Court File and Parties

COURT FILE NO.: 3497/14 DATE: 2019-05-17 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: LE TREPORT WEDDING & CONVENTION CENTRE LTD. Plaintiff – and – CO-OPERATORS GENERAL INSURANCE COMPANY Defendant

Counsel: Emily Stock and Brandon Cook, for the Plaintiff Robert W. Dowhan and Matthew McMahon, for the Defendant

HEARD: April 1, 2, 4, 5, 8-10, 2019

Gray J.

[1] On July 8, 2013, there was a major rainstorm in the GTA. It was described as follows in exhibit 57, one of the documents filed by counsel for the plaintiff:

On July 8, 2013, the GTA experienced a rain event unparalleled in its recorded history. Environment Canada measured in excess of 90 mm of rain in less than two hours at Pearson International Airport. That is the highest amount of measured rainfall in that short a period of time since such data tracking began. As a result, flooding was widespread across the GTA. The storm of July 8, 2013 also produced the highest single day rainfall total in recorded history for the GTA.

[2] The plaintiff, which operates an enterprise in Mississauga catering largely to weddings, conventions, and similar events, suffered considerable damage as a result of the storm. The defendant, at the time, was the plaintiff’s insurer. The plaintiff claimed compensation for its loss, which was partially satisfied by the defendant. The plaintiff sues for the balance it claims is owing.

[3] For the reasons that follow, the action is dismissed.

Background

[4] As noted, the plaintiff is in the business of hosting wedding receptions and other functions. It has a large facility, approximately 32,000 square feet, at 1075 Queensway East in Mississauga, near the corner of the Queensway and Stanfield Road. Stanfield Road is approximately one kilometer west of Dixie Road.

[5] The principal of the plaintiff is John Cipressi. He purchased the business in part in 1988, and purchased the balance of it in 2004.

[6] At the times material to this case, the premises were insured pursuant to an insurance policy issued by the defendant, Co-operators General Insurance Company. The policy had been sold to the plaintiff by Josie Croucher, an agent acting on behalf of the defendant.

[7] The policy is an “all-risks” policy, subject to certain exclusions, which themselves are subject to certain exceptions.

[8] The policy itself consists of a number of “forms”. At the risk of too much detail, they include, for this policy, forms AB, B-1, AB-3, AB-11, B-1(8), AB-10, AB-100, and B-1(J). The client is given the option of purchasing different categories of insurance by the use of these forms, and the actual coverage can be tailored through the use of a “Declarations” page placed at the beginning of the policy. On the Declarations page, items such as deductibles and policy limits are specified. The actual coverages purchased by the plaintiff will be described in the evidence of Thomas Carroll, who testified on behalf of the defendant.

[9] The relevant provisions from form AB are as follows:

1. INDEMNITY AGREEMENT

   In the event that any of the insured property is lost or damaged during the policy period by an insured peril, the Insurer will indemnify the Insured against the direct loss or damage so caused to an amount not exceeding whichever is the least of:

   a. The value of the lost or damaged property as determined in the applicable form or endorsement;

   b. The interest of the Insured in the property;

   c. The limit of insurance specified in the “Declarations” for the lost or damaged property.

   The inclusion of more than one person or interest shall not increase the Insurer’s liability.

2. REQUIREMENTS AFTER LOSS

   a. Upon the occurrence of any loss of or damage to the insured property, the Insured must, if loss or damage is covered by the contract, in addition to observing the requirements of Statutory Conditions 9, 10 and 11:

   i) Immediately given notice of the loss or damage in writing to the Insurer;

   ii) Deliver as soon as practicable to the Insurer a proof of loss verified by a statutory declaration:

   1. Giving a complete inventory of the lost or damaged property and showing in detail quantities, costs, actual cash value and particulars of amount of loss claimed;

   2. Stating when and how the loss occurred, and if caused by fire or explosion due to ignition, how the fire or explosion originated, so far as the Insured knows or believes;

   3. Stating that the loss did not occur through any wilful act or neglect or procurement, means or connivance of the Insured;

   4. Showing the amount of other insurances and the names of other Insurers;

   5. Showing the interest of the Insured and of all others in the property with particulars of all mortgages, liens, encumbrances and other charges upon the property;

   6. Showing any changes in title, use, occupation, location, possession or exposures of the property since the issue of the contract;

   7. Showing the place where the property insured was at the time of loss;

   iii) If required by the Insurer, give a complete inventory of undamaged property, showing in detail quantities, cost, actual cash value of that property;

   iv) If required, and if practicable, produce accounts, warehouse receipts, stock lists, invoices and other pertinent records, verified by statutory declaration, as well as any relevant contracts or agreements with others.

   b. The evidence furnished under clauses a. iii) and iv) of this condition must not be considered proofs of loss within the meaning of Conditions 12 and 13.

3. REPAIR OR REPLACEMENT

   a. Unless a dispute resolution process has been initiated, the Insurer, instead of making payment, may repair, rebuild, or replace the insured property damaged or lost, giving written notice of its intention to do so within 30 days after receipt of the proof of loss;

   b. If the Insurer gives notice under subparagraph a. of this condition, the Insurer must commence to repair, rebuild, or replace the property within 45 days after receipt of the proof of loss, and must proceed with all due diligence to completion of the work within a reasonable time.

4. ACTION

   Every action or proceeding against the Insurer for the recovery of any claim shall be absolutely barred unless commenced within one year after the loss or damage occurs, unless legislation provides otherwise.

[10] The relevant provisions from form B-1 are as follows:

1. INSURED PROPERTY

   A. This Form insure the following items for which a limit of insurance is specified in the “Declarations” and only while at the “Premises”:

   “BUILDING”, “EQUIPMENT”, “STOCK”, “CONTENTS”, “ALL PROPERTY”

2. INSURED PERILS

   This Form, except as otherwise provided, insures against all risks for direct physical loss of or damage to the insured property.

3. EXCLUSIONS

   B. EXCLUDED PERILS

   This form does not insure against loss or damage caused directly or indirectly:

   b. in whole or in part by flood, including “Surface Water”, waves, tides, tidal waves, tsunamis, or the breaking out or overflow of any natural or artificial body of water. This exclusion applies whether or not there are one or more other causes or events (whether covered or not) that contribute concurrently or in any sequence to the occasioning of the loss or damage, except for loss or damage caused directly by resultant fire, explosion, smoke, leakage from “Fire Protective Equipment”, all as described in Claus 17 G. This exclusion does not apply to property in transit or loss or damage caused directly by leakage from a watermain;

   c. i) By seepage, leakage or influx of water derived from natural sources through basement walls, doors, windows or other openings

4. DEFINITIONS

   Wherever used in this Form:

   G “Named Perils” means:

   g Windstorm or Hail : there shall in no event be any liability for loss or damage:

   i) to the interior of the “building” or to “Contents” unless damage occurs concurrently with and results from an aperture caused by windstorm or hail;

   ii) directly or indirectly caused by any of the following, whether driven by wind or due to windstorm or not; snow-load, ice-load, tidal wave, tsunamis, high water, overflow, flood, waterborne objects, waves, ice, land subsidence, landslip.

   J “Surface Water” means water of natural precipitation temporarily diffused over the surface of the ground.

[11] The relevant provisions from Form AB-3 are as follows:

1. INDEMNITY AGREEMENT

   The insurer agrees to indemnify the Insured against loss directly resulting from necessary interruption of business, caused by destruction or damage by the perils insured against to property at the “Premises”, up to the limit(s) of insurance stated in the “Declarations” for this Form and subject to the provisions, limitations, exclusions, conditions and other terms of this Policy including this Form.

2. MEASURE OF RECOVERY

   This insurance, subject to the limit of insurance stated in the “Declarations”, is limited to loss of “Gross Profit” due to (a) Reduction in Turnover and (b) Increase in Cost of Working and the amount payable shall be:

   a. In Respect of Reduction in Turnover: the sum produced by applying the “Rate of Gross Profit” to the amount by which the “Turnover” during the “Indemnity Period” shall, in consequence of the destruction or damage by a peril insured against, fall short of the “Standard Turnover”.

   b. In Respect of Increase in Cost of Working: the Additional expenditure (subject to Provisions Claus b.) necessarily and reasonably incurred for the sole purpose of avoiding or diminishing the reduction in “Turnover” which but for that expenditure would have taken place during the “Indemnity Period” in consequence of the destruction or damage by a peril insured against, but not exceeding the sum produced by applying the “Rate of Gross Profit” to the amount of the reduction hereby avoided;

   Less any sum saved during the “Indemnity Period” in respect of such of the “Insured Standing Charges” as may cease or be reduced in consequence of the destruction or damage by the perils insured against;

   Provided that if the amount of insurance be less than the sum produced by applying the “Rate of Gross Profit” to the “Annual Turnover”, the amount payable shall be proportionately reduced.

3. DEFINITIONS

   e. “ Indemnity Period ” the period beginning with the occurrence of a peril insured against and ending no later than 12 months thereafter during which the results of the business shall be affected in consequence of the destruction or damage by a peril insured against, except that if media for, or programming records pertaining to, electronic data processing or electronically controlled equipment, including “Data” thereon, be destroyed or damaged by a peril insured against then the “Indemnity Period” in respect thereof shall not extend beyond

   i) 30 consecutive days after the occurrence of such destruction or damage; or

   ii) The date upon which liability ceases under this insurance for loss arising from other property destroyed or damaged by the same occurrence;

   Whichever shall be later.

   f. “ Rate Of Gross Profit ”: the “Rate Of Gross Profit” earned on the “Turnover” during the financial year immediately before the date of the destruction or damage by perils insured against

4. PROVISIONS

   f. On the happening of any destruction or damage by a peril insured against in consequence of which a claim is or may be made under this Form, the Insured shall with due diligence do and concur in doing and permit to be done all things which may be reasonably practicable to minimize or check any interruption of or interference with the business or to avoid or diminish the loss.

[12] The relevant provisions from Form AB-11 are as follows:

1 The Insurer agrees to amend the basis of settlement from actual cash value to “replacement cost” subject to the following provisions:

a. “replacement” shall be effected by the Insured with due diligence and dispatch;

b. “replacement” shall be on the same site or on an adjacent site;

c. Settlement on a “replacement cost” basis shall be made only when “replacement” has been effected by the Insured and in no event shall it exceed the amount actually and necessarily expended for such “replacement”;

d. Failing compliance by the Insured with any of the foregoing provisions, settlement shall be made as if this endorsement had not been in effect;

e. Any other insurance effected by or on behalf of the Insured in respect of the perils insured against by this Policy on this property to which this endorsement is applicable shall be on the basis of “replacement cost” as defined herein;

f. If this Policy insures two or more items, this endorsement applies separately to each item to which this endorsement applies.

