942325 Ontario Inc. v. Commonwealth Insurance Co. [[2005 22135 (ON SC)](https://www.canlii.org/en/on/onsc/doc/2005/2005canlii22135/2005canlii22135.html), 75 O.R. (3d) 653]

81 O.R. (3d) 399

Court of Appeal for Ontario

Weiler, Gillese and Blair JJ.A.

March 10, 2006

Insurance -- All risk insurance -- Interpretation and construction -- Owner of chain of grocery stores sustaining losses of perishable food due to lack of refrigeration resulting from province-wide power failure -- All risk policy insuring against "all risks of direct physical loss of or damage to property" -- Insured's property losses being directly caused by blackout -- Property losses not falling under any exclusion clause in policy.

NOTE: The catchlines above relate to a decision of Milanetti J. of the Superior Court of Justice. An appeal of this judgment to the Court of Appeal for Ontario (Weiler, Gillese and Blair JJ.A.) was dismissed on March 10, 2006. The appeal book endorsement of the court was as follows:

Robert J. Clayton, for appellant. J. Ross MacFarlane, for respondent. @1@H

[1] ENDORSEMENT BY THE COURT: -- Commonwealth Insurance Company and Zurich Insurance Company (the "appellants") appeal the order requiring them to indemnify the respondent, Commisso's grocery stores carrying on business as 942325 Ontario Inc., for property losses suffered as a result of a massive power failure in southern Ontario in August, 2003.

[2] The appellants raise several grounds of appeal related to the application judge's interpretation of the "all risk" insurance policy carried by the respondent.

[3] The first relates to the cause of the respondent's losses. Pursuant to the policy, coverage extends to "direct physical loss . . . or damage to property insured, except as herein excluded". The appellants' interpretation is that the property losses were not directly caused by the blackout but by the lack of refrigeration. The application judge held that the losses were directly caused by the blackout. We agree with her conclusion that the blackout was the proximate cause of the loss. The respondent's stock would not have been discarded had the unusual and unexpected blackout not occurred. "Proximate" does not mean "closest in time"; the blackout was an effective cause of the loss.

[4] Second, the appellants submit that the application judge erred in holding that there was some ambiguity in the exclusion provisions of the policy. We agree with the application judge that there was. Accordingly, any ambiguity in the policy must be read in favour of the insured.

[5] Third, the appellants rely on the prior decision of this court in Fresh Taste Ltd. v. Sovereign General Insurance Co., 2005 34559 (ON CA), [2005] O.J. 4076, 27 C.C.L.I. (4th) 7 (C.A.) where, pursuant to a [page400] policy containing somewhat similar wording, the court held that the exclusion clause applied. In our opinion, the wording of the Fresh Taste policy is distinguishable from that in the present policy. Under both policies, coverage is excluded if the change of temperature was a direct or indirect cause of the loss. However, under the policy in the case before us, the exclusion is stated to not apply to "loss or damage caused directly by a peril otherwise insured and not otherwise excluded under this Section". The loss was caused by the power outage, "a peril otherwise insured", which was not "otherwise excluded" under the Section.

[6] Fourth, the appellants rely on the exclusion in the policy under C Perils excluded, sub-paragraph (xi), for electrical injury or disturbances from artificial causes, . . . electrical breakdown in or on the premises, "unless a peril not otherwise excluded ensues". Again, as we interpret the policy, the power outage is not otherwise excluded by the clause.

[7] Fifth, the appellants submit the loss is consequential and consequential loss caused directly by a change in temperature due to damage to equipment is excluded. The damage here was not caused by damage to the refrigeration equipment.

[8] Finally, the appellants also rely on the wording of an exclusion endorsement entitled "Mold, fungus, wet and dry rot and bacteria exclusion endorsement". We agree with the application judge that the appellants produced insufficient evidence to invoke this exclusion. We also reject the appellants' submission that they would, at this stage, be entitled to prove on an item-by-item or store-by-store basis as part of a further adjustment process that loss was due to bacterial infestation. The record supports the conclusion that the food was disposed of as a matter of public safety pursuant to government guidelines, not necessarily due to bacterial infestation.

[9] Accordingly, the appeal is dismissed. The costs of the appeal are to the respondent and are agreed at $15,000, all inclusive.

Appeal dismissed.