Company of Canada, 2025 ONSC 633
SUPERIOR COURT OF JUSTICE – ONTARIO
(COMMERCIAL LIST)
RE: Nordik Windows Inc., Cash and Carry Inc., Hargar9 Studios Inc., and Real Food for Real Kids inc.
AND
Aviva Insurance Company of Canada, Aviva General Insurance Company and Aviva Canada Inc.
BEFORE: W.D. Black J.
COUNSEL: Stephen Birman, Lucy Jackson, Crawford Smith and Nicole Kelly, for the Plaintiffs (moving parties)
Glenn Zacher and Lesley Mercer, for the Defendants
HEARD: January 28, 2025
ENDORSEMENT
Overview
1This proceeding has been certified as a class proceeding. Justice Morgan heard the certification motion to that end in January of 2023, and by way of reasons for decision and order dated March 22, 2023, His Honour certified the action(s) and confirmed a list of certified common issues.
2Commencing in June of 2020, numerous class actions were issued across Canada against insurance companies that had issued commercial property insurance policies with business interruption coverage. The class proceedings were/are on behalf of various classes of policyholders alleged to have suffered losses as a result of COVID-19 and/or the widespread government shutdown orders made in response to the pandemic.
3Eight such class proceedings were commenced against the defendant Aviva Insurance Company of Canada (“Aviva”) in Ontario, including seven class actions in which Aviva (sometimes including related Aviva entities, as this proceeding originally did), was the sole defendant. This includes the within action (the “Nordik Action”), and the two companion actions (together, the “Lerners Actions”).
4The Nordik and Lerners Actions seek, among other relief, damages for breach of contract on behalf of holders of Aviva commercial property insurance policies (the “Policies”) for alleged business interruption losses arising from the COVID-19 pandemic. The Nordik and Lerners actions advance claims under supplemental coverages for restricted access (the “RA Clause”), and negative publicity (the “NP Clause”).
5The Nordik Action also advances claims under the business interruption coverage for physical loss of or damage to an insured’s premises (the “BI Physical Damages Clause”), and claims for breach of the duty of good faith and punitive damages.
6The RA Clause insures the actual loss of business income sustained by an insured when ingress to or egress from the insured’s premises is restricted by an order of civil authority resulting from enumerated localized perils, namely, murder/suicide, defective drains, food poisoning, or an outbreak of a contagious or infectious disease that is required by law to be reported to government authorities.
7The NP Clause insures the actual loss of business income sustained as a direct result of occurrences of largely the same localized perils, including an outbreak of a contagious or infectious disease within a specified geographic radius of the insured premises that is required by law to be reported to government authorities.
The Plaintiffs’ Allegations
8The plaintiffs allege that the RA and NP coverages were triggered by the closure orders made by the provincial governments in March and April of 2020, and by subsequent civil authority orders, and/or as a result of the outbreak of COVID-19 within a specified radius of the insured’s premises.
9The plaintiffs also allege that Aviva breached its duty of good faith to fairly evaluate coverage under the Policies at issue and placed its own interests ahead of its insureds in denying coverage. The plaintiffs claim $30,000,000.00 in punitive and/or aggravated damages for Aviva’s alleged misconduct.
The Certified Common Issues
10In certifying this action, Morgan J. certified, among other common issues, the following common issues dealing expressly with Aviva’s alleged breach of the duty of good faith and the claim for punitive damages:
Have the defendants breached any duty of good faith to the Class Members, and, if so, does that have any impact on the defendants’ ability to rely on any statutory or policy-based limitation periods or other conditions?
Is the Class entitled to an award of punitive damages?
11The Nordik and Lerners Actions have been transferred to the Commercial List, and I have been assigned to case manage both matters.
Agreed Timetable and Discovery Plan
12The parties have agreed to a litigation timetable, pursuant to which examinations for discovery are to take place by March 14, 2025 and a 6-week trial will proceed on January 19, 2026. The trial will address the coverage issues under the Aviva policies. Of greater moment for this motion, the trial will also address the question of whether Aviva breached its duty of good faith to the Class and whether such misconduct – if found – warrants an award of punitive damages.
13The parties have also agreed to a discovery plan, subject to details of a dispute about the production of certain categories of documents (the “Disputed Documents”). The motion before me deals with the Disputed Documents; the plaintiffs seek production of all such Disputed Documents, and Aviva resists such production.
