The Ontario Court of Appeal Considers Insurance Policy Interpretation in Early COVID-19 Coverage Claim

  • September 29, 2022
  • Thomas Russell


The COVID-19 pandemic has left a scar upon numerous sectors in Canada, leaving many businesses reliant on their insurance coverage plans for the resulting business losses. 202135 Ontario Inc., et al v. Northbridge General Insurance, 2022 ONCA 304  appears to be the first COVID-relating coverage case to come before the Ontario Court of Appeal. In this case, the court considered how to interpret a limit of liability clause, ultimately finding in favor of the insured.[1]

Background Facts

The underlying facts of the case are relatively simple. The insured party owned seven daycare centre locations around Toronto which were insured for property and business losses by Northbridge between February 3, 2020 to February 3, 2021. Due to the COVID-19 pandemic, all seven daycare centre locations were closed between March 17, 2020 and June 22, 2020, causing business losses.

The insurance policy which covered the insured party was more complicated and lead to the disagreement between the parties. The original insuring agreement under the policy did not include coverage for business losses in the case of a pandemic. However, this coverage was added under an endorsement titled the A.D.C.O. Program Endorsement.

The A.D.C.O endorsement included the limit of liability clause, which provided:

“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”. . . .”[2]

Under this clause, liability would be limited either to $50,000 or, if provided, an amount indicated under the ‘schedule’. The policy included a schedule for each of the seven insured properties. None of the seven schedules provided a relevant limit of liability. Therefore, under this policy, Northbridge was required to provide the insured up to $50,000 for business losses caused by COVID-19.  

It was under this situation that the parties arrived at their disagreements. Northbridge insisted that this limit of liability clause, when read on its own, clearly and unambiguously meant that the maximum coverage was an aggregate total of $50,000 per policy period for all seven locations. The insured, on the other hand, argued that the limit of liability clause, read in the context of the policy as a whole, clearly and unambiguously meant that the limit of liability was $50,000 per location.

This matter was brought to an application judge, who found that the limit of liability clause was ambiguous, and ultimately found in favour of the insured. In response, Northbridge appealed to the Ontario Court of Appeal.