2 Any reference to actual cash value in a co-insurance clause in this Policy is deemed to be a reference to “replacement cost” of the property insured.

[13] Forms AB-100 and B-1(J) are of critical importance from the perspective of this case. Form AB-100, in its entirety, reads as follows:

FLOOD ENDORSEMENT

This policy is extended to include, only if indicated in the “Declarations”, loss or damage caused directly by the peril of flood subject to the following conditions;

1. FLOOD

   For the purpose of this endorsement, flood shall mean the rising of, the breaking out or the overflow of any body of water, whether natural or man-made and includes waves, tides, tidal waves and tsunamis.

2. DEDUCTIBLE CLAUSE

   The Insurer is liable for the amount by which the loss or damage caused by flood exceeds the amount of the deductible specified in the “Declarations” in any one occurrence. This Deductible Clause applies separately to each location for which flood coverage is provided.

3. EXCLUSIONS

   This endorsement does not cover loss or damage caused directly or indirectly by:

   a. water which backs up through sewers, sumps, septic tanks or drains;

   b. water below the surface of the ground including that which exerts pressure on or flows, seeps or leaks through sidewalks, driveways, foundations, walls basement or other floors, or through doors, windows or other openings in such sidewalks, driveways, foundations, walls or floors;

   c. any of the following perils whether or not caused by or attributable to flood: fire, explosion, smoke, “Leakage From Fire Protective Equipment” or leakage from a watermain, theft, riot, vandalism or malicious acts.

4. EXTENSION OF COVERAGE

   The Insurer shall be liable for loss or damage to the property insured caused by wind, hail, rain or snow entering a building through an opening in the roof or walls directly resulting from a flood.

5. PRO RATA CLAUSE

   The Insurer shall only be liable for that proportion of a loss payable under this endorsement which the amount insured hereunder bears to the total amount of insurance covering the peril of fire on the same property. If the Policy covers two or more items, this provision shall apply to each item separately.

[14] Form B-1(J), in its entirety, reads as follows:

SEWER BACK UP ENDORSEMENT

The coverage provided by this Policy is extended to include loss or damage caused directly by the backing up of sewers, sumps, septic tanks or drains subject to the following:

Limit of insurance

The liability of the Insurer for this extension of coverage shall not exceed the lesser of:

1. The limit of insurance stated in the “Declarations’ for the Form to which this endorsement attaches or

2. The limit of insurance specified in the “Declarations” for this Form.

Deductible

The Insurer is liable in any one occurrence for the amount by which the loss or damage exceeds $2,500, or the amount of the deductible for this Form specified in the “Declarations”, whichever is greater.

All other terms and conditions of this Policy remain unchanged.

[15] Mr. Cipressi testified that his facility is part of a larger plaza, that has a large parking lot in front of the property, between the building and the Queensway. Between the parking lot and the Queensway, there is a shallow ditch, which is approximately three or four feet wide. At the entrance to the building is a six-inch curb and then a four-inch lip.

[16] Approximately 600 metres east of the facility, there is a small ditch, that appears to be a creek, known as Tonelli Creek. It runs from a point north of the Queensway and, when it reaches the Queensway, it then goes underground in a southerly direction. Approximately one year ago, Mr. Cipressi attended at Tonelli Creek and took a number of photographs, which were entered in evidence. They show a very small amount of water in the bottom of the ditch, which appears to have banks about two or three feet high in some places. The pictures were apparently taken in early spring, because there are no leaves on the trees.

[17] Mr. Cipressi testified that on July 8, 2013, he was at the property at approximately 5:00 p.m. waiting for a client. He testified that shortly thereafter rain came pouring down. He testified that there were massive amounts of rain, which caused considerable flooding on the Queensway. Water was flowing down the Queensway, westward, and cars on the Queensway had water up to the mid-point of their hubcaps. Water came pouring from the Queensway across the ditch, into the parking lot, and ultimately into the building after about one half hour of rain.

[18] Mr. Cipressi testified that he saw a canoe paddling down the Queensway, from east to west. By that point, cars on the Queensway were stalled because of the amount of water. He testified that there were two or three cars in the parking lot, and the water by then was three quarters of the way up the tires of the cars.

[19] Mr. Cipressi testified that water was entering the building through the doors and was falling from the ceilings. Water was also coming up into the building from floor drains. He testified that the building has a flat roof, with a six-inch parapet, and water was flowing over the roof. It was also flowing into the building through the roof in various ways.

[20] Mr. Cipressi testified that there were at least two inches of water in the front lobby. There was water in the washrooms, and in the large event rooms water was at least ankle deep. There was water in the part of the building used as a warehouse, and it became necessary to disconnect the power.

[21] Mr. Cipressi testified that during the rain storm, one customer showed up to drop something off.

[22] Mr. Cipressi testified that during the rain storm he called his bookkeeper, Eileen Duffy, because she had a relationship with Josie Croucher, and he asked her to call Ms. Croucher. Ms. Duffy advised that she had called Josie, and someone from the insurer would be on their way shortly.

[23] Mr. Cipressi testified that by 8:00 or 9:00 o’clock in the evening, no one from the insurer had showed up, and at around midnight someone called and said that it would not be possible to come until the next morning.

[24] Mr. Cipressi testified that the next morning, before someone from the insurer arrived, he was able to find some equipment in Hamilton to start the cleaning process. That morning, he was able to get a contractor, and some friends and family, to assist.

[25] Mr. Cipressi testified that at around 11:00 a.m. Tom Baldassara arrived. He was with a contractor that is regularly used by the insurer. He advised that because of the number of claims arising out the of rain storm, there was only a limited amount he could do right away, but Mr. Baldassara advised that they should “keep doing what you’re doing”. Mr. Cipressi testified that two people came at around 5:00 or 5:30 p.m., with two fans and a dehumidifier, which were not sufficient under the circumstances.

[26] A number of photographs were taken by Eileen Duffy, which were entered into evidence. They showed a number of rooms in the facility that appeared to have different levels of damage. Most of the water had by then been dispersed through open doors. Many of the carpets were still very wet, with water pooled on them. Around a number of drains there were obvious signs of sewage that had come up through the drains. Some ceiling tiles had fallen. Watermarks on some of the walls were obvious.

[27] Mr. Cipressi testified that there were a number of events scheduled at the facility. He considered it to be necessary to put them on, and he did so. A clean up was done to the best of their ability. Mr. Baldassara’s contracting company, FirstOnSite Restoration, had deodorized the property and dried it out, and had steam cleaned the carpets.

[28] While Mr. Cipressi was out of town, he received a call that someone from the insurer had shown up on Friday or Saturday, July 12th or 13th. He was told it was Thomas Carroll. Mr. Cipressi did not know he was coming, and he requested that they meet Monday July 15th, to which Mr. Carroll agreed.

[29] Mr. Cipressi testified that they met on July 15th. Present were Mr. Carroll, Mr. Baldassara, a representative from the contractor Mr. Cipressi had used on a temporary basis, Eileen Duffy, and himself. He testified that they met in the reception area, and examined the rest of the facility, including the washrooms, the kitchen and bar, and the various halls. The ceiling tiles, of which pictures had been taken, had by then been repaired or replaced.

[30] Mr. Cipressi testified that the tone was positive. He was advised that the insurer, under the circumstances, was very busy, and Mr. Carroll was handling over 80 files. He was told that “dark water”, which had come up from the drains, was bad, and anything it touched had to be thrown out. This was particularly the case with food products and anything soft such as chair covers.

[31] Mr. Cipressi testified that he told Mr. Carroll that he had functions ongoing that had to be put on. He testified that he wanted to schedule dates in October, November and January, when there was less going on, when any repair work should be scheduled. He wanted to get an estimate of the scope of the work and a schedule for doing it. He testified that everyone agreed to this.

[32] I should note at this point that there is significant disagreement about this issue, and its resolution will have some importance.

[33] Mr. Cipressi testified that he was advised by Mr. Carroll that it would take eight to ten weeks to do the tear out, the remediation and the rebuilding, and that it might take three months and he should allow for four or perhaps five months. He was told that he had business interruption insurance in any event.

[34] Mr. Cipressi testified that he overheard Mr. Baldassara say to Mr. Carroll that he, Mr. Cipressi, was just looking for money, and had no intention to have the insurer do the work, and that Mr. Cipressi would have the work done himself. Mr. Cipressi said this was not accurate.

[35] Mr. Cipressi testified that he was told that there would be prepared a quote for the tear out and repair work, and a schedule. He would be provided with funds to compensate for the emergency work that Mr. Cipressi had had done. Mr. Cipressi testified that he received a letter the next day, July 16, 2013, which surprised him. Because of its importance, I consider it necessary to reproduce it in full. It reads as follows:

Further to our conversation, this letter will confirm that we have discussed your loss and the activities we believe are crucial to proper mitigation and restoration of this loss. We clearly understand your concern regarding the scheduled functions and your need to not disrupt them; however improper mitigation is only going to create more problems for you and your business.

You are currently moving forward with functions such as weddings where hundreds of people are sitting in and walking around in a room with sewage contaminate carpets. This puts you a very serious risk of possible liability claims. Food is being served to clients in a room with hundreds of individuals moving around and disturbing the sewage particles in the carpet. You advised that you have to “crank” the air conditioning or the smell comes back. That smell is sewage contaminate building materials.

Again, we understand you feel a need to keep operating; however we have a very clear understanding of the need to mitigate this loss properly. The proper way to mitigate this loss is as follows:

1. Close your doors until the emergencies and repairs are completed. You have business interruption coverage to compensate you for the shutdown.

2. All carpeting in the halls need to be removed and replaced.

3. All drywall affected by the sewage must be removed and replaced.

4. All baseboards and other materials at ground level, affected must be removed and replaced.

5. All parquet flooring on the dance floors must be removed and replaced.

6. During the tear out phase, any other materials discovered to be affected need to be removed and replaced.

We do not feel that we are being given the authorization to move forward on this loss in a responsible way, not only for you, but for your clients. I have requested that Tom from First On Site immediately complete an estimate for the emergency tear out, cleaning and drying. I have also requested the estimate for the repairs to put everything back the way it was before the loss. I expect these estimates by Friday July 19, 2013. Once received, I will contact you to offer settlement so you can continue to handle this loss as you see fit.