The Disputed Documents
14The identified categories of Disputed Documents are:
(a) All materials (internally developed that explain the rationale for the RP and NP coverages, the pricing of the RA and NP coverages, and the marketing of the RA and NP coverages);
(b) All internal guidance/training manuals produced to adjusters with respect to coverage for COVID-19 under the RA, NP and physical damages coverages;
(c) Records in any form, relating to or arising out of Aviva’s determination and/or decision at a corporate level that the policies do not provide coverage for losses related to COVID-19;
(d) All internal communications provided to adjusters from head office regarding the availability of the RA and NP and physical loss coverages after January 1, 2020;
(e) All communications between Aviva and its reinsurers regarding the pandemic exclusion clause added to policies as of July 1, 2020, or thereafter;
(f) All internal communications regarding Aviva’s decision to cover claims arising from COVID-19 under the CDSPI and Gougeon policies (being claims of dentists under the CDSPI insurance program and claims of seasonal resort owners under the Gougeon program).
15Prior to the motion, Aviva has provided or agreed to provide the Disputed Documents in subparagraphs (a) and (b) in paragraph 14 immediately above.
16I should also note, in that vein, that Aviva, as it fairly points out, has agreed in the discovery plan, to produce extensive relevant documentation. It is apparent that the parties have generally been cooperative with one another throughout these proceedings, agreeing on timetables and various other matters. Having reached an impasse on this productions issue, the parties have continued to cooperate in identifying the precise categories of documents sought, and in appropriately populating the record for the court’s determination of that dispute.
Justice Morgan’s Findings in the Certification Motion
17The plaintiffs emphasize that on the certification motion, Morgan J. held that there was evidence before him supporting the allegation that Aviva had resorted to a blanket denial of claims. His Honour said:
“Moreover, the evidence in the record establishes that Aviva effectively issued a blanket denial of coverage for all of its business interruption insureds with losses stemming from COVID-related restrictions. The affiants on behalf of Nordik who submitted formal notices to Aviva have produced rejection letters in identical language. It is apparent from the evidence that Nordik (sic) sent out form-letter rejections to all insureds who submitted notices of claims under the business interruption provisions.”
Relevant Aspects of the Pleadings
18This issue is joined in the pleadings. The plaintiffs plead, among other allegations, that Aviva adopted a policy of “pre-judging the Plaintiffs’ and Class Members’ claim for loss of business income and failed to consider fully and fairly all relevant factors”, that “Aviva’s company‑wide policy that the business interruption Policies at issue in this action do not cover losses related to COVID-19 was in direct violation of its duty of utmost good faith”, and that “Aviva pre-emptively and improperly determined coverage for Class Members and communicated that position to its brokers and its insureds for the purpose of and/or which had the effect of dissuading Class Members from making claims for coverage.”
19In response, among other things, Aviva specifically asserted that it “did not, as alleged, adopt a company-wide policy that its insurance policies did not cover losses relating to the COVID-19 pandemic.”
20Relatedly, Aviva pleads:
“Aviva denies, as alleged in the Nordik Action, that it failed to fairly evaluate pandemic-related business interruption claims, that it pre-emptively and improperly denied coverage for such claims, or that it pre-emptively or improperly communicated the alleged company-wide policy to brokers or insureds for the purpose of dissuading the making of insurance claims.”
21Further, Aviva pleads, in denying the basis for an award of punitive damages, that it “acted in accordance with its duty of good faith at all times, including in the assessment of the plaintiffs’ and class members’ claims.”
Evidence of Aviva’s Deponent Ms. Penwarden
22In the context of the certification motion, Aviva filed an affidavit of Susan Penwarden, then Aviva’s Chief Technical Underwriter, sworn March 19, 2021. Ms. Penwarden was cross‑examined on that affidavit on April 2, 2021. Ms. Penwarden, who now occupies a different position within Aviva, is one of two corporate representatives of Aviva to be examined for discovery in the upcoming examinations.
23Ms. Penwarden testified that she and the team she led at Aviva undertook a review, in the summer of 2020, of the coverages at issue.
