Earlier this year, we wrote about an Ontario court decision on two proposed class actions relating to business interruption insurance claims and business income losses sustained during the COVID-19 lockdown and restrictions.
In a more recent Quebec case, the court was presented with a proposed class action by dentists claiming insurance indemnities as a result of business interruptions sustained during the COVID-19 lockdown.
Proposed Class Action Seeks Compensation For COVID-19 Lockdown
Specifically, the proposed members of class action before the court was described as follows:
“All dentists (whether practicing individually or through a professional corporation),dental clinics, and dental offices situated in the Province of Québec who, as of March 16, 2020, were subject to a contract of insurance with the [the insurance companies] that included “business interruption” or “operating loss” or similar types of insurance coverage…”
The claimants argued that the interruption of most dental procedures in March 2020 in response to government decrees related to the COVID-19 pandemic entitled them to payments by insurers under all-risks insurance policies. Specifically, they sought compensation for physical damage caused to their workplaces due to COVID-19 contamination. The claimants also argued that they suffered significant business interruption losses as a result of the government shutdown because they saw a reduction in the number of patients at their clinics.
In response, the insurance companies argued that the claimants had not offered sufficient proof of any material damage or loss to insured property or that the COVID-19 pandemic had caused any such loss or damage. They also noted that any negative effects caused by the pandemic and the resulting government measures on the claimants’ income or profits were not covered under the policies.
The Law on Class Actions in Quebec
In Quebec, authorization for class actions is governed by s. 575 of the Code of Civil Procedure, which reads:
575. The court authorizes the class action and appoints the class member it designates as representative plaintiff if it is of the opinion that
(1) the claims of the members of the class raise identical, similar or related issues of law or fact;
(2) the facts alleged appear to justify the conclusions sought;
(3) the composition of the class makes it difficult or impracticable to apply the rules for mandates to take part in judicial proceedings on behalf of others or for consolidation of proceedings; and
(4) the class member appointed as representative plaintiff is in a position to properly represent the class members.
As such, the claimants had to prove all four elements to obtain authorization.
Court Refuses to Authorize COVID-19 Lockdown Class Action
The court held that the first, third and fourth elements under s. 575 had been met.
However, the court refused to authorize the class action based on the second element, finding that the claimants had failed to prove the facts on which to justify the conclusions sought.
After reviewing the relevant insurance policies, the court first noted that they offered coverage “against loss or damage directly caused to an insured property, by a covered risk”. The court further observed that the risks covered were “all risks of loss or damage to property directly caused to an insured property”.
The court concluded that the claimants had not presented sufficient proof to validate their claims, stating:
“None of these allegations can be seen to provide evidence on the merits that the equipment of dentists in general or of the claimant was directly affected or damaged by COVID-19. There is not a single factual element which suggests that the claimant (or any other dentist) had to suspend the permitted operations (urgent procedures) due to contamination of the equipment or the office.
Obviously, it is clear that this situation generated a loss for the claimant, but is this loss caused by direct damage to an insured property? Does the decree ordering dentists to limit their activities to urgent procedures qualify as a covered loss and, if so, has it affected the insured property?” [translated]
The court answered those questions in the negative.
Moreover, the court found that the claimants had failed to prove that the pandemic, the COVID-19 virus or any form of contamination had directly caused material loss or damage to the claimants’ insured property. Instead, the court observed that the only allegations relating to pecuniary damages were presented as loss of income caused by reduced business activities, which was not covered by the policies.
Finally, the court stated:
“It follows that the claimant’s claim does not relate to loss of income caused by material loss or damage to her insured property. It is simply a request to be compensated for the loss of income occasioned by the limitation of its activities caused by the operation of the government decree.” [translated]
As such, the court held that the claimants had failed to show an arguable case and refused to authorize the class action.
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