Water damage may require specialized care and treatment in order to complete proper restoration and to minimize the extent of damage. It is particularly important to address any potential condition that could lead to micro-organism or mould growth. In that regard we would recommend that you consult with a water damage remediation specialist with appropriate training/qualifications from an industry recognized body such as the Institute for Inspections Cleaning and Restoration Certification (IICRC). For information regarding mould clean up you can refer to the Canada Mortgage and Housing Corporation (CMHC) website.

The Co-operators will not consider any new or additional loss/damage sustained due to lack of appropriate clean-up or remediation activity in relation to this incident under any circumstances.

[Emphasis added]

[36] Mr. Cipressi testified that he was surprised to receive the letter because he and Mr. Carroll had, in fact, discussed a shutdown of the business, but that it would be later. He noted that Mr. Carroll said he would obtain estimates for the emergency work and for the repairs by July 19, 2013.

[37] Mr. Cipressi was concerned about the suggestion, in the letter, that there could be danger from sewage particles and mould in the air, so he retained an air quality specialist to do tests and prepare a report. He obtained a report, that was filed in evidence, that appeared to show that air quality was generally acceptable, with the exception of one small area in the warehouse and in the washrooms. He got his contractor to fix that particular problem area. The cost was $4,780.18.

[38] Mr. Cipressi testified that he received a quotation on July 19, 2013 showing a cost for the emergency tear out work, in the amount of $46,396.32. He was paid that amount. He had actually incurred costs of $45,094.12, so it more than covered the emergency work. Mr. Cipressi testified that he asked when the repair quote was anticipated to arrive, and was told “it’s coming”.

[39] On July 23, 2013, Josie Croucher sent the following email to Eileen Duffy:

Eileen

I need to talk to you later today and go over the options to get moving on the repairs to the hall. There is a significant amount of tear out needed. Having the replacement carpets ready to go in could take a week to 10 days. The tear out and drying could be 10 days. The tear out of everything on a claim this size could be a few days. The proper drying time on water damage claims are minimum 3 days. We could be 10 days before we are in a position to begin repairs. The recent claims challenges are going to make it very tough to get repairs going anytime soon. But to keep going the way we are and not shutting down is setting us all up for further health claims not only to your clients but all of you as well, It is not healthy for any of you to be working in the office with the mould spoors floating around and being pushed around by the A/C.

I am in meeting this morning I’ll let you know when I’m out so we can discuss this further.

Josie

[Emphasis added]

[40] On September 26, 2013, Mr. Cipressi received an email from Mr. Carroll, to which was attached a quote from FirstOnSite for the repairs. The email is of some importance and I will reproduce it in full. It reads as follows:

Please find attached the estimate of repairs. The line item total (all labour and materials) is $105,533.94.

The estimate also allows 10% overhead for a general contractors overhead costs. You are not entitled to this amount if you are taking a cash settlement.

The estimate also allows 5% profit for our preferred contractor. As a client is not permitted to profit from their loss, you are not entitled to this amount either.

The estimate also includes 13% HST which is not paid to any commercial client on losses.

The number we are dealing with is $105,533.94. This would be considered full replacement cost of your loss. Your policy does have the replacement cost endorsement; however the full replacement cost is not paid until the repairs are completed. Until that time, the policy pays what is called Actual Cash Value. The actual cash value is a depreciated amount based on the age of the materials affected. Assuming 5% per year (meaning every 20 years you would be required to change carpets, paint….) after 20 years, the affected materials would be at the end of their life and have little to no retail value.

My understanding is that there was significant water damage at your location in 2009 where your previous insurer pad a cash settlement for the repairs (including carpeting) which was never replaced. Based on this, I can assume the materials affected have been there since at least 2008. Given this information, I would apply 25% depreciation (5% per year) to the $105,533.94) and offer $79,150.45 as the initial Actual Cash Value payment.

You are entitled to the full $105,533.94 however, all of the repairs listed in the estimate must be completed and an inspection of repairs and documentation of your costs up to $105,533.94 would need to be provided to recover the difference between replacement cost and actual cash value. I could negotiate a full and final settlement slightly higher than the $79,150.45 if you would prefer to do that.

Again, I apologize that this has taken so long.

[41] The attached quote from FirstOnSite appears to be a rather detailed outline of exactly what work needed to be done on each room that FirstOnSite considered required repair. The total cost was $105,533.94. Attached to the quote is a chart of the various rooms, and some rooms in the facility are not included.

[42] Mr. Cipressi testified that he was shocked to receive the estimate. It was not what he expected, and did not provide enough in terms of the repairs. He testified that it would not justify shutting down his business to effect the repairs as reflected in the quote.

[43] Mr. Cipressi testified that he advised Mr. Carroll that he was not happy with the quote, and that it was not fair.

[44] Mr. Cipressi testified that the email from Mr. Carroll and the quote contained no list of what items he should throw out. There was no instruction as to how to put in a claim for damaged equipment and inventory, or how to put in a claim for business losses. In fact, he testified that he never received a blank proof of loss from the insurer.

[45] Mr. Cipressi testified that he spoke to Mr. Carroll on more than one occasion and told him that he did not think the offer was fair, and that it was not enough.

[46] Mr. Cipressi testified that he received a letter dated March 24, 2014 from the insurer, advising that the insurer would no longer provide coverage effective May 1, 2014.

[47] Mr. Cipressi received the following email from Mr. Carroll on April 21, 2014:

Hello John

We have had multiple discussions regarding your claim. Based on the First On Site estimate of repairs, the Actual Cash Value of the repairs is $79,150.45. This payment was made today and will arrive by the end of the week. The payment is being made now as your claims prescription date is July 08, 2014. We are quickly approaching this date. When your repairs are completed, we will require a site meeting with First on Site to review all repairs. The only work that will be considered is what is contained in the Frist on Site estimate to a Replacement Cost of 100% of First on Sites estimate.

You have until July 08, 2014 to complete repairs and contact us for a site meeting to recover the difference between ACV and RC. If we do not hear from you by then, your file will be closed.

Thank you

Thomas Carroll

[48] Mr. Cipressi noted that there was nothing in the email regarding any claim for damage to the contents of the building or for business losses.

[49] Mr. Cipressi testified that he contacted a lawyer, Garfield Payne, who wrote to Mr. Carroll on May 2, 2014. He advised that a proof of loss would be forthcoming, which would include claims for equipment, contents, professional fees, extra expense and labour expenses.

[50] An “interim” proof of loss was filed dated July 4, 2014, which included claims for damage to the building in the amount of $298,097.79, damage for stock and equipment in the amount of $237,509.18, and professional fees “to be advised”. The damage claim with respect to the building was supported by a report of Douglas Wilkins and Associates. In his covering memorandum, Mr. Wilkins states:

The attached estimate covers all damages as a result of a Drain Backup Black Water Loss that occurred on July 8/2013. The roof drains also backed up on the building roof causing damage to the suspended ceilings of the kitchen and washroom areas. This estimate does not cover any Emergency services or any repair work that has been done immediately after the loss. It details all of the remaining repair work related to this loss that the property owner is completing and damaged equipment that requires replacement. The repair work will take four-six weeks complete. If you have any questions please do not hesitate to contact this office.

[51] Also attached was a “Stock and Equipment Loss Spreadsheet”, that was apparently prepared by Eileen Duffy, that lists equipment and stock apparently having a value of $237,509.18.

[52] By memorandum dated July 28, 2014, Mr. Carroll rejected the claim. His memorandum included the following:

We note that the estimate submitted with your proof compiled by Douglas Wilkins and Associates was not completed until February 7, 2014. You are relying on a scope and estimate completed seven months after the loss while no mitigation was completed. We also notice that you are claiming a great deal of equipment that was apparently suitable for use for many months after the loss; however need to be replaced now, one year after the loss.

[53] The plaintiff obtained some further estimates. An estimate was obtained from Naipaul Restoration, dated January 2, 2015, which shows a repair cost of $608,940.69. An estimate was obtained from ServPro Of Aigincourt dated February 9, 2016, which shows a repair cost of $714,821.77.

[54] Ultimately, the plaintiff retained National Fire Adjustment Co. Inc. represented by David Leblanc. National Fire Adjustment Co. Inc. provided an estimate dated September 2, 2016, showing a repair cost of $681,869.99. That was used as the basis for the plaintiff’s case for an appraisal process that it triggered, which took place on March 21, 2016. That process was more fully described by Mr. Leblanc in his evidence. It is sufficient to say at this point that the defendant objected to the appraisal process, but ultimately each party appointed an appraiser and they appointed an umpire. The plaintiff’s appraiser was Mr. Leblanc, and the defendant’s appraiser was Mr. Carroll. The umpire was Pete Volaric, a lawyer in Hamilton. A hearing took place, and an appraisal award was released dated March 21, 2016, that was signed only by Mr. Volaric and Mr. Leblanc. In the award, the value of the damage to the building was calculated at $561,974.40, as the Actual Cash Value, and $591,552 as the replacement cost, subject to the $2,500 policy deductible and amounts already paid by the defendant. The value of the contents/equipment loss was calculated at $253,332.89, as the Actual Cash Value, and $337,777.18 as the replacement cost.

[55] Mr. Cipressi testified that the plaintiff had already received from the defendant the sum of $46,396.32 for the emergency work, and $79,150.45, being the purported actual cash value of the repair cost, and in November, 2018, received sufficient funds to make up a total of $500,000, being the policy limit for a sewer back-up claim.

[56] Mr. Cipressi testified that there was a decrease in profit after the rain incident. This was more fully discussed in the evidence of Eileen Duffy and in the evidence of Dawson Coneybeare, an expert witness called by the plaintiff. Mr. Cipressi testified that there was a decrease in profit of 15 per cent in the two-year period after the incident. He testified that there were issues with Salon B, one of the event rooms, as a result of stains that remained and a stench. He had lost a walk-in freezer, as a result of which he could not make desserts for events ahead of time, and required more people to prepare them during an event. He said he did not receive enough money from the defendant to be able to buy a walk-in freezer, which he estimated would cost $40,000. It should be noted that in one of the exhibits tendered by the plaintiff, the estimated cost of a freezer is $20,000.

[57] Mr. Cipressi testified that there was an extensive renovation of the premises in 2015. However, a new freezer was only obtained in 2018.