24That review led to a decision, at the corporate level, that the pandemic was not covered under the Policies. As explained in Ms. Penwarden’s affidavit, that determination was in part premised on a distinction between pandemics and “outbreaks” (outbreaks, as noted, are specifically identified within the coverage):
“It is my understanding that an “outbreak” is a small localized event of a disease, whereas a “pandemic” occurs when a disease has spread throughout the world and is out of control. This is consistent with what I have read on the subject.”
25As can be seen in Ms. Penwarden’s evidence concerning the specific clauses at issue, this premise as to the distinction between pandemic and outbreak is central to Aviva’s defence. Ms. Penwarden’s evidence on the relevant clauses is as follows:
“a. Restricted Access:
“The RA Clause does not provide for business interruption losses caused by province-wide shutdown orders… .”
b. Negative Publicity:
“…[T]he NP Clause does not provide coverage for business income losses arising from global pandemics.”
c. Physical Damage:
“…[T]he actual or suspected presence of COVID-19 at an insured premises, as well as restrictions placed on access to an insured premises as a result of any applicable government shutdown orders, does not amount to “physical loss of or damage to” those premises… .”
26The plaintiffs emphasize that it is not clear how or when Aviva arrived at its interpretations of the coverage wording. Ms. Penwarden confirmed in her evidence that she was not aware of the specific language in the coverages at issue until after the commencement of this litigation, and was not aware of the distinction that she draws between outbreaks and pandemics until, at earliest, the end of December of 2019, when COVID-19 was identified by the World Health Organization.
27In her evidence, Ms. Penwarden deposes that Aviva paid “hundreds of millions of dollars” to dentists under the CDSPI insurance program, and to seasonal resort owners under the Gougeon program. The plaintiffs characterize this evidence as “an apparent effort to demonstrate that Aviva acted in good faith towards some insureds” and argue that Aviva’s reference to and reliance on its decisions to cover COVID-19 claims under those programs is relevant to Aviva’s internal decision-making process in this case, inasmuch as the reasons why Aviva chose to honour a small subset of claims with similar coverages should prove instructive.
28The other aspect of Ms. Penwarden’s evidence that the plaintiffs highlight is her acknowledgement that Aviva added a “pandemic exclusion clause” to its policies as of July 1, 2020, after the commencement of this litigation. Her evidence is that “Aviva Canada included this clause for purposes of confirming that there was no coverage for any losses caused by a global pandemic, including COVID-19 and to align with the position taken by its reinsurers.”
Aviva’s Positions re Allegations of Bad Faith
29In its response, while obviously differing on the legal implications of the facts recited by the plaintiffs, Aviva largely does not take issue with those facts.
30It denies that it marketed or sold the Policies as providing coverage for business interruption losses caused by global pandemics, that it charged or received premiums for such coverage, or that such coverage was contemplated in its assessment of risk and insuring cost in determining and allocating costs and premiums for the commercial property insurance policies and business interruption endorsements that it issued.
31Aviva also characterizes the plaintiffs’ bad faith allegations as “boilerplate” and notes that those “bald” claims have not changed since the outset of the proceedings, notwithstanding that the plaintiffs have served four amendments of the statement of claim.
32It also notes that it objected to the inclusion of Common Issue 9 on that basis that it contained a “false premise” in assuming that Aviva had acted in bad faith. Aviva says that Morgan J. agreed, and that the certified (revised) version of common issue 9 reflects His Honour’s agreement with Aviva’s objection, inasmuch as it asks whether or not Aviva “breached any duty of good faith.”
33Aviva says that Morgan J. did not otherwise address the bad faith allegations, but acknowledges that His Honour found, in including in the class definition insureds who had not made insurance claims, that “the plaintiffs had met the low evidentiary bar of some basis in fact that Aviva had effectively issued a blanket denial of coverage, and had communicated to brokers that the vast majority of its policies did not respond to pandemic-related losses.”
34Aviva also emphasizes that the parties agreed, in the discovery plan, to an expedited discovery schedule, and that under the discovery plan Aviva agreed to produce nineteen different categories of documents relevant to the common issues, “including documents that relate specifically to the allegations underpinning Common Issue 9.”
35As noted, at the outset of the hearing before me, the parties confirmed that Aviva has since agreed to produce the documents sought in the first two categories of Disputed Documents.
