Executive Summary: Key Legal and Evidentiary Issues

• Plaintiff sought additional business interruption compensation under an insurance policy following subsidence and flood events at a commercial property.

• The court considered whether the insurer, Aviva, failed to compensate for the full indemnity period and undervalued lost business income.

• A key issue was whether the plaintiff’s restaurant and event venue business would have opened and been profitable but for the insured events.

• The court examined whether Aviva breached its duty of good faith contractual performance in handling the claim and cancelling the policy.

• Experts disputed projected revenues, comparable businesses, and whether a “ramp up” period applied for a new venture.

• The insurer’s unilateral reliance on its own evidence and failure to warn of policy cancellation consequences supported a finding of bad faith.

Facts and outcome of the case

1048977 B.C. Ltd., owned by Trina Allam, intended to open a high-end restaurant and event venue in South Surrey. In 2016, land subsidence caused by neighboring construction halted renovation efforts. This was followed by a hydrogen sulphide gas leak and a subsequent flood from burst pipes. The business never opened, and the property was ultimately sold in 2017. The plaintiff had insured the property with Aviva Insurance Company of Canada and filed a claim for business interruption losses under the commercial insurance policy.

Aviva paid $1,065,937 based on its calculation of business income loss for a 12-month indemnity period following the subsidence. The plaintiff argued that this was inadequate because it failed to account for a second insured event (the flood), and because Aviva undervalued the business income. The plaintiff also alleged that Aviva breached its duty of good faith, especially by cancelling the policy after she elected to receive a cash settlement and by failing to consider the business loss estimates her accountant provided.

The legal dispute centered on whether the plaintiff suffered an actual loss of business income that was higher than Aviva’s calculated amount, and whether Aviva’s claims-handling practices were in breach of its contractual duties. The court applied the Murano factors to assess future business income for a business that had not yet opened. It found that while the plaintiff’s projected income figures were optimistic, the business would have opened and been profitable, and Aviva had failed to compensate for the full indemnity period — which should have extended 12 months from the second occurrence (the flood) rather than just the first.

The court further found that Aviva had breached its duty of good faith in multiple ways: by unreasonably ignoring the plaintiff’s financial evidence, by relying solely on its own accountants' estimates, and by failing to inform the plaintiff that opting for a cash settlement would likely result in cancellation of her insurance policy. However, the court ruled that this bad faith did not cause the plaintiff to sell the property at a loss and declined to award compensatory or punitive damages beyond what was contractually owed.

In its final order, the court awarded $2,278,000 to the plaintiff for unpaid business income loss. It also issued a declaration that Aviva breached its duty of good faith, though it dismissed additional claims for damages. The question of legal costs was reserved, with the plaintiff granted leave to make submissions following the judgment.