[58] Mr. Cipressi testified that there were only three event cancellations in total, resulting in a loss of revenue of approximately $25,000. He testified that there was nevertheless a loss in revenue as a result of less bookings, which are usually booked anywhere from nine to 18 months ahead in the case of weddings.

[59] In cross-examination, Mr. Cipressi acknowledged that he did not reduce his prices since the rain event. He testified that the slowest period is from January to March, and the busiest period is in the fall.

[60] Mr. Cipressi acknowledged that on July 8, 2013, the skies simply opened up and it rained cats and dogs. He had never seen that volume of rain before. He said the area simply filled with water, and it was everywhere he looked.

[61] Mr. Cipressi testified that he examined the entire building. Water came into the kitchen. In the warehouse, water was two or three feet high in some areas. He testified that water came from everywhere. He did not see the water coming from the floor drains.

[62] Mr. Cipressi acknowledged that he had brought his own people in to remove the water.

[63] Mr. Cipressi acknowledged that he prepared a list of expenses for the emergency work which he gave to the insurer, in the amount of $45,094.12. He acknowledged that the insurer had paid this.

[64] Mr. Cipressi acknowledged that Mr. Baldassara was on the property on the second day after the rain event. His company steam cleaned the carpets.

[65] Mr. Cipressi testified that he met with Mr. Baldassara and Mr. Carroll on July 15, 2013. He testified that by then, a good part of the property had been cleaned up. He testified that Mr. Carroll told him that the loss would be covered under the sewer back-up provision in the policy.

[66] Mr. Cipressi acknowledged that he had been advised that he should shut down the business in order to do the repair. He testified that he was all right with that, but wanted to do it later when he had a complete schedule and scope of work. He said he did not recall that he was told that he should shut down immediately. He acknowledged, however, that he received the letter from Mr. Carroll on July 16, 2013, in which he was told he should shut the business down. He said he had an air quality test done to make sure he could carry on.

[67] Mr. Cipressi acknowledged that the renovations he did in 2015 and 2016 involved renovations to both the exterior and interior of the premises. He said it cost more than $300,000, but less than $800,000. He acknowledged that he purchased a new freezer in 2018.

[68] Mr. Cipressi acknowledged that he swore each proof of loss to be true. The proof of loss he filed that was based on Mr. Leblanc’s estimate was much higher than the estimate obtained by Mr. Wilkins, but he swore that each proof of loss was true. He acknowledged that the National Fire Association gets a fee from his organization based in part on the amount he recovers.

[69] Mr. Cipressi acknowledged that until he retained Mr. Wilkins, he did not complete a list of equipment or furniture to be claimed. He said that once he received the estimate in September, 2013, it took him time to absorb it.

[70] Mr. Cipressi acknowledged that he has received a total of $500,000.

[71] Rocco Coluccio testified. He has been a principal with the Toronto District School Board for twelve years. He knows Mr. Cipressi, and has been a client for many years. He has had several functions with Le Treport, and believes that they provide stellar service.

[72] Mr. Coluccio testified that on July 8, 2013, he was at home when the rain started. He said it was a once in a lifetime storm.

[73] Mr. Coluccio testified that his son was staying with friends and his wife wanted him to pick him up. Mr. Coluccio left in his vehicle, and decided to drop in to Le Treport with payment for an event.

[74] Mr. Coluccio testified that driving was horrific because of the water. He testified that when he arrived at Dixie Road and the Queensway, he turned left and there was water over the wheel wells.

[75] Mr. Coluccio testified that when driving west on the Queensway, he approached Tonelli Creek. As he passed the creek, the force of the water turned his vehicle into another lane because of the water gushing from the stream.

[76] Mr. Coluccio testified that when he arrived at Stanfield Road, there was a mini-whirlpool of water which went down Stanfield and along the Queensway.

[77] Mr. Coluccio testified that he drove through the intersection and turned right into the driveway leading to Le Treport’s parking lot. He saw Mr. Cipressi outside the building, and he was dishevelled and wet. Mr. Coluccio said he was there to give Mr. Cipressi a seating plan and a cheque. He said he saw water in the parking lot that had come over the grass and going into the building. He saw water in the foyer.

[78] Mr. Coluccio testified that the event he had scheduled with Le Treport did not proceed. He did not feel comfortable having the function. He saw Salon B, which was the room in which the event was to take place. He could see damage in the room. His deposit was returned.

[79] On cross-examination, Mr. Coluccio acknowledged that the rainstorm on July 8, 2013 was unique. He agreed that the water came from the rainstorm, and that it had dumped a lot of water. He testified that he had driven north on Dixie Road, and the road was swamped. There was water from everywhere. The Queensway was covered in water, and the water came from everywhere. In the plaza in front of Le Treport’s premises, water had come from the Queensway onto the parking lot. He said it was nerve wracking and harrowing.

[80] Eileen Duffy testified. She is the Controller of the plaintiff. She is self-employed, and had previously been the bookkeeper. Her responsibilities are accounting, invoices, dealing with customers and contractors, and dealing with insurance companies. She testified that she is familiar with this particular insurance policy.

[81] Ms. Duffy testified that she was acquainted with Josie Croucher, and she arranged getting the policy through her.

[82] Ms. Duffy testified that on July 8, 2013, she was at home when the rain started in the early evening. Mr. Cipressi called her and said it was pouring at the premises. He asked her to call Josie, which she did. When Josie called back, she said Mr. Cipressi needed to talk to her, which he did.

[83] Ms. Duffy testified that Mr. Cipressi told her to get the power shut off.

[84] Ms. Duffy testified that the next day, July 9th, Josie texted her and said someone should be there by 11:00 a.m. She asked if they could start cleaning the premises, to which Ms. Croucher said yes.

[85] Ms. Duffy testified that she took the photographs that were tendered in evidence.

[86] Ms. Duffy testified that around 11:00 or 11:30 a.m. Mr. Baldassaraa arrived and told them to keep doing what they were doing. She testified that sometime late in the afternoon, someone arrived with two fans and a dehumidifier.

[87] On July 11, 2013, someone decontaminated the carpets and cleaned them.

[88] Ms. Duffy testified that on Friday July 12th, Mary Calleja, an employee, called at 5:30 p.m. and advised that someone was there from the insurance company. Mr. Cipressi was not there, and arrangements were made to meet on Monday July 15th.

[89] Ms. Duffy testified that on July 15th, she attended on a walk-through of the premises, and those present were shown the carpets, the kitchen, the ceiling tiles, and evidence of the water levels. They were told they could not keep food products, and they threw them out.

[90] Ms. Duffy acknowledged receipt of the letter from Mr. Carroll dated July 16, 2013, in which they were advised that they should shut down. As a result, they called in an air quality control company who did tests. When advised of the results of the tests, everything seemed okay.

[91] Ms. Duffy testified that when they received the estimate of the emergency tear out work, it turned out that they had done most of the work in any event. With respect to remedial work, they also did some of the work themselves. They hired a contractor to take out mould in the back offices. They replaced ceiling tiles. They kept the dehumidifier and the fans going. A maintenance company did the cleaning. They did not ask the insurance company to do this work.

[92] Ms. Duffy testified that they received the quote to do the repair work in late September, 2013. The amount offered was too low. Eventually, they received the amount offered, which was about $79,000.

[93] Ms. Duffy testified that she prepares the plaintiff’s financial statements to the trial balance then the plaintiff’s accountants prepare the financial statements as a whole. She identified financial statements from 2010 to 2017.

[94] Ms. Duffy testified that the profits for 2013 were generally acceptable, since they reflected bookings that had been made earlier. However, in the period from August of 2014 to the end of 2015, sales were down. This was unusual. She testified that when people saw the state of the place, they either did not book, or if they had, they cancelled.

[95] Ms. Duffy testified that Hall B was particularly affected. There was a smell and the carpet was bad. The carpet was replaced in 2014. The dance floor was damaged and has not been replaced.

[96] Ms. Duffy testified that a bank loan was taken out for the project in 2015.

[97] On cross-examination, Ms. Duffy testified that she took the photographs because there was damage, and it seemed better to take pictures. She acknowledged that water was down considerably by the next day.

[98] Ms. Duffy acknowledged that she read the letter dated July 16, 2013 before it was given to Mr. Cipressi. She acknowledged that there was a smell from the damp carpeting. She discussed the matter with Mr. Cipressi, and eventually the smell went away. She said they constantly cleaned the carpets. She acknowledged that Josie Croucher had advised them to shut down, as well as Mr. Carroll but she said that after the clean-up was done everything seemed fine. When they retained an air quality control company, that seemed to be sufficient. She acknowledged that no tests were done regarding exposure to faecal matter.

[99] Ms. Duffy acknowledged that she did not prepare a list of stock and equipment lost until May, 2014. She said it took three months to prepare, and she had to run the business at the same time.

[100] Ms. Duffy acknowledged that when the quote was obtained in September, 2013, for the repair, she and Mr. Cipressi did not discuss getting their own quote. However, they did get quotes later, in July, 2014.

[101] Ms. Duffy acknowledged that there had been losses in 2010 and 2011, before the rain event.

[102] David Leblanc testified. He was hired by the plaintiff as an appraiser. He acknowledged that he is retained on a contingency basis, and his fee will be five per cent of the amount recovered to $500,000, and ten per cent of anything over that amount.

[103] Mr. Leblanc prepared the estimate in the amount of $681,869.99. He stated that the type of loss was from sewer back-up and a flood.

[104] Mr. Leblanc testified that if the water contains faecal matter, it is necessary to throw out anything it contacted, if the item is soft. If the item is hard, it can be cleaned. If a hard item has prolonged exposure to faecal matter it must be discarded.

[105] Mr. Leblanc participated in the appraisal process, and he was the plaintiff’s appraiser. Mr. Carroll was the defendant’s appraiser, and they agreed on an umpire, Pete Volaric. Each party prepared material that was given to the umpire. After discussion, the appraisal award was issued which has been described earlier.

[106] Mr. Leblanc prepared a proof of loss dated March 10, 2016, in which the amount of $1,262,393.32 is claimed.

[107] Mr. Leblanc testified that there was no discussion during the appraisal process of business losses.

[108] Mr. Leblanc on cross-examination acknowledged that his task is to achieve maximum recovery for his client.

[109] Mr. Leblanc acknowledged that he did not speak to Mr. Wilkins or any of the other persons who prepared estimates. He acknowledged that the earlier estimates were based on damage caused by sewer back-up but he disagreed. He said the damage was caused by both sewer back-up and a flood.

[110] Mr. Leblanc acknowledged that his estimate was considerably higher than most of the others, but that was because he had considered different damages than had been considered by the others.