The Plaintiffs’ Legal Argument
36In terms of the law that applies to the dispute before me, the plaintiffs begin with the notion that, in a class action, the usual requirement under the Rules that a party produce all documents relevant to any matter in issue is generally filtered through and defined by the common issues. They rely on the proposition set out in Fischer v. IG Investment Management Ltd., 2015 ONSC 3525 (and elsewhere) that to determine whether or not a document is relevant, one must look to whether or not the evidence will “increase or decrease the probability of the truth of the facts in issue.”
37Aviva largely agrees, albeit emphasizing that since the amendment to the Rules in 2010, the test for production is actual relevance, a more stringent standard than the former test of “semblance of relevance.” Aviva also stresses that while the scope of production is limited by and to the common issues, a document must still be relevant to the underlying pleading to be producible.
38Where the parties more significantly part company is in their respective formulations as to how the Policies are to be interpreted, how that interpretation shapes production, and as to the significance of allegations of bad faith in that analysis.
39Starting from their conception of relevance outlined above, the plaintiffs broadly assert that “any document relevant to the bad faith and punitive damages claims and Aviva’s defences to those claims, is relevant for the purposes of discovery and therefore producible.”
40The plaintiffs then recite the unassailable proposition that “an insurance contract imparts a duty on the insurer to treat its insured with the utmost good faith and fair dealing” and that the duty of good faith applies to “any matter arising under or in relation to it” (Kang v. Sun Life Assurance Company of Canada, 2013 ONCA 118).
41The duty of good faith, the plaintiffs continue, obliges an insurer to act “both promptly and fairly when investigating, assessing and attempting to resolve claims made by its insureds”, and to “assess the merits of the claim in a balanced and reasonable manner” (702535 Ontario Inc. v. Non-Marine Underwriters Members of Lloyd’s London, 2000 ONCA 5684).
42The plaintiffs next quote authority to the effect that the duty of good faith applies and extends to every stage of the claims process, including through trial, and that “the duty of good faith is not to be analyzed inflexibly, as the contours of the duty of good faith and fair dealing in Canadian law has yet to be determined.” (I note that this quotation is taken from the Court of Appeal for Ontario’s 2013 decision in Kang, which predates the series of Supreme Court of Canada decisions, starting with Bhasin v. Hrynew (2014) SCR 494 in 2014 and later Callow in 2020 and Wastech in 2021, confirming the important place of good faith as an “organizing principle” for contract law, all of which arguably have enlarged the “contours of the duty”).
43An insurer abiding by its duty of good faith, the plaintiffs assert, “must give as much consideration to the welfare of the insured as to its own interests” in part because the insurer possesses the power in the contractual relationship, not the insured (Usanovic v. Penncorp Life Insurance Company (La Capitale Financial Security Insurance Company), 2017 ONCA 395).
44Pointing to the Supreme Court of Canada’s well-known decision in Whiten v. Pilot Insurance Co., 2002 SCC 18, the plaintiffs underline the link between a breach of the duty of good faith and the availability of punitive damages, and suggest that the process within Aviva leading to the “systemic denial” of the claims here “may give rise to a meaningful punitive damages award.”
45Drilling down to the essence of their position in this motion, the plaintiffs next assert that:
“The only way that an insured can ascertain whether its coverage claim was handled improperly and in bad faith is through the production of the insurer’s internal files showing how they handled, or should have handled, the coverage request and the information available to the insurer at the material time.”
46For this proposition, the plaintiffs place particular emphasis on DiTomaso J.’s 2015 decision in Sky Solar (Canada) Ltd. v. Economical Mutual Insurance Company, 2015 ONSC 4714, and on Brockenshire J.’s 2000 decision in Samoila v. Prudential of America General Insurance Co. (Canada), 2000 CanLII 22690 (ON SC), 50 O.R. (3d) 65.
47In Sky Solar, in considering an insurer’s obligation to produce internal documents, DiTomaso J. said:
“[61] A court considering whether the duty of good faith owed by an insurer has been breached will look at the conduct of the insurer throughout the claims process to determine whether in light of the circumstances, as they then existed, the insurer acted fairly and promptly in responding to the claim.
62Ontario Courts have found that the only way that an insured can ascertain whether its coverage claim was handled improperly and in bad faith is by production of the insurer and broker’s internal files showing how they handled or should have handled, the coverage request, and the information available to them at the material time.”
