Dolden Wallace Folick’s Class Action Newsletter – October 2021

October 1, 2021

Dolden Wallace Folick’s Class Action Newsletter – October 2021

Ontario Court Certifies Business Interruption Class Actions against Aviva Canada

By Janice Finney, DWF Toronto, Email: jfinney@dolden.com

The Ontario Superior Court of Justice has certified three class actions against Aviva Insurance Company of Canada over business interruption coverage refusal, which may have a significant impact on denials of business interruption claims related to COVID-19.

The claims against Aviva were carved out of a larger class proceeding to provide a more expeditious and focused claim. Aviva provided “restricted access coverage” for loss of income caused by business interruption relating to a global pandemic. Aviva’s policy, unlike other similar policies, did not require actual property damage.

Summary

On July 15, 2021, in Nordik Windows Inc. v. Aviva, 2021 ONSC 4477 (“Nordik”), Justice Belobaba certified the two class actions brought by Royal Canadian Legion branches and Ontario denturists, and conditionally certified the class action brought by a number of other representative plaintiffs referred to as the “Nordik Consortium”. The only remaining issue was whether the Nordik Consortium would be suitable representative plaintiffs.

On September 10, 2021, in an addendum (Nordik Windows Inc. v. Aviva, 2021 ONSC 5807) to his earlier decision, Justice Belobaba also certified the action brought by the Nordik Consortium as a class action.

In an unreleased decision, Justice Belobaba also certified, on consent, a class-action against 14 property and casualty insurers over business interruption coverage refusal.

Legion/Denturist Action

In the Legion/Denturist action, Aviva consented to a partial certification. Class definition was limited to any insureds who submitted a claim.

The only issue in dispute at the certification motion was the proposed common issue pertaining to negative publicity coverage. Aviva argued that the issue lacked sufficient commonality and could not be determined on a class-wide basis. Justice Belobaba found that the question was not “was there an outbreak” but “what constitutes an outbreak”. The latter did not require an individualized determination and would therefore be adjudicated in the common issues trial.

Nordik Consortium Action

In the Nordik Consortium action, all certification requirements under section 5(1) of the Class Proceedings Act were disputed. At the hearing, the plaintiffs limited their cause of action to breach of contract and breach of duty of good faith, which prompted Aviva to consent. Aviva also disputed the proposed common issue about negative publicity coverage, and the appropriate class representative.

The plaintiffs sought a broader class definition that included any person insured under Aviva’s BI policy who sustained a loss of business income. Justice Belobaba rejected this definition, and instead ordered that the class be defined as anyone who submitted a claim or will eventually submit a claim.

The court recently released an addendum to the decision, holding that Nordik Consortium were suitable class representatives. Aviva’s objection was largely focused on one of the plaintiffs, Nordik Windows. Aviva argued that Nordik Windows’ business operations had not been interrupted by any COVID-19 related orders from any civil authority as required under the policy. Nordik Windows was deemed essential, however, was shut down at the recommendation of a public health official in order to reconfigure the facility to achieve physical distancing.

Justice Beloboba noted that judicial interpretation of the key words in the policy, including “order of civil authority”, will be determined at the merits stage. However, at the certification stage, there was evidence to indicate that some portion of Nordik Windows’ business interruption losses were caused by an order of civil authority. The order made by the public health authorities required essential businesses to still operate in accordance with their recommendations and instructions, which Nordik Windows’ appeared to have done.

Justice Belobaba found no difficulty concluding that two of the other Nordik Consortium plaintiffs had viable causes of action against Aviva. The last Nordik Consortium plaintiff, Real Food for Real Kids Inc., was also found to be a suitable representative plaintiff. Interestingly, its business losses related to cancellation of catering orders from day-care centres and summer camps, which were forced to shut down due to COVID-19 measures. Aviva unsuccessfully argued that this was an indirect result of an outbreak. Justice Belobaba held that based on the evidence, it was arguable that the COVID-19 outbreak was the direct or proximate cause of the business losses.

Takeaway

With the onset of COVID-19 and the forced closure of many businesses, thousands of claims were made by businesses for COVID-19 related income losses. In many cases, denials were issued on the basis that the policies did not cover the effects of the pandemic.

Given the economic importance of these cases, it is very likely that the Aviva actions and the larger class proceeding will act as test cases to clarify whether or not there is coverage in principle for COVID-19 related losses under a variety of insurance policies. The court has also noted its intention to provide a legal determination to BI claimants as quickly as possible as “this is that rare class action where real people are sustaining real harm in real time.”

Class Action Certified for Approval of Settlement in Unique Medical Malpractice Claim

By Balraj Sihota, DWF Toronto, Email: bsihota@dolden.com

Background

A medical malpractice class action involving a unique set of facts was recently certified for settlement approval. The defendant fertility doctor in Davina Dixon et al. v. Dr. Norman Barwin (Court File No. 16-70454CP) used his own sperm, instead of the donor sperm, to inseminate a number of his patients without their knowledge or consent. More than 150 individuals may have been adversely affected by Dr. Barwin’s fertility practice going back to 1978.

Dr. Barwin operated a fertility clinic at the Ottawa Hospital between 1974 and 1984. He subsequently operated his own independent clinic from 1984 to 2012. The representative plaintiffs in the action, Mr. and Mrs. Dixon, underwent fertility treatments by Dr. Barwin in 1989 and successfully conceived; their daughter, Rebecca, was born on June 1, 1990.