[111] Mr. Leblanc acknowledged that with respect to items touched by black water, if it is soft it must be discarded. This would include carpets.

[112] Mr. Leblanc acknowledged that he was aware that the insurer had requested that Le Treport shut down its operation during any repair.

[113] Gilbert Johnstone testified. He is an estimator, and prepared the estimate that was submitted by Mr. Leblanc.

[114] Mr. Johnstone testified that he met with Mr. Cipressi. He walked through the premises and viewed them. He examined the photographs, and previous scopes of repair. He then prepared his estimate.

[115] Mr. Johnstone testified that the project to repair would take four to six months.

[116] Mr. Johnston testified that his estimate included some larger areas for repair that had not been considered by previous estimators, including FirstOnSite.

[117] Mr. Johnston testified that he was not involved in any estimate regarding the contents of the premises.

[118] On cross-examination, Mr. Johnstone testified that he did not review the estimate of Mr. Wilkins, which had previously been prepared for the plaintiff. He testified that different appraisers may see projects differently.

[119] On one particular item, Mr. Johnstone acknowledged that there were significant differences in estimates. For example, he estimated the cost of replacing the separation wall between the two parts of Hall A at $55,000. He acknowledged that in the estimate prepared by Naipaul Restoration, replacement of the same separation wall was estimated at $15,300.

[120] Mr. Johnstone acknowledged that there were other items in his estimate that were higher.

[121] Dawson Coneybeare testified. He is a business valuator, and was retained to measure the gross profit loss of the plaintiff after the rain event. There was no objection to his giving expert testimony.

[122] Mr. Coneybeare testified that revenue of the plaintiff was relatively stable up to the rain event. However, there was a 15 per cent decline in the 12 months after the event.

[123] Mr. Coneybeare testified that he relied on some independent research based on industry sources. He was able to determine that the industry was growing modestly in the two-year period prior to the incident. After the incident, growth of the industry was quite rapid, while the plaintiff had a decline.

[124] Mr. Coneybeare testified that he used the “differential profits” approach, that is to determine what profit could have been earned as compared to what profit was actually achieved. One considers the loss of gross profit and the increase in cost of working.

[125] Mr. Coneybeare examined what he called the “indemnity period”, and the “consequential damages period”. The indemnity period is that period of time under the policy during which business interruption loss will be paid. The consequential damages period is the period of damages suffered by the plaintiff, as a result of the failure of the defendant to live up to its obligations under the policy.

[126] Mr. Coneybeare testified that the total economic loss for the indemnity period is $267,000, and the total economic loss for the consequential damages period is $428,000, for a total economic loss of $695,000.

[127] On cross-examination, Mr. Coneybeare acknowledged that with respect to any factual matters, he relied exclusively on what was provided to him by the plaintiff.

[128] Mr. Coneybeare acknowledged that he relied on the period between 2010 and 2017. It was pointed out to him that sales for 2009 were approximately $300,000 higher than the sales for 2010. He also acknowledged that the revenue for 2009 was not actually regained until 2012, one year prior to the rain event.

[129] Mr. Coneybeare acknowledged that after the renovation in 2015, one would expect a revenue increase, which there was.

[130] Mr. Coneybeare acknowledged that he took into account additional food costs, which were likely affected by the failure to replace a walk-in freezer.

[131] Thomas Carroll testified. He is a “large loss” adjuster with the defendant. He has been with the defendant for 20 years.

[132] Mr. Carroll testified that there are different classes of water damage claims. A Class 3 claim is one involving black water. This claim was a Class 3 claim.

[133] Mr. Carroll testified that entitlements under the policy are governed by the policy terms, and by a declaration page which is at the front of the policy. It reflects the various types of insurance selected by the insured, including any deductibles and policy limits for the different types of coverage. In this case, the insurance included insurance for stock, with a deductible of $2,500, and a limit of $150,000; loss of profits, with a limit of $1,400,000; equipment, with a deductible of $2,500, and a limit of $200,875; a replacement cost endorsement; a flood endorsement with no limit; and a sewer back-up endorsement, with a deductible of $2,500 and a limit of $500,000.

[134] Mr. Carroll testified that with respect to the loss of profits insurance, that is reflected on Form AB-3. It provides for payment of loss of profits during the “indemnity period”. It indemnifies for loss of profits arising from interruption of business.

[135] Mr. Carroll testified that a claim for loss of profit will commence with a proof of loss, which can start the calculation immediately. In this case, he understood from the plaintiff that it would not be shutting down the business.

[136] Mr. Carroll testified that on July 8, 2013, the insurance agent was the first person notified of the loss. It was regarded as a major event, and was considered a “catastrophic” claim. The insurer set up a “catastrophic room” which handled all cases arising out of this event and they were given first priority.

[137] Mr. Carroll testified that this was considered, for the plaintiff, a sewer back-up event.

[138] Mr. Carroll testified that he attended the premises on July 12, 2013. He spoke to “Mary”. He noted that there was high humidty, and a smell. He did not actually see any loss, and he saw no standing water. There was a distinct sewer back up smell.

[139] Mr. Carroll testified that he spoke to Mr. Cipressi on the phone. Mr. Cipressi told him that he did not want anyone from the insurance company or contractors to be on the premises when clients were there. He found this strange.

[140] Mr. Carroll testified that he handed to Mary a brochure, that contained a proof of loss form. It also had a contents schedule, and his business card.

[141] I pause at this point to note that on his examination for discovery, Mr. Carroll did not say anything about handing a proof of loss form to Mary, and this is only point in the evidence during which he testified that there was any communication to the plaintiff of a proof of loss form.

[142] Mr. Carroll testified that on Monday July 15th, he attended at the premises with Mr. Baldassara. The plaintiff had already done some of the clean-up.

[143] Mr. Carroll testified that he tried to impress upon Mr. Cipressi the need to get going on the repair as soon as possible. Mr. Cipressi, however, did not want to shut down the operation. He said his reputation would be affected, and he had functions ongoing. He was afraid of being sued by his customers if he cancelled their events.

[144] Mr. Carroll testified that they completed the walk-through. He noted that the carpets were wet, the air was humid, and there was a smell of sewage. The main concern was that emergency services had to be underway immediately.

[145] Mr. Carroll testified that he told Mr. Cipressi that the issue was extremely serious. He told Mr. Cipressi that the work had to start right away. He noted that the plaintiff was still putting on functions, and serving food. People could get sick.

[146] Mr. Carroll testified that he made it clear to Mr. Cipressi that he had business interruption insurance, which would cover any loss during the time he had to shut down. Mr. Cipressi was adamant that he did not want to close. He did not want insurance people onsite.

[147] Mr. Carroll thought Mr. Cipressi’s position was irresponsible and dangerous. He decided that he had to get estimates so that he could give Mr. Cipressi the money and he could handle it any way he wanted. Mr. Cipressi did not want to miss any functions.

[148] Mr. Cipressi wanted to show Mr. Carroll the damage to contents. He showed him a small room with computer equipment in it. Mr. Carroll advised that this was not the priority at the moment. It was important to get the emergency services in and do the tear-out work. A “contents” team would look after the contents claim. He said he did not tell Mr. Cipressi that items had to be thrown out, and this is not something he would tell a client to do.

[149] Mr. Carroll testified that the meeting ended as a stalemate. He could not get Mr. Cipressi to handle the matter in a responsible way. He asked Mr. Baldassara to prepare estimates so that he could pay the client directly.

[150] Mr. Carroll, in his evidence, commented on some of the photographs. He said that some of the photographs clearly showed damage from sewer-back up. The fallen ceiling tiles were caused by a roof leak or roof drains backing up.

[151] Mr. Carroll testified that he wrote the letter dated July 16, 2013 to Mr. Cipressi because he wanted to make it clear that it was important that Mr. Cipressi close the operation so that repairs could be done. He had had discussions with Mr. Cipressi about “cranking” the air conditioning in order to keep the smell down.

[152] Mr. Carroll testified that he requested two estimates from Mr. Baldassara, one for emergency services and one for repairs. Mr. Baldasssar said that it would be unrealistic to expect both estimates by July 19th.

[153] Mr. Carroll testified that emergency services would include tearing out everything that was not salvageable, applying disinfectant to salvageable material, and drying everything. Repair services would be to put everything back.

[154] Mr. Carroll testified that the estimate for emergency services, $46,396.32 was paid in full to the plaintiff.

[155] Mr. Carroll testified that he received the estimate for repair services in September, 2013. The estimate was for a replacement cost of $105, 533.94, and a cash value of $79,150.45. He testified that if the client did his own repairs only the cash value would be paid at first, and the balance, to $105,533.94, would be paid once the work was actually done.

[156] Mr. Carroll transmitted the estimate to Mr. Cipressi. He testified that he received no response from the plaintiff.

[157] Mr. Carroll testified that he had no involvement in the corporate decision to not renew the plaintiff’s insurance policy.

[158] Mr. Carroll testified that on April 21, 2014, having had no response to the offer, he advised the plaintiff that the sum of $79,150.45 would be paid, and that any further claim must be completed within one year of the event.

[159] Mr. Carroll testified that the response he received was the letter dated May 2, 104 from a lawyer, Mr. Payne. A proof of loss was filed in early July, 2014. It was considerably higher than what was proposed by the insurer.

[160] Mr. Carroll testified that the insurer was, by then, prejudiced in attempting to quantify the claim. This was particularly so with respect to the claim for contents. At that point, the insurer had no opportunity to confirm what was claimed.

[161] Mr. Carroll testified that with some reluctance he agreed to go through the appraisal process. Notwithstanding that he raised many concerns during the process, an award was issued with which he did not agree.

[162] On cross-examination, Mr. Carroll acknowledged that on discovery he did not mention giving Mary a brochure or a proof of loss form. He also acknowledged that there was nothing in his file to indicate that he provided a proof of loss form. He never enclosed one in any of his correspondence. There was nothing in his correspondence to suggest that the plaintiff was told that it should file a proof of loss.

[163] Mr. Carroll acknowledged that he did not notice that his repair quote omitted one significant room, namely, Hall C.

[164] Mr. Carroll acknowledged that while he did not recall telling Mr. Cipressi that everything had to be thrown out, the remedial protocol actually requires that if something is soft it should be discarded, if it is touched by black water. For example, it is more than likely that chair covers would have to be disposed of if they were touched by black water.

[165] Mr. Carroll testified that he did not recall Mr. Cipressi saying he wanted to see estimates or that he wanted to see a schedule before shutting down his business.