66I find that the coverage and duty of utmost good faith issues are joined by the pleadings. Where Economical repeatedly pleads that it “fully investigated” the losses before denying coverage, Economical is compelled to produce their entire claims and investigation files in relation to the coverage claims and investigation files in relation to the coverage claims and bad faith claims made by Sky regarding the 2012 and 2013 failures under the Policy prior to the denial of coverage on October 30, 2013 as requested. Similarly FCA [the broker] is also ordered to produce its entire claims and investigation files regarding these two losses for the same reasons.”
48To similar and even more expansive effect, in Samoila Brockenshire J., considering the plaintiff’s motion seeking production of legal opinions received by the defendant insurer, production of manuals and claims policies relating to the adjustment of sickness and accident benefit claims and the entire claims file relating to the plaintiff, quoted with approval from the decision of Lovell, District Judge in the American case of Berguson v. National Surety Corporation, 112, F.D.R. 692 (1986 U.S.D.C., Montana):
“In a first party bad faith case such as this, where the insurance company has refused to pay benefits claims under the policy, the critical issue is whether the company had a good faith basis for its decision. This in turn requires a number of other inquiries, including the substance of any investigations concluded by the insurer, the information available to the company at the time its decision was made, and the manner in which the company arrived at its decision, including reliance on advice of counsel. The insurance company’s claims file constitutes the only source of this information….
Bad faith actions against an insurer, like actions by client against attorney, patient against doctor, can only be proved by showing exactly how the company processed the claim, how thoroughly it was considered and why the company took the action it did. The claims file is a unique contemporaneously prepared history of the company’s handling of the claim; in an action such as this the need for the information in the file is not only substantial, but overwhelming.”
49In granting the motion before him, Brockenshire J. adopted the reasoning in Berguson as a “common‑sense explanation of the problems in a suit such as this, and the way in which the problems could be resolved.” His Honour concluded, on this issue, that the plaintiff should have access to the entire claims file, “including anything and everything in the file during the period that the company maintained its refusal to pay.”
50Applying the principles from these cases to the four remaining categories of Disputed Documents, the plaintiffs argue that items (c) and (d) (as set out in paragraph 14 above) “go to the heart of Aviva’s decision-making process and how the corporate decision to deny coverage was made and communicated to adjusters within Aviva before being communicated to the Class.” As such, the plaintiffs urge, “these documents are thus relevant to the bad faith claim.”
51The plaintiffs also assert that, with respect to item (e), Aviva’s decision to add an explicit pandemic exclusion clause applicable to its Policies on or after July 1, 2020, the plaintiffs maintain that “Aviva’s decision to add a pandemic exclusion clause after the commencement of this litigation raises significant questions and it relevant to its understanding of it coverages and/or information provided to Aviva about its Policy wordings after coverage was initially denied.”
52Finally, the plaintiffs argue that, with respect to item (f), Aviva’s decision-making process must encompass and include Aviva’s decision to pay out pandemic claims under the CDSPI and Gougeon Programs while at the same time denying business interruption coverage to the plaintiffs, and that a comparison of the clauses and circumstances is relevant to the assessment of whether or not Aviva acted in good faith here.
Aviva’s Legal Argument
53After emphasizing the important premise that relevancy must be judged first and foremost in relation to the pleadings, Aviva urges that the interpretation of insurance policies, like any contracts, must determine the objective intention of the parties.
54To that end, Aviva references the decision of Penny J. in Workman Optometry et al. v. Certas et al., 2023 ONSC 3356 (aff’d 2024 ONCA 479), in which His Honour wrote:
“The purpose of the interpretation exercise is to determine the objective intent of the parties. Subjective intent is always irrelevant. Objective intent is determined by reading the words of the insurance contract in their plain and ordinary grammatical sense, in the context of the contract as a whole, with some consideration being given to the circumstances surrounding the creation of the insurance policy.”
55Justice Penny went on to explain what surrounding circumstances are appropriately taken (and not taken) into account, as follows:
“The surrounding circumstances include “anything which could have affected the way in which the language of the document would have been understood by a reasonable man” at the time the parties made their agreement: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53. However, evidence of surrounding circumstances may be considered only if those circumstances were reasonably known to both parties at the time of contract formation. Surrounding circumstance do not include evidence of subjective intention and understanding or subsequent conduct (to which different rules apply.)”
