Executive Summary: Key Legal and Evidentiary Issues

• Organized criminals in the Toronto tow truck industry dispatched arsonists and gunmen to intimidate and shut down Carr Law's insurance defence practice, causing direct physical damage to the firm's office.
• Certas moved for summary judgment, arguing its business interruption policy did not cover the firm's closure beyond the time needed to physically repair the office.
• Central to the dispute was whether the firm's prolonged closure qualified as a business "interruption" under the policy, and whether that interruption arose "as a result of" direct physical loss or damage from an insured peril.
• All of the firm's insurer clients, including Certas itself, withdrew approximately 2,500 active litigation files immediately after the shooting, causing the firm to cease operations.
• Contested policy language included the meaning of "interrupted," the phrase "as a result of," and the applicability of the s. 6B i) exclusion for "delay, loss of market, or loss of use or occupancy."
• The court found coverage in favour of Carr Law, dismissing Certas' motion and granting a declaration that business interruption losses beyond the repair period were covered, with the quantum of damages reserved for a separate trial.

Facts of the case

Carr Law Professional Corporation and its related holding company, 1883114 Ontario Ltd., operated an insurance defence law firm that had achieved notable success defending insurers against fraudulent automobile collision claims linked to the Toronto tow truck industry. That success made the firm a target. In August 2019, a hitman attempted to murder the firm's principal, Ms. Lisa Carr; the gun aimed at her head jammed when the trigger was pulled. A few days later, a second gunman visited the office to warn an associate lawyer to stop suing his "friend," or she would be murdered. On September 6, 2019, that same gunman fired seven shots through the front office doors, causing the receptionist to drop to the floor and be showered with glass. Ms. Carr reported the incidents to York Regional Police and she and her husband went into hiding.

The day after the September 6 shooting, the Insurance Bureau of Canada convened an urgent meeting with Ms. Carr and representatives of her insurer clients. All of the insurer clients refused to allow their claims office addresses to be used on court documents out of fear of being similarly targeted, and they individually instructed the firm to return their files. Certas, which insured both the office building and the law firm's property, was the first to pull its files. Ms. Carr attempted to rebuild the practice by associating with another law firm, proposing that her team prepare court documents remotely while the other firm's lawyers attended hearings, but the insurer clients declined to reinstate Carr Law on their files. The two gunmen were eventually arrested and sentenced; however, the organized crime figures who hired them remained at large.

Carr Law submitted a Proof of Loss claiming $5,285 under the building coverage for glass door replacement and $1.4 million under the business interruption coverage, representing lost fees during the 12-month period following September 6, 2019. Certas paid the door replacement claim and certain accounting costs, and had previously covered the fire damage. For the business interruption, it paid $25,000 for commercial losses during the days required to restore the office door, but declined the business interruption claim beyond that interval.

Policy terms and contractual clauses at issue

The Certas business insurance package sold to Carr Law consisted of standard-form policies, with the business interruption coverage expressly made subject to the terms of the Commercial Property Insurance – Broad Form. The operative indemnity clause stated: "Subject to the terms of the Commercial Property Insurance – Broad Form and the terms below, in the event that the business of the Insured is interrupted as a result of a direct physical loss or damage from an insured peril, the Insurer shall pay the Insured the actual loss of 'business income' and 'rental income' sustained during the 'indemnity period' in consequence thereof." The "indemnity period" was defined in s. 9 f) as the period beginning with the date of loss and ending no later than twelve consecutive months thereafter, "during which the results of the business shall be affected in consequence of the loss or damage."

The property damage coverage under the Broad Form insured against all risks of direct physical loss or damage to insured property, subject to exclusions. Section 6B l) iii) excluded criminal acts from coverage, but that exclusion was rendered inapplicable where the insured immediately notified both police and the insurer of the criminal act — which Carr Law did. Certas also relied on s. 6B i) of the Broad Form, which excluded "delay, loss of market, or loss of use or occupancy," as a separate basis to deny the extended business interruption claim.

Reasoning and analysis

The court structured its analysis around three issues: the meaning of "interrupted," the interaction of "as a result of" with "direct physical loss or damage from an insured peril," and the applicability of the s. 6B i) exclusion.

On the meaning of "interrupted," the court rejected Certas' argument that the term implied only a temporary closure. While acknowledging that "interruption" can connote an eventual resumption, the court held it would be unreasonable to construe the word so narrowly as to exclude businesses that stopped and did not resume. The indemnity period under s. 9 f) was defined by the ongoing effect of the loss on the business's financial results — not by the completion of physical repairs — and was capped at twelve months. The court noted that Certas could have expressly limited coverage to temporary closures but did not do so. The court also observed that an insurance defence litigation firm cannot simply reopen and attract new files the way a restaurant or factory can resume operations; having devoted its practice to a niche, the firm had no real prospect of reforming as a general insurance law firm within 12 months.

On the phrase "as a result of," the court found that the word "direct" in the policy modified the relationship between the physical loss and the insured peril — not the relationship between the business interruption and the physical loss. Because Certas chose not to insert the word "direct" before the phrase "as a result of," the court held that phrase could not be read as synonymous with "as a direct result of." Drawing on Diamond Auto Collision Inc. v. Economical Insurance Group and SIR Corp. v. Aviva Insurance Company of Canada, the court confirmed that inserting "direct" into a connecting phrase has conventionally been required to achieve a tighter causal link; its absence here meant the phrase tolerated some degree of consequential causality. The court found that the insurer clients' immediate withdrawal of all files in response to the arson and gun attacks — a response that Certas itself participated in — was sufficiently connected to the property damage to satisfy the "as a result of" standard. The court also noted the significance of the indefinite article "a" in the phrase "a result of," contrasting it with the more restrictive formulations "the result of" or "solely as a result of," reinforcing that the business interruption need only be one of potentially several results of the insured peril.

The court rejected the argument that the imminent peril doctrine assisted Carr Law's claim, agreeing with Certas that the firm's closure was driven by the insurer clients' withdrawal of files and concern for personal safety rather than by the certainty of further property damage. That finding, however, did not narrow the phrase "as a result of" to require a connection to additional property damage, since business interruption is an effect of property damage on a business, not a subset of property damage itself. Regarding the s. 6B i) exclusion, the court found it inapplicable: construing that exclusion to defeat claims for delay, market loss, or loss of occupancy that followed physical property damage would effectively nullify all business interruption coverage — an outcome inconsistent with the plain reading of the policy and the reasonable expectations of the parties.

Ruling and overall outcome

The court dismissed Certas' summary judgment motion and granted Carr Law's request for a declaration of coverage. The plaintiffs — Carr Law Professional Corporation and 1883114 Ontario Ltd. — were the successful parties. The court declared that the Certas business interruption policy covered the firm's closure beyond the period required to repair the physical damage to the premises, for up to twelve months from the date of loss. No specific dollar amount was awarded at this stage; the court accepted the parties' joint position that the quantum of business interruption losses requires a separate damages trial, as the application of the indemnity provisions involves determinations of mixed fact and law. The court also declined to find that Certas acted in bad faith in handling the claim, noting the absence of a formal coverage denial letter while restricting its decision to the coverage issue alone. Costs of the motion were not determined in the judgment, with the parties invited to resolve them by submission.