[166] With respect to the estimate provided by FirstOnSite, Mr. Carroll testified that he simply relied on the contractor.

[167] Mr. Carroll acknowledged that with respect to his offer to pay cash, there was nothing specified in the offer as to any claim for contents or business losses.

[168] Mr. Carroll testified that he did not recall whether Mr. Cipressi spoke to him about getting another quote after the first quote had been obtained. He acknowledged that he has never made a payment for contents, food or business losses.

[169] On re-examination, Mr. Carroll testified that the offer to do the repairs was not a “final” offer. He had had no indication from the plaintiff that the insurer could arrange for the repairs.

[170] Thomas Baldassara testified. He is now a property appraiser for another insurance company. He was with FirstOnSite from 2011 to 2013 as a project manager.

[171] After the event on July 8, 2013, he was paired with Mr. Carroll on this particular claim. He recalled walking through the property the day after the event, and walked through again later with Mr. Carroll and others. There was some equipment there, and there was an odour. The carpet was wavy. He had an instrument that measured moisture content in the air and building materials.

[172] Mr. Baldassara testified that after sewage water is removed, some items cannot be saved. They absorb bacteria. Included would be drywall and carpet. The normal protocol is to remove and sanitize items.

[173] Mr. Baldassara testified that on the Monday, July 15, 2013, he walked through the premises with Mr. Carroll. Mr. Carroll was concerned because he was not going to be allowed by the plaintiff to do the work. Mr. Carroll asked him to prepare two documents, one for emergency services and one for repair services. While he did not recall Mr. Carroll saying that items should be thrown out, he would not have been surprised if he had.

[174] After the meeting on July 15th, his instructions were to prepare a quote for emergency services and a quote for repairs, and that the insurer would pay the plaintiff directly. He said he sent the quotes to Mr. Carroll.

[175] With respect to the repair services quote, while Corey Meisner had his name on it, the quote was prepared by Mr. Baldassara. He testified that he prepared a diagram at the back of the quote to show the rooms that required repair. He testified if in his opinion there was no damage, the room would not be included on the diagram. He estimated approximately $105,000 to do the work.

[176] On cross-examination, Mr. Baldassara acknowledged that when he attended the premises on July 9, 2013, he saw people cleaning and working, and he told them to “keep going”. He supplied a couple of blowers and a humidifier.

[177] Mr. Baldassara testified that he went in to every room that had water in it. Some had already been cleaned, and some ceiling tiles had been replaced. Some areas were dry and some were not. He assumed that because Hall C was not on his diagram, there was no damage that required repair.

[178] Mr. Baldassara testified that the tear-out for drywall was based on moisture readings that he obtained each time he attended the premises.

Submissions

[179] Ms. Stock, counsel for the plaintiff, submits that the plaintiff should be granted judgment in the amount claimed.

[180] Ms. Stock submits that it is important to note that the insurance policy in question is an “all risks” policy. That means the policy is intended to cover damage to the property that occurs by any means, unless coverage for any particular cause is specifically excluded.

[181] Ms. Stock submits that the ordinary contractual principle of contra proferentem applies. To the extent that there is any ambiguity in the policy, the interpretation most favourable to the insured is to be adopted. Furthermore, to the extent that the insurer relies on an exclusion, the onus is on the insurer to establish that the exclusion applies.

[182] In this case, Ms. Stock submits that there is no dispute that the damage that was caused was as a result of water entering the premises. There is a dispute as to whether some or all of it was caused by water coming up through drains, or whether some or all of it was caused by water entering the building from the ground or through apertures in the roof.

[183] Ms. Stock acknowledges that there is a dispute as to whether the flood endorsement of the policy applies, while there is no dispute that the sewer back-up endorsement applies. If it is found that both endorsements apply, and if the damage was caused, in part, by both sewer back-up and by a flood, the court is entitled to apply the most favourable endorsement to the insured.

[184] Ms. Stock points out that pursuant to section 135(1) of the Insurance Act, an insurer is required to provide, to the insured, a form by which to submit a proof of loss, and that this must be supplied to the insured within 60 days after being notified of the loss. If the insurer neglects to provide such a form, the insurer is not entitled to rely on s.136 of the Act, which provides that no action shall be brought under a contract of insurance until the expiry of 60 days after the submission of a proof of loss.

[185] Ms. Stock submits that it is clear on the evidence that the defendant never provided to the plaintiff a proof of loss form. The only evidence tendered by the defendant that it did so was in Mr. Carroll’s evidence, in which he testified that he handed “Mary” a folder which contained a proof of loss form. Ms. Stock points out that Mr. Carroll had never mentioned any such occurrence before, and all representatives of the plaintiff denied that a proof of loss form had been supplied.

[186] Ms. Stock submits that both the sewer back-up endorsement and the flood endorsement apply here.

[187] There is no dispute that the sewer back-up endorsement applies.

[188] As for the flood endorsement, Ms. Stock submits that the flood endorsement is an extension of coverage, and is not an exception to an exclusion.

[189] Ms. Stock points out that in the policy itself, damage caused by flood is excluded, including “surface water”. There is a definition of “surface water” in the policy, which means water or natural precipitation temporarily diffused over the surface of the ground. She points out, however, that “surface water” is not excluded in the flood endorsement itself. She submits that if surface water is not excluded from the definition of a flood, it is only logical that if damage is caused by surface water, it must be covered by the flood endorsement. Once again, if there is any ambiguity in the language of the policy, including the flood endorsement, the meaning most favourable to the insured must be adopted.

[190] In any event, Ms. Stock points out that some of the water that entered the building did so through holes in the roof. She points out that the policy excludes damage caused “by the entrance of rain, sleet or snow through doors, windows, skylights or other similar wall or roof openings, unless through an aperture concurrently and directly caused by a peril not otherwise excluded in this form.” She submits that this provision appears to be designed to exclude damage caused by entrance of water through intended apertures, such as a door, but damage caused by entrance through cracks or other openings in the building, in this case, through a roof, is covered. Once again, to the extent that there is ambiguity, the interpretation most favourable to the insured should be adopted.

[191] In this case, the parties engaged in an appraisal process, which resulted in an appraisal award for $929,329.18 for replacement cost, and $815,307.29 for the actual cash value of the damaged building and contents/equipment. That appraisal award was obtained in March, 2016, but it was not until November, 2018, that the defendant paid out the policy limits of $500,000, on the assumption that it was only the sewer back-up endorsement that applied.

[192] Ms. Stock submits that the appraisal award is binding on the parties, and must be complied with by the insurer, unless the court concludes that only the sewer back-up applies. However, as submitted, either the main terms of the policy apply, or the flood endorsement applies, in which case the entire amount required by the appraisal award must be paid by the insurer.

[193] In addition to this amount, Ms. Stock submits that the plaintiff is entitled to damages under the business interruption provisions of the policy (Form AB-3) for the “indemnity period” as defined, as well as “extra contractual” damages, being those damages that are attributable to the insurer’s breach of contract. In addition, the plaintiff is entitled to punitive damages.

[194] Ms. Stock submits that it is clear from the evidence of Ms. Duffy, as well as the plaintiff’s expert witness, Mr. Coneybeare, that the plaintiff suffered an economic loss for at least two years after the insured event. While revenue was more or less stable in the 12-month period after the event, revenue decreased for about two years thereafter. This is because bookings were already booked for most of the year after the event, but bookings suffered thereafter. Ms. Coneybeare estimated the economic loss for the indemnity period at $267,000, and the economic loss for the consequential damages period at $428,000, for a total economic loss of $695,000. The defendant called no expert evidence of its own, and Mr. Coneybeare’s evidence is essentially unchallenged.

[195] Ms. Stock submits that under the plain wording of the business loss provisions of the policy, the plaintiff is entitled to claim for a loss of profit arising out of the interruption of the business consequent upon the happening of an insured event. That is clearly what happened here. As a result of the water damage, the plaintiff suffered a decrease in bookings, and the amount of the loss has been quantified.

[196] As for the claim for extra contractual damages, the plaintiff submits that the entire course of conduct by the insurer justifies a conclusion that the damages claimed are owing.

[197] Ms. Stock notes that the insurer failed to deliver a form for a proof of loss. The insurer then provided an entirely unreasonable estimate for repair costs, and gave no estimate for loss of stock or business interruption. The insurer paid out inadequate funds for the plaintiff to do any necessary repairs itself. The plaintiff was forced to get its own estimates.

[198] Ms. Stock submits that punitive damages are payable here. The conduct of the insurer included ignoring problems with the estimate it obtained that made it clear that there was an obligation to pay a greater amount; ignoring that there was a contents/equipment claim; and abusing its financial position when it knew the plaintiff was vulnerable after the insured event.

[199] Mr. Dowhan, counsel for the defendant, submits that the action should be dismissed. He submits that the only applicable part of the policy that applies is the sewer back-up endorsement, and the insurer has paid out the policy limits, namely, $500,000. In the result, no further amounts are owing.

[200] Mr. Dowhan submits that the evidence is clear that the water that entered the building and caused damage came from the huge rainstorm that blanketed the GTA with many centimetres of water.

[201] Mr. Dowhan submits that there is no evidence that any of the water that entered the plaintiff’s building came from the overflow of a natural or man-made body of water, such as a lake or river. The only evidence tendered by the plaintiff was that the ditch, or creek, approximately 600 metres east on the Queensway from the plaintiff’s premises flowed, in part, onto the Queensway during the downpour. However, there is no evidence that this meaningfully contributed to any of the water that flowed into the plaintiff’s premises. Certainly no expert evidence was called to that effect. There is no evidence that any other body of water was nearby that could have contributed to the flow of water.

[202] Based on any practical view of the evidence, it can only be concluded that the water on the surface of the land, some of which ended up in the plaintiff’s premises, came as a result of the rainstorm that was unique.

[203] What is clear, however, is that the water damage, at least in part, came from the drains inside the building that overflowed. The defendant does not dispute that since some of the damage was caused by sewer back-up, all of the loss must be considered to have been caused by it.

[204] Mr. Dowhan notes that in the first estimate obtained by the plaintiff, written by Mr. Wilkins, it is asserted that the loss was caused by a sewer back-up.

[205] Mr. Dowhan notes that with respect to the claim that the loss was caused, in part, by water entering the building through leaks in the roof, this aspect of the claim was not pleaded. Indeed, in paragraph 4 of the Fresh as Amended Statement of Claim, it is pleaded that “such damage includes that the roof drains backed up on the building causing damage to the suspended ceilings.” In any event, the policy, properly interpreted, does not include free-standing coverage for water entering through cracks in the roof.

