
DK
    Manufacturing Group Ltd. v Co-operators General Insurance Company
, 2016 ONSC 3983. However, he expressly declined to
    decide whether it should be followed. Stinson J. also referenced
Triple
    Five Corp. v. Simcoe & Erie Group
, 102
    A.R. 101 (Q.B.), where the court reached a similar conclusion to
Treeland
. In
Triple Five Corp.
, the insurance company conceded that business
    interruption losses continued to accrue after the accident. Thus, there was no
    analysis of the issue.

[29]

The respondent relies on several decisions of this
    court where a one-year limitation clause with the same or nearly identical
    wording to the limitation clause in the present case was enforced for business
    interruption loss claims:
International Movie Conversions Ltd. v.
    ITT Hartford Canada
, 57 O.R. (3d) 652
    (C.A.);
Boyce v. Co-operators Insurance Company
, 2013 ONCA 298, 116 O.R. (3d) 56;
LeBlanc
    & Royle Enterprises Inc. v. United States Fidelity and Guaranty Co.
, 17 O.R. (3d) 704 (C.A.). As the appellants point
    out, however, in none of those cases did the insured assert that the business
    interruption claims were subject to a rolling limitation period.

[30]

In addition to the foregoing cases, the respondent
    also relies on a decision of this court that did not deal with business
    interruption losses:
Goorbarry v. Bank of Nova Scotia
, 2011 ONCA 793, 109 O.R. (3d) 92. In that case,
    Feldman J.A., writing for the court, rejected the submission that a claim for
    long-term disability was subject to a rolling limitation period. The policy
    provided that a claim had to be asserted within two years of the covered
    event. That term was not defined, but Feldman J.A. found that a covered event
    occurred twice under the policy: first, when the insured provided initial proof
    of disability, and second, when the insured was deemed to have ceased to be
    disabled. Because these events did not reoccur each month, a rolling limitation
    period was inapplicable:
Goorbarry
,
    at para. 13.

[31]

In so ruling, Feldman J.A. distinguished the obiter
    comments of this court in
Wilsons Truck Lines Ltd. v. Pilot
    Insurance Co.
(1996), 31 OR (3d) 127 (C.A.).
    There, the policy required the initial payment for no-fault accident benefits to
    be paid by the insurance company within 30 days of filing and further payments
    to be paid every 30 days. The policy further provided that any action under the
    policy must be commenced within one year of when the cause of action arose. The
    court found that the insureds cause of action crystallized 31 days after he
    made his claim and then stated, If he was entitled to those benefits, his
    right to sue for them accrued every thirty days thereafter:
Wilsons
    Truck Lines
, at p.143. No explanation was
    given regarding why a rolling limitation period would apply in the
    circumstances.

[32]

Another instructive non-business interruption case
    from this court is
Bonilla v. Preszler
, 2016 ONCA 759, 134 O.R. (3d) 478. There, the trial judge granted
    summary judgment and dismissed the appellants action against the respondent
    insurer for terminating the Income Replacement Benefits (IRB) she had been
    receiving. On appeal, the insured argued that her claim was subject to a
    rolling limitation period. This court rejected that argument, finding that, It
    is well established in this courts case law that the limitation period is
    triggered by a single event, which is the refusal of an insurer to pay the IRB
    claimed:
Bonilla
, at para. 10.

[33]

This court most recently considered the availability
    of rolling limitation periods in the context of an alleged breach of a lease of
    commercial property. In
Pickering Square Inc. v. Trillium College
    Inc.
, 2016 ONCA 179,

347 O.A.C. 124,
the defendant tenant paid rent as required but failed
    to operate a business continually on the leased premises as it was obligated to
    do under the lease. The court found that this was a continuing breach because
    the plaintiff chose to affirm the lease and, as a result, the parties were
    required to perform their obligations under it as they fell due:
Pickering
    Square
, at paras. 30-34.

[34]

None of the cases cited above
    are on all fours with the case at bar. The cases relied on by the appellants
    are closer factually to the present case, but they are not binding and are largely
    devoid of analysis.
It is necessary therefore to consider first
    principles to determine whether this is one of those instances where the court
    should recognize a rolling limitation period.

[35]

The
    jurisprudence suggests that a rolling limitation period may apply in a breach-of-contract
    case in circumstances where the defendant has a recurring contractual
    obligation. The question is not whether the plaintiff is continuing to suffer a
    loss or damage, but whether the defendant has engaged in another breach of
    contract beyond the original breach by failing to comply with an ongoing
    obligation. In cases where there have been multiple breaches of ongoing
    obligations, it is equitable to impose a rolling limitation period.

[36]

In
Richards v. Sun Life Assurance Company of Canada
, 2016 ONSC 5492, [2016]
    I.L.R. I-5911, at para. 26, Bale J. distinguished between cases where the
    plaintiff is entitled to periodic payments and cases where the plaintiffs
    entitlement to periodic payment is in issue:

A rolling limitation period may apply to claims for periodic
    payments, in cases where the issue is whether certain payments to which the
    plaintiff is entitled have been made (e.g. payments of rent), as opposed to
    cases where the issue is whether the plaintiff was entitled to the periodic
    payments in the first place. In the former type of case, the material facts
    will have arisen on a periodic basis, and it will not be unfair to require a
    defendant to litigate those facts during the applicable limitation period
    following the date upon which an individual payment became due. However, in the
    latter type of case, the material facts will have arisen at the time that the
    plaintiff alleges he or she first became entitled to periodic payments, and it
    would be unfair to require the defendant to litigate those facts, for a
    potentially unlimited period of time.

[37]

In my view, where the
    trial judge erred was in focussing her analysis on the question of whether the
    appellants were continuing to suffer damages rather than on the issue of
    whether the respondent had a recurring contractual obligation. Unlike
Pickering
    Square
, where
    the tenant had a recurring obligation to occupy the premises every month during
    the term of the lease, the respondent was not obliged to make recurring payments.
    Rather, the policy covered business
interruption
losses and the respondent was obliged to pay
    those losses in their totality, subject to any limits in the policy. The fact
    that there was a 24-month cap on the business interruption losses does not
    convert the respondents obligation to indemnify into a recurring contractual
    obligation. Therefore, this was not a proper case for the application of a
    rolling limitation period.

[38]

The appellants knew as of
    the closing date for the sale of the businesses that they no longer had the
    assets under their control and that consequently they would thereafter suffer business
    interruption losses. While the precise amount of the damages was unknown, the
    appellants knew at that point that they had suffered loss or damage and under
    the policy they were obliged to commence a claim within one year. The fact that
    the extent of damages may not be known with precision does not stop the
    commencement of the limitation period:
Peixeiro v. Haberman
,
[1997] 3 S.C.R. 549, at
    para. 18. The Second Action was consequently time-barred in its entirety.

[39]

Based
    on the foregoing, I would dismiss the appeal and allow the cross-appeal in
    relation to the Second Action.


V.

Disposition

[40]

I
    would dismiss the appeal and allow the cross-appeal, with costs payable by the
    appellants jointly and severally in the agreed-upon all-inclusive amount of
    $20,000. The trial judge made a cost order in relation to the First Action, but
    not the Second Action. The matter is remitted to the trial judge for a
    determination of the costs of the Second Action if the parties are not able to
    reach an agreement in that regard.

Released: C.W.H. July 31, 2019

C.W. Hourigan J.A.

I agree. David M. Paciocco
    J.A.

I agree. Fairburn J.A.





[1]

This order has not been filed on appeal.