Twenty six years later, however, a paternity DNA test confirmed that Mr. Dixon was not Rebecca’s biological father. Through their own investigation, the Dixons discovered that Dr. Barwin was the father of a child of another one of his patients. Further DNA testing confirmed that Rebecca’s biological father was also Dr. Barwin.

This class action was issued in 2016. The representative plaintiffs were described as follows:

  • Mrs. Dixon – for patients who received artificial insemination services from Dr. Barwin
  • Mr. Dixon – the spouse or partner of any patients who received artificial insemination from Dr. Barwin
  • Rebecca – all individuals conceived and born as a result of artificial inseminations performed by Dr. Barwin or from material stored

The primary causes of action pleaded were negligence, battery, breach of contract and breach of fiduciary duty in using the incorrect reproductive products. The more significant heads of damages claimed were: (i) pain, suffering and loss of enjoyment; (ii) loss of care, guidance and companionship due to the lost biological connection with intended fathers; and (iii) costs of medical psychiatric treatment.

Settlement and certification

The parties agreed to a class settlement in principle on a ‘no admission’ basis in the total sum of $13.375m. Certification proceeded on consent for settlement purposes only. The parties agreed a compensation grid for the different categories of claimants (mothers, spouses and children). For Mr. and Mrs. Dixon and Rebecca, the maximum value for their respective claims would be up to $50,000, $50,000 and $40,000, respectively. Those figures would be impacted if the $13.375m fund is exhausted, in which case their compensation amounts would be reduced on a pro-rated basis.

The court will review the terms of settlement on November 1, 2021 and determine whether to grant court approval.

Take Away

It is not surprising that this claim settled prior to certification given the circumstances of the case. While the parties agreed to compensation caps for each of the claimant categories, it remains to be seen whether the court will approve the proposed settlement.

Assuming settlement is approved, this will be the first case of its kind in Canada. Even on a worldwide basis, there remains precious little jurisprudence for claims of this nature or in a class action context. In France, two girls who were not raised by their biological parents because they were switched at birth were each awarded damages of €400,000, and their parents and siblings were each awarded €300,000 and €60,000, respectively. Those awards were, however, rendered in a trial judgment and not in a class action proceeding.

On the Road to Narrowing the Test for Class Action Certification with Goodyear

By Chris Stribopoulos and Elka Dadmand, DWF Toronto, Email:
cstribopoulos@dolden.com and edadmand@dolden.com

Spring v. Goodyear Canada Inc, 2021 ABCA 182 (“Goodyear”) is the latest decision on the test for certification of a class action. In Goodyear, the Court of Appeal considered the evidentiary burden to establish a common issue amongst class members at a certification hearing and the certification requirement for pleadings to disclose a cause of action.

Factual Matrix

The representative plaintiff sustained injuries when the Goodyear tires on his vehicle failed due to an alleged manufacturing defect. The representative who purchased the Wrangler SilentArmor tires. On its face, the claim covered 51 different types of tires, totaling 11 million tires over a period of approximately 10 years. The case management judge certified the class action. Goodyear appealed on the basis that the proposed class was overly broad. Goodyear argued that the class be narrowed to consumers who purchased the six types of tires similar to those of the representative plaintiff and which were the subject of a recall.

The Decision of the Case Management Judge

The case management judge concluded that the proposed class action met the test for certification. The pleadings disclosed a cause of action: negligence in tire design and manufacturing, breach of duty to warn of a dangerous product, unjust enrichment and waiver of tort. Further, the identifiable class was comprised of all consumers who purchased the Wrangler SilentArmor tires. Although there was no conclusive evidence of a manufacturing defect that existed across all 51 tire types, the representative plaintiff demonstrated “some basis in fact” of a common defect.

“Some Basis in Fact” of a Common Defect

The central issue on appeal was whether there was “some basis in fact” to show that the claims of the prospective class members raised a common issue that could be fairly and efficiently answered in a class action proceeding.

There were gaps in the evidence as to the cause of the alleged failure in the tires and the systemic manufacturing defects leading to the representative plaintiff’s accident. While the Court of Appeal acknowledged that expert evidence was not essential to a certification hearing, there had to be some indication as to a common cause or source of the problem. Without knowing the nature of the defect, or whether it was systemic, the representative plaintiff could not demonstrate that the issue with his tires was a “common” issue affecting all tires of the class members.

The court recognized that while a certification hearing was not a determination of the merits of the proceeding, it was an important screening device requiring “more than symbolic scrutiny.” While the certification threshold is low, certification should not be granted in the complete absence of evidence supporting the claim.

Disclosure of a cause of action

The court’s certification analysis also included whether the pleadings disclosed a cause of action.

The representative plaintiff pleaded that Goodyear was unjustly enriched by profits earned from the sale of defective tires to the deprivation of the class members and at the risk to the general public. The representative plaintiff sought restitution and disgorgements of profits.

The Court of Appeal rejected “risk to the general public” as a cause of action because a remedy based on negligence required damages. The court also found that the “deprivation” suffered by any class member supported only personal deprivation, and not the deprivation of the general public. Moreover, class members did not suffer a deprivation, as they received the tires that they purchased. The court rejected disgorgement as a cause of action. Disgorgement is only a remedy once an actionable cause has been is established.

Takeaway

The case reinforces the importance of framing the scope of a class action sufficiently narrowly to establish a common issue that can be addressed in a class action proceeding. While a certification proceeding is not an adjudication of the merits of the claim, the court will reject certification if there is a complete absence of evidence supporting the claim. The case also reiterates the need to ensure that class action pleadings disclose a cause of action appropriate for class action proceedings.

Editor
Christine Galea
Tel: 647 798 0614
Email: cgalea@dolden.com

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