[206] Mr. Dowhan submits that since the insurer has paid out the policy limits in any event, it is not necessary to minutely examine all of the evidence. However, he notes that with respect to the appraisal process, the purpose of an appraisal is to determine only the value of a loss. The appraisal process does not determine whether any particular item was or was not damaged by an insured event. Nor is it the purpose of the appraisal process to interpret the policy. These questions are left for the court to determine.

[207] Mr. Dowhan points out that with respect to any potential claim for lost stock and equipment, the plaintiff is still using some of it. There is no breakdown as to what the plaintiff is still using, and it is undoubtedly the case that the plaintiff is claiming for some items that are still in use.

[208] Mr. Dowhan points out that with respect to Hall B, for which no invoices were provided, the restoration of the premises that occurred in 2015 included Hall B.

[209] Mr. Dowhan submits that with respect to the business interruption claim, there was no actual “interruption” of the business. The business did not at any time close down. The ordinary meaning of “interruption” is that there must be a temporary cessation of the business. That is not what occurred here.

[210] In any event, any business interruption was not “caused” by the insured event. Rather, it was caused by decisions made by the insured and actions taken as a result. The insurer urged the plaintiff to shut the business down so that emergency services and repairs could be effected. The plaintiff did not want to do that, because it had events ongoing and it was afraid its reputation would be harmed if it closed down. Even though it was pointed out to the plaintiff that a refusal to close down and effect the necessary repairs could be harmful to the health of occupants, the plaintiff stubbornly insisted on remaining open. At no time did the plaintiff correspond with the insurer and request that it do any repair work. This was entirely the choice of the plaintiff, and if it caused damage it was not caused by the defendant. Assuming there was a decrease in bookings, it was because the plaintiff declined to take steps to remediate the premises as strongly recommended by the insurer.

[211] Mr. Dowhan submits in any event that there is no evidence of any actual loss, either during the indemnity period or during what the plaintiff terms the “extra contractual damages period.”

[212] Mr. Dowhan points out that when one compares the revenue for the years subsequent to 2009, there was a decrease in revenue that was not recaptured until 2012. No explanation has been offered for this phenomenon. Like most businesses, revenue is likely to fluctuate from year to year. Thus, it is speculative, at best, to conclude that the decrease in revenue for a short period after the insured event can be explained by a loss arising out of the insured event. As noted, the plaintiff insisted on keeping the facility open and running events during that period. Once again, some of the purported loss can be attributed to the plaintiff’s own actions – it failed to obtain a new freezer (which would cost approximately $20,000) until 2018, even though the plaintiff asserted that this caused inconvenience and extra cost in serving desserts.

[213] As far as punitive damages are concerned, Mr. Dowhan submits that this is not an exceptional case that justifies such a claim. The insurer did its best in difficult circumstances, including circumstances caused by the plaintiff itself. The plaintiff declined advice from the insurer that it should mitigate its loss by shutting down and effecting repairs quickly. Rather, the plaintiff elected to stay open. The insurer cannot be faulted for the actions the plaintiff took.

Analysis

(a) General Principles of Interpretation

[214] There are a number of cases in which the relevant principles of interpretation of insurance policies are discussed, and it is unnecessary to analyse them in any detail. They include Consolidated-Bathurst Export Ltd. v. Mutual Boiler & Machinery Insurance Co., [1980] 1 S.C.R. 888; Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, [2010] 2 S.C.R. 245; Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., [2016] 2 S.C.R. 23; and MacDonald v. Chicago Title Insurance Co. of Canada, 2015 ONCA 842, 127 O.R. (3d) 663. The relevant principles are helpfully summarized by Hourigan J.A. in MacDonald at para. 66 as follows:

• The court must search for an interpretation from the whole of the contract and any relevant surrounding circumstances that promotes the true intent and reasonable expectations of the parties at the time of entry into the contract;
• Where words are capable of two or more meanings, the meaning that is more reasonable in promoting the intention of the parties will be selected;
• Ambiguities will be construed against the insurer having regard to the reasonable expectations of the parties;
• An interpretation that will result in either a windfall to the insurer or an unanticipated recovery to the insured is to be avoided;
• Coverage provisions are to be construed broadly, while exclusion clauses are to be construed narrowly;
• The contract of insurance should be interpreted to promote a reasonable commercial result; and
• A clause should not be given effect if to do so would nullify the coverage provided by the policy.

[215] The contra proferentem doctrine was discussed in some detail by Estey J. for the majority in Consolidated-Bathurst. He cited with approval the following passage from the 9th Edition of Cheshire and Fifoot’s Law of Contract:

If there is any doubt as to the meaning and scope of the excluding or limiting term, the ambiguity will be resolved against the party who has inserted it and who is now relying on it. As he seeks to protect himself against liability to which he would otherwise be subject, it is for him to prove that his words clearly and aptly described the contingency that has in fact arisen.

[216] Estey J. also cited with approval the following statement of Lindley L.J. with respect to the need to apply the doctrine cautiously, in Cornish v. Accident Insurance Company (1889), 23 Q.B. 453 (C.A.), at page 456:

In a case on the line, in a case of real doubt, the policy ought to be construed most strongly against the insurers; they frame the policy and insert the exceptions. But this principle ought only to be applied for the purpose of removing a doubt, not for the purpose of creating a doubt, or magnifying an ambiguity, when the circumstances of the case raise no real difficulty.

[217] An ambiguity does not arise simply because there are competing interpretations. One only arises where there are two or more reasonable interpretations: Amberber v. IBM Canada Ltd., 2018 ONCA 571, 424 D.L.R. (4th) 169, at para. 45. As stated by Laskin J.A. in Chilton v. Cooperators General Insurance Co. (1997), 32 O.R. (3d) 161 (C.A.), at p.169, “The court should not strain to create an ambiguity where none exists.”

(b) Interpretation of this Insurance Policy

[218] As noted earlier, the policy here is an “all risks” policy. In other words, it insures against all risks of damage to the property except for those that are excluded. To the extent that the insurer relies on an exclusion, it bears the onus to establish that the exclusion applies.

[219] On the other hand, to the extent that the insured relies on a provision in the policy that provides for coverage, the onus is on the insured to establish that the provision relied on applies.

[220] The main policy excludes coverage for loss or damage caused by flood “including ‘Surface Water’, waves, tides, tidal waves, tsunamis or the breaking out or overflow of any natural or artificial body of water.” The term ‘Surface Water’ is defined in the policy as meaning “water or natural precipitation temporarily diffused over the surface of the ground.”

[221] In my view, there is no ambiguity in these provisions. Unless there is coverage elsewhere in the policy, damage caused by flood, including ‘Surface Water’, is excluded from coverage.

[222] Furthermore, also excluded from coverage is loss or damage caused “by the backing up or overflow of water from sewers, sumps, septic tanks or drains, wherever located, unless concurrently and directly caused by a peril not otherwise excluded in this form.”

[223] Once again, there is no ambiguity. Loss or damage caused by an overflow of water from sewers and drains is excluded from coverage, unless it is otherwise covered in another part of the policy.

[224] Also excluded is loss or damage caused “by the entrance of rain, sleet or snow through doors, windows, skylights or other similar wall or roof openings, unless through an aperture concurrently and directly caused by a peril not otherwise excluded in this form.”

[225] I agree with counsel for the plaintiff that these words would not specifically exclude coverage for damage caused by water leaking through holes in a roof. However, one must also consider Article 5B(c)(i) which provides: “this form does not insure against loss or damage caused directly or indirectly…by seepage, leakage or influx of water derived from natural sources through basement walls, doors, windows or other openings.” One must also consider Article 17 G “Named Perils” (g), which reads, in its relevant part: “there shall in no event be any liability for loss or damage directly or indirectly caused by any of the following, whether driven by wind or due to windstorm or not: snow-load, ice-load, tidal wave, tsunamis, high water, overflow, flood, waterborne objects, waves, ice, land subsistence, land slip.”

[226] Furthermore, I agree with counsel for the defendant that in its pleading, the plaintiff did not plead that it was entitled to be compensated for loss or damage caused by water leaking through holes in the roof. Rather, the plaintiff pleaded that damage was caused by the roof drains backing up on the building causing damage to the suspended ceilings. By pleading its claim in that way, the defendant would not have had any reason to believe that a claim was being advanced on the factual basis of the submission made by the plaintiff’s counsel.

[227] The real issues, in this case, are whether the sewer back-up endorsement applies, or the flood endorsement applies, or both apply. I will deal with those issues in a moment.

[228] First of all, however, I will deal with the question of whether the insurer delivered to the plaintiff a Proof of Loss form.

(c) Did the Defendant Deliver a Proof of Loss Form?

[229] As noted earlier, the Insurance Act requires that the insurer deliver to the insured a Proof of Loss form, after it has been notified that there has been a loss. There are consequences that flow from the failure to deliver such a form.

[230] The plaintiff’s witnesses swore that no Proof of Loss form was ever delivered. The only evidence tendered on behalf of the defendant was that of Mr. Carroll, who testified that he handed to “Mary” a pamphlet that included a Proof of Loss form.

[231] I do not accept that the insurer delivered a Proof of Loss form. It was acknowledged that Mr. Carroll never mentioned delivering a Proof of Loss form to anyone prior to his evidence in court. It would seem to be an odd way to deliver a Proof of Loss form as one of a number of things contained in a pamphlet handed to an ordinary employee, rather than to a responsible person involved in running the plaintiff’s operation. As Mr. Carroll acknowledged, things were extraordinarily hectic after the rain event, as there were dozens of claims being pursued to the point where the insurer set up a separate “war room” to handle them. It would not be surprising if Mr. Carroll overlooked furnishing a Proof of Loss form here.

[232] I hold that the insurer never delivered a Proof of Loss form to the plaintiff, and accordingly, the plaintiff is not restricted in advancing the claims it asserts by virtue of the late delivery of Proofs of Loss.

(d) Does the Flood Endorsement Apply?

[233] The definition of “flood” in the endorsement is as follows:

For the purpose of this endorsement, flood shall mean the rising of, the breaking out or the overflow of any body of water, whether natural or man-made and includes waves, tides, tidal waves and tsunamis.

[234] It is to be noted that the words “Surface Water”, as defined in the policy, are not included within the term “flood” in the endorsement.

