Insurer Aviva has been told to pay $1 million in costs following its unsuccessful attempt, in a re-hearing, to avert a COVID business interruption insurance class action following the exit of a judge from the case due to perceived “bias”.
The case centres on COVID-related business interruption claims from a consortium, previously said to potentially represent tens of thousands of insureds, spearheaded by Ontario-headquartered installation business Nordik Windows. Arguments for the class action to proceed were first heard in 2021.
The Nordik action was initially conditionally certified, but in December 2021 the judge in the case, the late Justice E. Belobaba, recused himself from proceedings due to a “perception of bias that had arisen at the first hearing” and ordered a re-hearing under a different judge.
Nordik was successful in the re-hearing, with the class action granted certification and three further representative plaintiffs added to the suit in March 2023.
Aviva had taken the view that the initial proceedings were inconclusive and it was only unsuccessful at the second hearing, meaning it should only be on the hook for costs for the latter. This is according to the latest Ontario Superior Court of Justice decision from Justice E.M. Morgan, dated May 17, 2023.
Counsel for Aviva had argued that $338,594 would have been a reasonable costs figure, court documents show. Nordik had sought upwards of $1.42 million.
In the decision, Justice Morgan said that both parties were “right and wrong” on the issue.
Aviva was unable to “ignore the costs of the first round altogether”, Justice Morgan said as per court documents. However, Morgan further said that the plaintiff could not include the costs of arguing the initial round as Beleboba had ordered that it “must be repeated”.
“He [Belobaba] ruled that the need for repetition of the argument was due to his own comments at the hearing, and not due to the arguments pursued by either counsel,” Justice Morgan said. “Neither side can claim success from that hearing.”
While Justice Morgan acknowledged that the costs sought by Nordik were “on the high side”, it was found that they were “commensurate with the effort put into the matter and the amount at stake in the litigation”.
An Aviva spokesperson said: “We are unable to comment as the matter is before the courts.”
In addition to the Nordik action, Aviva faces two further class actions, from Royal Canadian Legion branches and Ontario dentists.
The insurer was originally named in the national Workman class action – described by Justice J McEwen in January 2022 as a case that involves “enormous collective claims that will likely be measured in the billions of dollars, has wide-ranging ramifications for Canadian businesses and involves other substantial commercial dimensions which will result in wide-ranging ramifications for participants in the Canadian insurance industry” – but was removed from the roster of insurer defendants in January 2021, with Belobaba, who died in May aged 75, having cited an “important difference in coverage” among other factors in the decision.
Aviva told brokers via a May 2020 bulletin that the “vast majority” of its policies were not triggered by global pandemics or province-wide shutdown orders, according to court documents.
As of March 2020, “in the neighbourhood” of 44,000 businesses had Aviva insurance policies that contained its three “standard clauses” relating to physical damage coverage, negative publicity and restricted access coverage, according to evidence supplied to the court as per the re-hearing certification decision.