56I pause to note that, while Penny J.’s guidance on the role of surrounding circumstances is unassailable with respect to the interpretation of a policy as to coverages, in my view the rules of the game are not quite so limited when the allegation at issue is one of failing to act in good faith. That is not to suggest that an insurer is taken to have acted in bad faith merely by virtue of denying a claim, or that an insurer’s decision to deny coverage needs to be “correct;” rather, it means that where there are plausible allegations that an insurer failed to act with utmost good faith, the surrounding circumstances concerning the decision at issue may be approached with a broader ambit.
57I say “plausible” because it is not enough, as Aviva argues, simply to allege bad faith baldly. Rather, alleged breaches must generally be individually identified in the pleading, and supported by specified material facts.
58Aviva relies on a handful of cases stressing that production of a defendant insurer’s complete internal file would be a “rare, exceptional and extraordinary action” ( e.g. Kanani v. Economical Insurance, 2020 ONSC 7201).
59These cases stress that simply alleging bad faith broadly, without pointing to specific facts in support of the allegation, is in the nature of a “fishing expedition”, and to be discouraged. In Intact Insurance Company v. Malloy, 2020 NSCA 18, 2020 NSCA18, the Court of Appeal for Nova Scotia, overturning a motions judge’s order requiring the insurer to turn over its internal file to the claimant, said:
“Although the pleadings are a factor to be taken into consideration in determining whether documents are relevant, they are not the only factor. If that were the case, adroit counsel would draft pleadings in such a manner to allow a party to embark on a fishing expedition. This is precisely what the Rules were intended to avoid when they were amended to move from the “semblance of relevance” test to relevancy.
Allegations, no matter how specifically worded or drafted, which have no basis in the facts or the evidence without more, cannot be the basis of a production application. This is particularly true here, where there was a dearth of evidence before the motions judge.”
60I accept unreservedly that there has to be some “fire beneath the smoke”, and that merely alleging bad faith, without more, as Aviva argues the plaintiffs have done here, should not lead to an order requiring production of the insurer’s internal file.
Discussion of Arguments
61Here, however, I find that on balance there is sufficient evidence, and the parties have sufficiently joined issue on the contents of Aviva’s internal files, that some additional production is warranted.
62First, in my view, the fact that Morgan J. found some basis in fact to support the common issues regarding Aviva’s breach of its duty of good faith and the class members’ entitlement to punitive damages is significant, and on its own cloaks these claims with prima facie legitimacy. This is not to say that Morgan J.’s finding definitively concludes the inquiry, but when an experienced jurist makes this finding, this tends to move the request for the Disputed Documents out of the realm of a fishing expedition. In other words, Morgan J.’s findings suggest that the allegations are not merely plucked out of the air, and have been found by one of my colleagues to have at least some basis in the evidence.
63Second, appreciating that this factor was an important factor underlying Morgan J.’s conclusion, such that it may not be fair to characterize it as an entirely separate consideration, I too am struck by the appearance that Aviva effectively issued a blanket denial of coverage of all of its insureds claiming for COVID-related losses under business interruption clauses.
64While I appreciate that the sheer volume of such claims might reasonably engender certain shortcuts and repetition in the language employed to deny them, Aviva’s pleadings specifically aver that “Aviva properly evaluated all pandemic-related business interruption claims” and denies that it adopted a company-wide policy to deny coverage for all losses relating to the COVID-19 pandemic. Even accepting the need for economies of scale in the language employed to communicate denials of such claims, it is nonetheless curious that Aviva, while purporting to have evaluated each claim individually and carefully, communicated its denial of coverage for all such claims in identical language.
65In my view, this at least raises a question about the plaintiffs’ assertion that Aviva pre‑judged these claims, and failed to consider all relevant factors in each case.
66I am also skeptical about, or at least not entirely persuaded by, the stated distinction between pandemics and “outbreaks” which is central, in the evidence of Ms. Penwarden, in justifying the decision to deny coverage – which would be available for “outbreaks” – when instead the event at issue is a pandemic.