[235] It is also to be noted that where water enters through an opening in the roof, there is liability where it directly results from a flood. The relevant wording is:

The Insurer shall be liable for loss or damage to the property insured caused by wind, hail, rain or snow entering a building through an opening in the roof or walls directly resulting from a flood.

[Emphasis added]

[236] Excluded from the endorsement is “water which backs up through sewers, sumps, septic tanks or drains.”

[237] In the case before me, it is clear, from the evidence, that damage to the property was caused by an influx of water resulting from the extraordinary rain storm that accumulated on the ground, and in this case, on the roof of the building. It clearly constituted “Surface Water” as defined in the policy, and which is excluded from coverage and is not included within the definition of “flood”.

[238] On the evidence, I am not persuaded that the plaintiff has proven, on a balance of probabilities, that any of the water that invaded the plaintiff’s property came as the result of the breaking out or the overflow of a body of water. A practical view of the evidence must be taken, and the only evidence of any possibility of water breaking out of or from the overflow of any body of water was given by Mr. Coluccio, who saw water coming from the ditch known as Tonelli Creek. No other evidence, particularly expert evidence, was tendered. Tonelli Creek is 600 metres away from the plaintiff’s premises, and the evidence is that there were several inches of rain that covered the ground in all directions over a large area. In the scheme of things, I am not convinced that any of this water would have materially added to the volume of water that covered the ground and the roadways and that eventually found its way onto the plaintiff’s property. The plaintiff has not satisfied me on the balance of probabilities that that is so.

[239] The interpretation of language similar to that in this policy was given by Charney J. in Parker Pad & Printing Ltd. v. Gore Mutual Insurance Company, 2017 ONSC 3894, 138 O.R. (3d) 620.

[240] At para. 46, Charney J. noted that there is no question that the ordinary meaning of the word “flood” would include the pooling of water resulting from a rainstorm. At para. 47, however, he stated:

In this case, however, the term flood is given a very specific and restricted definition in both the Insurance Policy and the Flood Endorsement, so the ordinary meaning of “flood” does not assist. The plaintiff is covered only if the influx of rainwater through the foundation was caused by a “flood” as defined by in clause 6 of the Flood Endorsement: “the rising of, the breaking out or the overflow of any body of water whether natural or man-made”.

[241] At paras. 53 and 54, he stated:

In my opinion the ordinary meaning of the phrase “the rising of, the breaking out or the overflow of any body of water whether natural or man-made and includes waves, tides, tidal waves, and tsunami” is limited to pre-existing bodies of water and does not include pooling of rain water in a location where no body of water previously existed. I come to this conclusion by considering all of the words in context. A pre-existing body of water such as a lake, river or reservoir can rise, breakout or overflow. In this case the pool of water did not exist before the rain, and cannot be said to rise, break out or overflow because it has not pre-determined boundary or lever from which it can rise, break out or overflow.

While the term “body of water” might be ambiguous when considered in isolation, it is not ambiguous when considered in the context of the complete clause. In my view the context clearly shows that the intention was to include the rising, breaking out or overflow of an existing and identifiable body of water.

[242] In my view, the same reasoning applies here. The damage to the plaintiff’s property was not caused by a “flood” as defined in the policy. The term “Surface Water” is not included in the definition of flood, while it is a specific exclusion in the policy itself. In my view, the case is even stronger than was the case before Charney J. that there is no coverage for what occurred through the Flood Endorsement.

[243] As noted earlier, to the extent that the plaintiff seeks to rely on the provisions of the policy regarding the entrance of rain through roof openings, I noted earlier that there are other provisions in the policy that would appear to exclude such a claim. However, I need not engage in any detailed interpretative exercise, because the plaintiff has simply not pleaded the facts necessary to establish a claim on that basis.

(e) Does the Sewer Back-up Endorsement Apply?

[244] Subject to a limit of coverage, and subject to a $2,500 deductible, the sewer back-up endorsement provides coverage as follows: “The coverage provided by this Policy is extended to include loss or damage caused directly by the backing up of sewers, sumps, septic tanks or drains…”

[245] The insurer concedes that this endorsement applies, and has paid out the policy limit, $500,000. Thus, unless the business interruption provisions of the policy apply, or the defendant is liable for extra-contractual damages and/or punitive damages, that is the extent of the insurer’s obligation.

(f) Do the Business Interruption Provisions Apply?

[246] The relevant policy provisions are contained in Form AB-3, which is headed “Profits Endorsement Form”. It opens with the following words:

The insurer agrees to indemnify the Insured against loss directly resulting from necessary interruption of business, caused by destruction or damage by the perils insured against to property at the “Premises”, up to the limit(s) of insurance stated in the “Declarations” for this Form and subject to the provisions, limitations, exclusions, conditions and other terms of this Policy including this Form.

[Emphasis Added]

[247] The defendant’s primary argument is that the words “interruption of business” must mean that there is a complete, albeit temporary, cessation of the business in order for the endorsement to apply.

[248] There is surprisingly little authority on this point. Neither counsel were able to provide me with any.

[249] In my own research, I have found one case, EFP Holdings Ltd. v. Boiler Inspection and Insurance Co. of Canada, 2001 BCSC 1580, 34 C.C.L.I. (3d) 212, a decision of Pitfield J. In that case, the language of the policy provided coverage where a business is “interrupted or interfered with” solely as a result of an accident. At para. 16, Pitfield J. stated:

In my opinion the words “interrupted” and “interfered with” as used in the phrase “interrupted or interfered with” should be read disjunctively. The words have different meanings. “Interruption” contemplates a break in the continuity of the business. “Interference” contemplates a lesser event which may not interrupt the business but impedes or interferes with the profit making capability of the business resulting in a diminution of gross profit.

[250] In the policy before me, only the word “interruption” is used. The words “interfered with” are not used. If the interpretation of Pitfield J. is adopted, the policy before me would not cover the plaintiff’s claim. The plaintiff did not shut down the business at any point. Rather, it kept operating.

[251] I have consulted dictionary definitions of the word “interrupt” and the word “interruption”.

[252] The definition of “interrupt” in the Oxford English Dictionary includes “Stop the continuous progress of (an activity or process).” In the Cambridge Advanced Learner’s Dictionary and Thesaurus, the word is defined as “To stop something happening for a short period”. In the same dictionary, the word “interruption” is defined as “An occasion when someone or something stops something from happening for a short period.” In the Cambridge Business English Dictionary, the term “business interruption” is defined as “A period when a business cannot operate because of a storm, flood, or other event.”

[253] In my view, there is no ambiguity in the term “interruption of business”. It means that the business must cease operating. Where that happens, the insurer will compensate the insured for its loss of business resulting from the business being shut down. However, unless there is an interruption of business, the endorsement does not apply.

[254] In this case, the business was not shut down. Accordingly, the endorsement does not apply.

(g) Is the Insurer Liable For Extra-Contractual Damages?

[255] I am not convinced that there were actually lost profits that have been proven. As noted earlier, in the year following the incident, there was no decrease in revenue. I am not convinced that any decrease in revenue thereafter was necessarily anything more than a reflection of the cyclical nature of the business, which appears to have been the case during the period between 2009 and 2012. Assuming, however, that the decrease in revenue can be said to have resulted from the incident, I am not convinced that it was as a result of any fault of the defendant. I am persuaded that the plaintiff made its own decision to keep operating, and the lack, or at least delay, of necessary remediation and repair was the more likely cause of any decrease in revenue.

[256] There is a dispute between Mr. Cipressi and Mr. Carroll as to whether Mr. Cipressi told Mr. Carroll that he was willing to shut the business down at some point. I am convinced by the documentary record that Mr. Cipressi did not want to shut the business down, and he wanted to keep operating throughout.

[257] He was warned in writing, on at least two occasions, that he had to shut down in order to effect repairs as quickly as possible. He was told that failure to do so could be unhealthy because of the contact with food and soft material with black water.

[258] In my view, what was being conveyed to Mr. Cipressi through correspondence with Mr. Carroll and Ms. Croucher was important, and it is inconceivable to me that Mr. Cipressi would not have responded in writing if he actually wanted to shut down on some later date.

[259] Even when Mr. Cipressi received an estimate for repairs, of approximately $105,000, or a cash payment of $79,000, he did not respond in writing. The whole tenor of the offer was based on the assumption that Mr. Cipressi would look after the repairs himself. If the insurer was going to look after the repairs, there would have to be a period when the business would be shut down. While Mr. Cipressi thought the estimate was too low, at no time did he advise the insurer, in writing, that he was prepared to shut the business down while the repairs were being effected.

[260] In his first memorandum to Mr. Cipressi, Mr. Carroll noted that Mr. Cipressi was concerned about scheduled functions and his need to not disrupt them. I am persuaded on a balance of probabilities that this is the real reason why Mr. Cipressi did not want to shut the business down. That was his decision to make.

[261] Accordingly, I am persuaded that if there was any loss of revenue it was a result of Mr. Cipressi’s decision to not shut the business down while repairs were being effected. It was not through any fault of the defendant.

[262] Had Mr. Cipressi agreed to shut the business down, the repairs would have been the responsibility of the insurer. It would not have been necessary to engage in any discussion of whether the estimate ultimately provided by the defendant was adequate. Even then, as noted, Mr. Cipressi at no time objected to the estimate prior to his retaining counsel many months later, when it would have been difficult, if not impossible, for the insurer to satisfy itself as to the accuracy of the new estimate being put forward on behalf of the plaintiff.

[263] For these reasons, I am not satisfied that the insurer is liable for extra-contractual damages.

(h) Is the Insurer Liable for Punitive Damages?

[264] Since I have found that there was no breach of contract on the part of the defendant, there is obviously no viable claim for punitive damages.

[265] If I had found otherwise, I would not have concluded that this claim is one of the exceptional cases of “malicious, oppressive and high-handed” misconduct that “offends the court’s sense of decency”: Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595, as per Binnie J. at para. 36.

[266] In my view, the insurer acted in a reasonable manner and relied, as it was entitled to do, on estimates provided by a third party that it had used many times before. The real cause of the dilemma was the actions of the plaintiff in failing to cooperate with the insurer in closing down the business so that repairs could be effected as quickly as possible.

Disposition

[267] For the foregoing reasons, the action is dismissed.

[268] I will entertain brief written submissions as to costs, not to exceed five pages together with a bill of costs. Mr. Dowhan will have five days and Ms. Stock will have five days to respond. Mr. Dowhan will have three days to reply.

Gray J.

Released: May 17, 2019