Executive Summary: Key Legal and Evidentiary Issues

• Scope of business interruption coverage where loss stems from COVID-19 public health decrees rather than physical damage to insured property.
• Interpretation of an all-risks commercial property policy requiring a “sinistre” causing direct damage to insured property before business income losses are covered.
• Reliance on prior Québec case law (including Centre de santé dentaire Gendron Delisle and a prior small-claims judgment) to confirm that pandemic-related shutdowns are not insured risks under similar wordings.
• Absence of any evidence that the veterinary clinic or pet shop premises or property suffered direct physical damage from COVID-19 or related measures.
• Argument that a later endorsement expressly excluding such pandemic-type losses cannot retroactively broaden earlier coverage, rejected by the court.
• Judicial discretion to deny costs and dispense the unsuccessful insured from paying court fees despite dismissal of the claim.

Facts of the dispute

Vladimir Dvorak, a 76-year-old veterinarian, operated two businesses in Québec: Bureau vétérinaire Sainte-Catherine and Animalerie Angora. He held a commercial insurance policy (“assurance entreprise”) issued by La Personnelle, assurances générales inc. The dispute arose from losses he alleged to have suffered between the end of March and early May 2020, during the first phase of the COVID-19 pandemic in Québec. Government decrees, public health recommendations and sanitary directives significantly restricted the operation of many businesses. In Dvorak’s situation, his age and elevated health risk from COVID-19 made it unsafe, in his view, to personally operate his veterinary office and pet shop within the constraints imposed by public authorities. He claimed that, but for this pandemic context and the resulting decrees, his businesses would have generated at least CAD 15,000 in revenue during the relevant period, a figure accepted by the insurer as a reasonable estimate of potential earnings. Originally, he calculated the loss at about CAD 35,398.46 for the veterinary clinic and CAD 2,258.83 for the pet store, but he reduced the claim to CAD 15,000 to proceed in the Small Claims Division of the Cour du Québec. The insurer did not dispute the factual narrative regarding the impact of COVID-19 measures on his ability to operate, nor did it contest the quantum of the alleged loss as a hypothetical earnings figure. The sole real controversy was whether the policy’s coverage for business interruption and related protections extended to this type of pandemic-related loss.

Insurance claim and procedural context

Dvorak brought a small-claims action in the Cour du Québec seeking an indemnity for part of his business interruption loss. He argued that the decrees, recommendations and sanitary rules put in place by the Québec government during the COVID-19 crisis effectively prevented him from running his two establishments, especially considering his advanced age and vulnerability, and that these circumstances should be treated as a compensable “sinistre” under his commercial policy. La Personnelle opposed the claim on a strictly coverage-based ground: whatever the equities of the situation, it maintained that the policy did not insure this category of loss. It argued that the business property and business interruption sections of the policy only respond when there is direct material damage to insured property caused by a covered peril, and that government shutdown measures and pandemic-related risk to a person’s health fall outside that insuring agreement. Thus, the litigation focused not on the existence or size of the loss, but on whether the policy terms could be interpreted to encompass income losses stemming from public health decrees and the insured’s personal health risk, in the absence of physical damage to the premises.

Policy terms and clauses at issue

Although the judgment does not reproduce the entire wording of the policy, the court makes clear that it is dealing with a typical commercial property and business interruption package. The insurer characterized the coverage as “protection-assurance des biens des entreprises” covering “tous les risques de perte matérielle directe,” but only where a “sinistre” directly affects one or more insured properties. The court relied heavily on a prior Superior Court decision, Centre de santé dentaire Gendron Delisle inc. c. La Personnelle, assurances générales inc., which had analyzed a materially similar policy issued by the same insurer. In that earlier case, the Superior Court held that business interruption coverage only applies when an insured peril causes direct damage to insured property, and that an interruption “du fait d'un sinistre couvert ayant atteint les biens assurés se trouvant sur les lieux assurés” is required. In other words, the coverage does not extend to every interruption of operations; it is triggered only where the interruption results from a covered loss event that has caused direct physical damage to the insured’s property. The court in Dvorak adopted this reasoning, emphasizing that to benefit from the guarantee, the insured must show a “sinistre” that falls within the insured risks and results in direct damage to covered property. The judge then reviewed the provisions invoked by Dvorak in his own policy and found that each of them shared the same basic requirement: explicit reference to insured property being directly affected by a covered loss event. No clause extended business interruption coverage to closures caused solely by government decrees, public health orders, or generalized pandemic risk, where no insured property suffered physical damage.

Reliance on prior jurisprudence

To determine the proper interpretation of the policy, the court followed the Superior Court’s analysis in Centre de santé dentaire Gendron Delisle and noted that the Court of Appeal later allowed the plaintiff in that case to discontinue its appeal, while adding comments confirming the soundness of the trial judge’s coverage analysis. The Court of Appeal had indicated that the trial judge clearly explained why the insurance policies at issue did not cover either the risk invoked or the prejudice alleged, and that no arguable error could be found in that reasoning. The Dvorak judgment also referred to another small-claims decision, 9207-3154 Québec inc. c. Gourdeau, in which similar pandemic-related business interruption claims were rejected on the same conceptual basis: without direct, physical damage to insured property, the business interruption extension is not triggered. Against that background, the judge held that Dvorak had not advanced any persuasive argument distinguishing his situation or his policy wording from those earlier cases. The court also addressed Dvorak’s point that, after the pandemic began, La Personnelle introduced a new endorsement that more explicitly excluded this kind of loss. The judge ruled that the insurer’s later decision to clarify and tighten policy language did not retroactively change the legal interpretation of the earlier contract, nor did it suggest that the previous version had in fact covered pandemic-related shutdown losses.

Court’s analysis and outcome

The court’s analysis turned on the insured’s failure to establish a covered “sinistre” within the meaning of the policy. While recognizing that Dvorak had indeed suffered a significant business interruption due to COVID-19 measures and his own health vulnerability, the judge held that this situation did not involve any direct physical damage to insured property. All of the relevant policy provisions invoked by the plaintiff contained an explicit requirement that an insured property be directly affected by a loss event. The evidence did not show that COVID-19 itself, or the governmental decrees, had damaged the premises, fixtures, or other tangible property insured under the contract. As a consequence, the insuring agreement was never triggered and no business interruption indemnity was payable. Having found that the policy did not respond, the court dismissed Dvorak’s claim in its entirety. However, the judge decided, in the circumstances, to relieve him of any obligation to pay court costs, noting that the insurer did not appear to insist on costs. The successful party was therefore the defendant insurer, La Personnelle, assurances générales inc., but no damages, indemnity or costs were ordered in its favour; the total monetary amount effectively granted or ordered to the successful party was zero, and no precise costs award can be determined beyond the indication that the dismissal was rendered “sans frais de justice.”