A chain of hair salons is at the centre of a lawsuit that their lawyer hopes will become a class action with more businesses suing to force insurance companies to pay out claims for the cessation of business as a result of the pandemic.
The claim filed in B.C. Supreme Court was launched by Great Clips, which owns and operates eight hair salons across British Columbia and sought insurance relief in March as the pandemic gained momentum and temporarily shut down their business.
However, the claim says, Intact Insurance Company, which provided Great Clips with business-interruption insurance, refused to pay out in May “on grounds that the requisite loss or damage to insured property had not been satisfied.”
“They paid for some form of all-risk business interruption insurance, and then they are being told, ‘If you read the absolutely tiny print …’ or, ‘We have some way to weasel out of paying’ with different insurance companies having different positions, but it all comes to the same thing,” Great Clips lawyer Tony Merchant said from Regina. “Each of the insurance companies refusing to pay are breaching the duty of good faith.”
The claim notes that despite such past Canadian outbreaks as SARS (severe acute respiratory syndrome) and H1N1, Great Clips’s policy does not offer coverage due to a pandemic outbreak.
Mr. Merchant said that he would welcome other plaintiffs as part of the suit because it would underline the seriousness of the matter, and that many businesses have lost millions of dollars during the pandemic, and are searching for some means of getting compensation.
He said his firm has been contacted by more than 500 business owners raising concerns about the issue.
The claim filed by Mr. Merchant lists more than two dozen insurance companies as defendants, and seeks an order certifying the class action and appointing Great Clips as a representative plaintiff. It also seeks declarations from the court that each of the defendants breached their contracts and common-law duty by not providing business-interruption insurance and acted in bad faith.
The claim says that when plaintiffs and class members began making claims on defendants for support under business-interruption insurance policies, “they were surprised and dismayed to see their claims uniformly denied.”
Mr. Merchant said he expected significant damages – the claim seeks $100-million in punitive and aggravated damages – but he cannot yet quantify the figure because he doesn’t know how many companies will be affected.
Jennifer Beaudry, a spokesperson for Intact Financial Corporation, Canada’s largest property and casualty insurer, said that Intact is aware of the application.
“As this is potentially in litigation, we cannot provide further details at this time. We continue to provide support and relief to our customers wherever we can,” Ms. Beaudry said in a statement.
Aaron Sutherland, vice-president of the Insurance Bureau of Canada, said that he could not specifically comment on the legal action.
Generally, he said, insurance policies wouldn’t cover a pandemic unless the policy specifically says it would.
Earlier this year, another spokesman for the insurance bureau warned that commercial insurance policies and traditional business-interruption policies do not offer coverage for business interruption or supply-chain disruption due to a pandemic.
In a statement issued in March to The Globe and Mail, a federal Finance Department spokesperson said that not every business has business-interruption insurance and that pandemics are not likely covered by this type of insurance. “If businesses have questions about their coverage, they should consult with their insurance advisers,” said the statement.
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