At our weekly meeting today, Angie Bellehumeur discussed the Court of Appeal’s decision in Le Treport Wedding & Convention Centre Ltd. v Co-operators General Insurance Company, 2020 ONCA 487, which involved an insurance coverage dispute.
On July 8, 2013, the Greater Toronto Area (GTA) experienced the most expensive natural disaster the province has ever seen. It was the highest single day rainfall in the history of the GTA. The water that entered the appellant’s facility that day caused significant damage.
The appellant was insured under an all-risks policy by Co-operators General Insurance Company. This case is concerned with whether the appellant was entitled to coverage under a Flood Endorsement, as well as other issues regarding the appellant’s coverage for business losses, extra-contractual damages due to the insurer’s delayed payments, and compensation for professional fees incurred to establish the quantum of business interruption loss.
The appellant had purchased a Commercial Broad Form insurance policy from the insurer. The policy excluded coverage for loss or damage caused by flood, including a flood via “surface water.” The appellant had purchased the Flood Endorsement to extend coverage to potential damage or loss caused by flooding.
The Commercial Broad Form policy defines “surface water” as “water or natural precipitation temporarily diffused over the surface of the ground.” The Flood Endorsement defines flood as “the rising of, the breaking out of or the overflow of any body of water, whether natural or man-made and includes waves, tides, and tsunamis.”
While interpreting the definition of “flood” in the Flood Endorsement, the trial judge gave effect to Commercial Broad Form’s exclusion of surface water.
The Court of Appeal held that this was an error, noting that “an endorsement is not a standalone insurance policy” and it is “linked to the policy to which it is attached and with which it is purchased” (para 31). The policy and endorsement must be read together.
The Court of Appeal also held that reading the “surface water” exclusion into the Flood Endorsement would effectively nullify flood coverage in this case and in most cases. The Court questions how the Flood Endorsement would ever be engaged for buildings on land some distance away from water, if it excluded flood via surface water.
In determining whether the appellant’s damages were covered by the Flood Endorsement, the trial judge relied upon Parker Pad & Printing Ltd. v. Gore Mutual Insurance Company, 2017 ONSC 3894 which held that the ordinary meaning of the definition of flood found in the Flood Endorsement did not include “pooling of rain water in a location where no body of water previously existed.”
In Parker Pad, rainwater had been pooling on the pavement and seeped through the building’s foundation. This did not trigger the Flood Endorsement’s coverage. However, the Court of Appeal disagreed that the facts of this case are analogous to Parker Pad.
The Court of Appeal relied on the evidence given at trial that the water flowed out from an upstream creek towards the facility with a force so great that it redirected an automobile. This influx of water into the appellant’s facility falls within the Flood Endorsement’s definition of “flood”.
Additionally, the Court of Appeal found that the ordinary meaning of the word ‘flood’ would undoubtedly include the “massive, forceful, and fast-moving flow of water into the facility on this occasion.”
In short, since the creeks and rainstorm management systems overflowed downstream towards the appellant’s facility, and since the way in which the water flowed into the facility should be understood as a flood in its ordinary sense, the Court of Appeal held that the Flood Endorsement applied and that the appellant was entitled to compensation.