back to publications search

Rolling Limitation Periods For Business Interruption Coverage

October 25, 2019

This July, the Ontario Court of Appeal released a unanimous decision holding that the limitation period to enforce a claim for indemnity for business interruption loss (“BI”) begins to run from the date of the underlying loss. In so holding, the Court declined to follow a well-established body of caselaw in the western provinces to the effect that the limitation period to enforce BI claims “roll” throughout the indemnity period under the policy.

In Marvelous Mario’s Inc. v. St. Paul Fire and Marine Insurance Co. (“Marvelous Mario’s”) the insured sought coverage under a commercial policy which covered “direct loss from any Peril” for loss of property due to theft and related business interruption loss.

The litigation was commenced after the one-year limitation period stipulated in the policy. In the lower court, the claim arising out alleged theft or mishandling of goods was dismissed based on the missed limitation period; however, the court allowed the BI claim, holding that such claims are subject to a rolling limitation period. The court reasoned that a new claim accrued each day following the theft during the indemnity period.

On appeal, all findings were upheld except for the conclusion that BI claims are subject to a rolling limitation period. In dealing with this issue, the Court of Appeal noted that the analysis performed by the trial judge was largely based on a 1985 decision of the Saskatchewan Court of Appeal called Treeland Motor Inn Ltd. v. Western Assurance Co. (“Treeland”), which had never been followed in Ontario. The Ontario Court of Appeal declined to follow Treeland, and the other decisions that were cited in support, saying that they were largely devoid of a substantive analysis of the issue.

The Court of Appeal held that in the context of an action for breach of contract, it is only equitable to impose a rolling limitation period where there have been multiple breaches of a recurring contractual obligation. As such, whether a rolling limitation will exist will depend on whether the Insurer has repeatedly breached a recurring contractual obligation. When examining the policy, the Court of Appeal found that the Insurer was not obliged to make recurring payments but to indemnify for the covered losses in their totality. Additionally, while there was a 24-month cap on the BI claim, the indemnity period itself did not convert the Insurer’s obligation into a recurring contractual obligation. As such, the Court of Appeal concluded that the BI coverage was not subject to a rolling limitation period.

In stark contrast, case law in Saskatchewan, Alberta and British Columbia generally seems to hold that BI claims are subject to rolling limitation periods.

In the seminal case, Treeland, a decision of the Saskatchewan Court of Appeal, the Insured sustained damage to his property due to a fire. The Insured had a policy covering BI losses which contained a contractual limitation period of one-year “next or after the loss or damage occurs”. One year and one day after the fire, the insured filed its statement of claim for its BI loss. The Saskatchewan Court of Appeal addressed the issue of when “damage occurs”, holding that, “[s]uch loss or damage as may have been sustained in this case as a result of the alleged interruption of the Plaintiff’s business, commenced with the fire 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, namely the day of the fire.

Subsequently, Treeland has been followed by the Saskatchewan Court of Queen’s bench in multiple decisions and has been followed in British Columbia and Alberta.

In Wenngatz Construction & Holdings Ltd. v Canadian Surety Co. (a decision from British Columbia), the insured claimed under a multi-peril policy for capital loss and rental loss resulting from a fire in one of its apartment blocks in February 1984. The action was filed in March 1985.

The contractual limitation period provided that claims that were not commenced within “one year next after the loss or damage occurred” were barred. The insurer brought a motion for summary judgment dismissing the case on the basis of the missed limitation period. In declining to summarily dismiss the action, the court found that the reasoning in Treeland applied such that the limitation period for the BI loss, “commence[d] with the fire and continue[d] to accrue from day to day thereafter”.

The Treeland reasoning was subsequently affirmed in Jaffsons Properties Inc. v. Gerling Global Insurance Co. and Nikka Developments Ltd. v. Maplex General Insurance Co., both decisions of the British Columbia Superior Court.

Three years after Treeland, the Alberta Court of Queen’s Bench in Triple Five Corp. v Simcoe & Erie Group approvingly cited the case for the proposition that BI claims are subject to a rolling limitation period. However, as noted by the Court of Appeal in Marvelous Mario’s, in Triple Five the Insurer had conceded that the BI loss continued to accrue after the accident and could not be said to have “occurred” on the date of the accident.

Thereafter, in 718340 Alberta Ltd. v. C.G.U. Insurance Co. of Canada, the Alberta Court of Queen’s Bench applied Treeland, saying, “[b]ecause we are dealing with business losses, the case law is settled that the limitation period does not begin to run on the date of the accident, in this case the explosion and fire.” The court concluded that the limitation period for the BI claim did not begin to run until the last day of the indemnity period.

As a result, there are now two lines of conflicting authority and whether a given BI claim will be subject to a “rolling” limitation period will depend in part on where the loss occurs. In Saskatchewan, Alberta and British Columbia, other things being equal, BI claims will likely be subject to a rolling limitation period, unlike in Ontario. For many of the remaining provinces, it remains to be seen whether the courts will adopt the reasoning of the Ontario Court of Appeal in Marvelous Mario’s or the reasoning adopted in the western provinces, as exemplified by Treeland.

Do not miss the latest developments in Canadian insurance law