Insurers faced with barrage of COVID-19 coverage disputes

More than a dozen coverage disputes arising from business interruption from lockdowns and restrictions during the COVID-19 pandemic are making their way through Ontario courts.

Law firm McCarthy Tetrault has served 17 individual statements of claim with the Ontario Superior Court of Justice against insurers, Justice Edward Belobaba noted in a decision released May 27.

That late-May decision is not on the merits of any particular case. Justice Belobaba’s ruling was to deny a motion from four defendant insurers — Economical Mutual Insurance Company, Gore Mutual Insurance Company, Intact Insurance Company and Novex Insurance Company — named in a separate proposed class-action lawsuit initially launched in July 2020. The decision is indexed as Workman Optometry v. Aviva Insurance because Aviva is the first proposed defendant insurer listed in alphabetical order and Workman is one plaintiff. Aviva is not one of the moving parties in the May 27 ruling.

Allegations against the insurers have not been proven.

Specifically, Economical, Gore Mutual, Intact Insurance Company and Novex asked for a temporary stay on the individual lawsuits filed by McCarthy Tetrault. This is because the separate proposed class action (filed by law firms Koskie Minsky and Merchant Law Group), in which those four insurers are among more than a dozen named defendants, is awaiting a certification ruling.

In the proposed Workman class action, Koskie Minsky and Merchant Law Group aim to sue more than a dozen insurers on behalf of all persons and corporations in Canada who had contracts for business interruption insurance who suffered losses either as a consequence of COVID-19 or as a result of decisions regarding COVID-19.

In Ontario, the pandemic emergency order meant the representative plaintiffs were forced to close or significantly reduce the operations of their businesses, according to the original statement of claim in the Workman class action.

Now McCarthy Tetrault is representing commercial insurance claimants who want to pursue their own coverage dispute lawsuits.

Separately, lawyers have told Canadian Underwriter that different business interruption insurance policies have different wordings. Several insurers have publicly said most of their BI policy wordings only provide coverage if there is some form of physical loss or damage to the property.

In Ontario, potential plaintiffs who do not wish to be part of a certified class action lawsuit and be bound by its results must take active steps to opt out of the proceeding, Torys noted in an article titled Class Actions in Canada Part 1: Class Proceedings 101.

“If a plaintiff (pursuing an individual lawsuit) has good reason to reject the class proceeding and pursue an individual claim, then as a general proposition they should have every right to do so,” Justice Belobaba wrote in his May 27, 2021 decision.

Justice Belobaba cited an affidavit from an official with Sunwing Travel Group (one of the plaintiffs represented by McCarthy Tetrault) stating that Sunwing does not want to be part of the Workman class action.

Sunwing had a policy written, on a subscription basis, by Economical and Allianz Global Risks US Insurance Company.

Sunwing is suing those two insurers for at least $125.5 million, for damage and loss related to the COVID-19 pandemic. Allegations against Economical and Allianz have not been proven.

“Sunwing wants its claim determined based on the approach developed and implemented by its counsel of choice” Sunwing chief operating officer Andrew Dawson stated, as quoted in the May 27 court ruling.

“The past year has been difficult for our business, and Sunwing wants its claim prosecuted as quickly as possible. Sunwing’s claim is sizeable, and any recovery will be most impactful now, while Sunwing is trying to recover financially” from COVID-19 and the resulting government orders.

“Sunwing is willing and prepared to go through discovery and proceed to a hearing on the merits of its case on an expedited basis,” Dawson stated, as quoted by the court, in explaining why Sunwing wants to opt out of a class action.

Economical Insurance is a party in the proposed Workman class action but Allianz is not. Economical and McCarthy Tetrault declined to comment for this story.

A spokesperson for Allianz Global Corporate & Specialty told Canadian Underwriter on Wednesday that AGCS does not comment on individual claims settlements or pending legal matters.

“As a result of the coronavirus pandemic Allianz Global Corporate & Specialty, the corporate insurer of Allianz Group, has been notified of a number of claims from businesses around the world which we evaluate on a case-by-case basis to determine coverage. We will certainly honour COVID-19-related claims where they are part of our policies and cover is clear. However, many businesses will not have purchased cover that will enable them to claim on their insurance for COVID-19 pandemic losses,” the AGCS spokesperson said.

In Ontario, a judge has the authority to temporarily stay an individual lawsuit before a court has made a ruling on whether or not to certify a separate proposed class action.

Quoting from Singh v. RBC Insurance Agency Ltd., released in 2020, Justice Belobaba wrote in Workman that four prerequisites must be met before an Ontario judge can temporarily stay an individual lawsuit pending certification of an Ontario class action lawsuit. Those prerequisites are:  There is substantial overlap of issues in the two proceedings; the two cases share the same factual background; issuing a temporary stay will prevent unnecessary and costly duplication of judicial and legal resources; and the temporary stay will not result in an injustice to the party resisting the stay.

In the 17 individual lawsuits against insurers filed by McCarthy Tetrault a temporary stay would result in injustice to those plaintiffs, Justice Belobaba found, while also finding that not granting the motion would not result in prejudice to Intact, Novex, Gore or Economical.

There is no prejudice to the four insurers because there is a possibility that the parties to the Workman class action may agree to a consent certification, making a motion by Economical, Intact, Novex and Gore moot, Justice Belobaba wrote.

The defendant insurers can also bring a motion to court to determine, as a question of law, the availability of insurance coverage under the standardized “physical loss or damage” provision for COVID-related business losses, wrote Justice Belobaba. This could potentially resolve all 17 individual lawsuits and possibly many more without further litigation, he added.

Of the 17 lawsuits filed by McCarthy Tetrault, four are against Intact, five are against Novex, four are against Gore, and four are against Economical.

At one point, five class actions had been filed in Ontario against insurers, Justice Belobaba wrote in Workman Optometry et al v. Aviva Insurance et al., released Jan. 26, 2021, by the Ontario Superior Court of Justice.

As a result of Justice Belobaba’s Jan. 26, 2021 ruling, two separate proposed class actions, against Aviva, were now “carved off” from the Workman lawsuit because Aviva is providing significantly different policy wording from the other defendant insurers in the Workman case.

As a result, law firm Lerners was able to proceed with a separate proposed class-action lawsuit against Aviva, representing denturists and legion branches. Another proposed class action against Aviva is being carried by law firms Thomson Rogers, Lax O’Sullivan Lisus Gottlieb and Miller Thomson. Those firms represent Nordik Windows and other claimants wanting to sue Aviva over denial of BI coverage. Allegations against Aviva have not been proven.

There cannot be two or more certified class actions in the same jurisdiction representing the same class in relation to the same claim, Justice Belobaba wrote in the ruling released in January 2021.

Feature image via iStock.com/isayildiz