COVID-19 Fails to Constitute “Direct Physical Loss or Damage” at Court of Appeal

  • November 30, 2023
  • Thomas Russell


As the world struggles to recover from the effects of the COVID-19 pandemic, one question that has been gaining some attention in the world of insurance is: in what circumstances did COVID-19 trigger coverage for business interruption under property policies?

In the United States and Australia, courts have previously found that COVID-19 would not trigger coverage under a property policy where there was a “physical” requirement included in the definition of “property damage”.[1]

In SIR Corp v Aviva Insurance Company of Canada[2], released by the Ontario Court of Appeal earlier this month, Canadian courts are ruling in the same direction.

Background Facts

During the COVID-19 pandemic, many small businesses saw their operations suspended by emergency orders from the provincial government. The Appellant in this case, SIR Corp. and related entities (“SIR”), own and operate approximately 60 restaurants.[3] As a result of an emergency order by the Ontario Government during the pandemic, SIR was unable to offer in-person dining in its restaurants, resulting in damage to its food and beer stock and otherwise causing business losses.[4]

SIR sought coverage from their insurer, Aviva, under an all-risk insurance policy, but was denied.[5] SIR took the matter to court and subsequently lost at the Superior Court of Justice in 2022.[6]