The Ontario Court of Appeal has held that business interruption claims are not subject to a rolling limitation period.
In Marvelous Mario’s Inc. v. St. Paul Fire, the appellant insureds commenced two actions claiming insurance coverage under a commercial insurance policy issued by the insurer respondent. That policy covered “direct loss from any Peril”, including business interruption loss and loss of property due to theft or wrongful handling.
The trial judge dismissed the First Action in its entirety, finding those claims were not covered under the policy. In the Second Action, the trial judge dismissed the property claim as time-barred, but allowed the business interruption claim to proceed in part. She held that business interruption claims were subject to a “rolling limitation period” and that some of those claims were preserved. She reasoned:
[60] For the reasons set out above, the second claim, being the claim for business interruption losses, commenced latest on the day the sale to Amore Sweets closed. It was at that time that the plaintiffs knew or had the means of acquiring the knowledge that they had a claim for business interruption losses arising out of the loss of their property.
[61] However, a claim for business interruption losses is, by its nature, an ongoing claim. As the Saskatchewan Court of Appeal stated in Treeland Motor Inn Ltd. v. Western Assurance Co., 1985 CarswellSask 165 (Sask C.A.) at para. 4, the alleged interruption of the plaintiffs’ business might have commenced with a particular event (in that case, a fire; in this case, the closing of the sale to Amore Sweets) “but continued to accrue from day to day thereafter, and cannot therefore be said to have “occurred” on the day of the event which triggered it”.
[62] In effect, the plaintiffs’ business interruption claim is subject to a rolling limitation period. A new claim accrues each day for the business losses sustained that day. I thus conclude that the plaintiffs’ claim for business interruption (to the extent it can be proven in the next phase of this trial) beginning one year before the commencement of the second action is not out of time – that is, the business interruption losses suffered commencing November 16, 2001 are not barred by reason of the contractual limitation period. To the extent the plaintiffs seek recovery for business interruption losses they suffered before November 16, 2001, those claims were not advanced within the contractual limitation period and are therefore barred. [emphasis added]
The insureds appealed on the other issues and the insurer cross-appealed on the rolling limitation issue.
The Court of Appeal dismissed the appeals but allowed the cross-appeal. The Court acknowledged that there were no cases directly on point on whether business interruption claims were subject to a rolling limitation period. Accordingly, the Court considered “first principles”:
The jurisprudence suggests that a rolling limitation period may apply in a breach-of-contract case in circumstances where the defendant has a recurring contractual obligation. The question is not whether the plaintiff is continuing to suffer a loss or damage, but whether the defendant has engaged in another breach of contract beyond the original breach by failing to comply with an ongoing obligation. In cases where there have been multiple breaches of ongoing obligations, it is equitable to impose a rolling limitation period. [emphasis added]
The Court found:
[T]he policy covered business interruption losses and the respondent was obliged to pay those losses in their totality, subject to any limits in the policy. The fact that there was a 24-month cap on the business interruption losses does not convert the respondent’s obligation to indemnify into a recurring contractual obligation. Therefore, this was not a proper case for the application of a rolling limitation period.
It followed that the limitation period for the business interruption claims started on the day the insureds knew that they had suffered a loss or damage. The fact that the extent of damages may not have been known with precision did not stop the commencement of the limitation period.
This is the first Ontario decision that has considered whether business interruption claims are subject to a rolling limitation period.
See Marvelous Mario’s Inc. v. St. Paul Fire and Marine Insurance Co., 2019 ONCA 635
