Ontario Superior Court dismisses insurance claim over water damage incident in a restaurant

A water pipe in a sprinkler burst, damaging the businesses' property and contents

Ontario Superior Court dismisses insurance claim over water damage incident in a restaurant

In a recent ruling, the Ontario Superior Court of Justice dismissed a claim against the insurer companies following a water damage incident.

In Aviva Insurance et al v. Sahara Resturant, 2024 ONSC 1415, a water pipe in a sprinkler burst in a restaurant owned by the respondent, Sahara Restaurant, damaged the restaurant’s property and contents.

The restaurant promptly notified the insurers, Aviva Insurance Company of Canada, Lloyd's Underwriters, and Chubb Insurance Company of Canada. However, the insurers moved for a declaration that the limitation period for Sahara Restaurant to pursue a claim for loss under the hospitality insurance policy issued to Sahara Restaurant expired on January 1, 2019.  The insurers took the position that although Sahara Restaurant notified the insurers of the loss in a timely fashion, it did not file a Statement of Claim against the insurers before the expiration of the limitation period. 

The Ontario Superior Court ultimately agreed with the insurers, emphasizing that the one-year limitation period to commence a claim, as outlined in the insurance policy and the Insurance Act, was definitive. Despite Sahara Restaurant's arguments that ongoing discussions with the insurers and a demand for an appraisal extended or suspended the limitation period, the court concluded these did not affect the original timeframe.

Moreover, the court addressed Sahara Restaurant’s claim of promissory estoppel and allegations of bad faith by the insurers, finding insufficient evidence to support these claims. The court deemed communications between Sahara's broker and the insurers as normal dealings that did not imply an extension of the limitation period.

As a result, the court dismissed Sahara Restaurant's application to compel the insurers to participate in an appraisal of losses. The court underlined the importance of adhering to the contractual limitations periods within insurance policies and clarified that an appraisal demand does not pause or extend these periods.

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