67Ms. Penwarden, at the relevant time the Chief Technical Underwriter for Aviva, testified that she and her team completed an investigation into the coverages at issue in the summer of 2020. It was during this process, involving internal communications and deliberations, that Aviva developed the corporate position that pandemics, in contrast to “outbreaks,” are not covered under the Policies. Ms. Penwarden’s evidence on that issues was as follows:
“11. It is my understanding that an “outbreak” is a small localized event of a disease, whereas a “pandemic” occurs when a disease has spread throughout the world and is out of control. This is consistent with what I have read on the subject.”
68Likewise, Ms. Penwarden confirmed that Aviva’s position was that the “RA Clause does not provide coverage for business interruption losses caused by province-wide shutdown orders,” that the “NP Clause does not provide coverage for business income losses during global pandemics,” and that the presence of COVID-19 at an insured premises, or restrictions placed on access to an insured premises as a result of applicable government shutdown orders does “not amount to “physical loss of or damage to” those premises….”.
69Finally, of note, Ms. Penwarden acknowledged that she was not aware of the specific language in the coverages at issue until after the commencement of this litigation, and was not aware of the purported differences between outbreaks and pandemics, described in her evidence, until at earliest December 31, 2019, when COVID-19 was identified by the World Health Organization.
70These revelations concerning the timing of Ms. Penwarden (and her team)’s determinations about the basis for denying coverage across the board for the pandemic-related claims at issue have implications, in my view, for Aviva’s stated position that the court’s task is only to give effect to the plain and ordinary grammatical meaning of the words in the Policies.
71While that is certainly true as a general proposition, surely it is relevant to the evaluation of Aviva’s position to understand that the interpretation on which Aviva relies was not developed or confirmed until some time in the summer of 2020, well after the relevant language was in place.
72Moreover, and again, while there is nonetheless a substantial argument that the plain meaning of the words on the page govern – as an expression of the parties’ intent – relative to coverages provided in the Policies, it must be relevant to consider, in relation to a claim of bad faith, that Aviva’s own position on the Policies was developed after the fact based on internal deliberations in the setting of an onslaught of claims. The plaintiffs did not and could not have known, at the time they purchased the Policies, that Aviva would take the position it has, because Aviva itself did not develop and assert that position until much later.
73As such, in my view, the “words on the page” to which Aviva agreed before reassessing and reasserting its position based on subsequent internal deliberations must be revisited and interpreted in light of that change in position.
74In simple terms, it is difficult to say that the words in the Policies give effect to Aviva’s intended interpretation, or the objective interpretation to which the parties agreed, when Aviva did not fully formulate its intended interpretation until many months later.
Conclusions re Disputed Documents
75Having made these observations, I now turn to the specific Disputed Documents at issue.
76As noted, Aviva has agreed to produce the Disputed Documents in categories (a) and (b) of the six categories in contest.
77In my view, the conclusions I have reached above dictate that Aviva should produce all Disputed Documents in categories (c), (d) and (e). In each case, the documents in question will, or are likely to, provide contemporaneous evidence of Aviva’s internal decisions and after‑the‑fact interpretations of the relevant provisions.
78I find, however, that the documents in category (f) are less clearly relevant. While the relevant language of the CDSPI and Gougeon policies is only modestly different than the relevant provisions of the policies at issue here, they are nonetheless different, and thus it is not evident to me that Aviva’s determinations with respect to those policies will shed light on its decisions relative to the Policies at issue here.
79To the extent that it becomes apparent in the materials produced in items (a) through (e) that there are relevant comparisons made, internally by Aviva, to the determinations relative to the CDSPI and Gougeon policies, then I may be prepared to revisit this conclusion, but for now I am not ordering production of Aviva’s materials for category (f).
Costs
80While success has been somewhat divided, and while Aviva voluntarily agreed to produce the documents in categories (a) and (b) without the need for the hearing of this motion, the plaintiffs have nonetheless been the more successful parties here, and are entitled to at least a portion of their costs. Unless there were any offers made, the scale of such costs should be partial indemnity; as noted Aviva has been appropriately cooperative in the proceedings and in this motion.
81I ask the parties to discuss and attempt to agree on those costs. If they cannot do so by two weeks from the date of release of this decision, then the parties should advise me that is the case and I will devise a plan and timing for exchange of submissions.
W.D. BLACK J.
DATE: FEBRUARY 12, 2025