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Insurance - Causation. Green Rise Foods Inc. v. N.V. Hagelunie [chain of causation]
In Green Rise Foods Inc. v. N.V. Hagelunie (Ont CA, 2026) the Ontario Court of Appeal allowed an insured's appeal, here concerning the "the correct analytical approach to be followed regarding the interpretation and application of the standard form greenhouse insurance policy issued by the respondent to the appellant (“the Policy”) in the context of a claimed loss caused by a series of events".
The court considers insurance interpretation principles applicable to 'chain of causation' issues:i. What is the effective cause or causes of the loss?
a. General principles: the required analytical approach to causation in insurance policy interpretation in series of events cases
[39] In insurance coverage disputes, the cause of the loss typically drives the coverage analysis. As Professor Erik S. Knutsen observed, this is because “[m]ost insurance policy coverage and exclusion clauses contain some causation element whereby a certain class of event must cause the loss in order for the clause to be triggered”: Halsbury’s Laws of Canada, “Insurance” (Toronto: LexisNexis Canada, 2023 Reissue), at HIN-13.
[40] The causation analysis becomes more difficult when multiple factors potentially operate at the same time to bring about a loss. In Craig Brown et al., Insurance Law in Canada (Toronto: Thomson Reuters Canada, 2025) (loose-leaf 2025-Rel. 5), the authors identify two types of scenarios in cases where multiple factors function to bring about the claimed loss. First, there are chain of causation cases, in which “the occurrence of a factor sets off a series of incidents eventually resulting in the loss which is the subject of the claim”: § 8:12. This triggering factor or another event in the chain is the effective cause of the loss. Second, there are concurrent cause cases in which “two or more independent causes contribute to the loss and where the loss cannot, as a practical matter, be apportioned among the various contributing factors”: § 8:12. In other words, in concurrent cause cases, there is more than one effective cause of the loss.
[41] As I shall explain in more detail below, this case involved a series of factors that potentially operated together to bring about the claimed loss. While the motion judge found that the “direct cause” of the loss was excessive levels of carbon monoxide, he also determined that the excessive levels of carbon monoxide “were created by the malfunctioning Boiler and went undetected by the malfunctioning Monitor.” In light of this determination, the motion judge was required to determine what was the effective cause or causes of the loss by employing the chain of causation or concurrent cause analytical framework.
[42] Causation in chain of causation and concurrent cause cases, in the context of the interpretation of insurance policies, is “to be decided on common sense principles and to be ascertained by determining what is in substance the cause” of an event: Boiler Inspection & Insurance Co. of Canada v. Sherwin‑Williams Co. of Canada Ltd., 1951 CanLII 306 (UK JCPC), [1951] 3 D.L.R. 1 (J.C.P.C.), at p. 15 (emphasis added), aff’g 1949 CanLII 60 (SCC), [1950] S.C.R. 187. In chain of causation or concurrent cause cases, the immediate cause of the loss is not necessarily the effective cause of the loss.
[43] Although courts have often adopted the shorthand of “proximate” cause to aid in the analysis, it is important to remember that “proximate”, in this context, does not mean “closest in time” to the loss; rather, “proximate” refers to the “effective cause of the loss”: 942325 Ontario Inc. v. Commonwealth Insurance Co. (2006), 2006 CanLII 7015 (ON CA), 81 O.R. (3d) 399 (C.A.), at para. 3, aff’g (2005), 2005 CanLII 22135 (ON SC), 75 O.R. (3d) 653 (S.C.). See also Sher-Bett Construction (Manitoba) Inc. v. The Co-Operators General Insurance Company, 2021 MBCA 10, 457 D.L.R. (4th) 111, at paras. 46-51, 75; Co-operative Fire & Cas Co. v. Saindon, 1975 CanLII 180 (SCC), [1976] 1 S.C.R. 735, at pp. 747-48; and Milashenko v. Co-operative Fire and Casualty Co. (1968), 1968 CanLII 533 (SK CA), 1 D.L.R. (3d) 89 (Sask. C.A.), at p. 100, per Culliton C.J.S. (dissenting), rev’d (1970), 1970 CanLII 977 (SCC), 72 W.W.R. 228 (S.C.C.), for the reasons of Culliton C.J.S.
[44] Most helpful is the explanation of the effective cause of the loss, per Lord Shaw of Dunfermline, from Leyland Shipping Company v. Norwich Union Fire Insurance Society, [1918] A.C. 350 (H.L. (Eng.)), at p. 369, as follows:What does "proximate" here mean? To treat proximate cause as if it was the cause which is proximate in time is, as I have said, out of the question. The cause which is truly proximate is that which is proximate in efficiency. That efficiency may have been preserved although other causes may meantime have sprung up which have yet not destroyed it, or truly impaired it, and it may culminate in a result of which it still remains the real efficient cause to which the event can be ascribed. [Emphasis added.] This decision was cited with approval by the Privy Council in Canada Rice Mills Ltd. v. Union Marine & General Insurance. Co., 1940 CanLII 322 (UK JCPC), [1941] 1 D.L.R. 1 (J.C.P.C.), at p. 11. As the Privy Council noted, at p. 11, citing to the reasons of Lords Finlay and Dunedin in Leyland Shipping Company, “causa proxima in insurance law does not necessarily mean the cause last in time but what is ‘in substance’ the cause, per Lord Finlay at p. 355, or the cause ‘to be determined by commonsense principles,’ per Lord Dunedin at p. 362.”
[45] Consistent with this approach, the following cases are useful in illustrating the coverage analytical principles that the motion judge should have considered in this case to determine the effective cause or causes of the loss.
[46] In Boiler Inspection & Insurance Co. of Canada, a chain of causation case, a tank exploded due to the mixing of certain substances, causing vapours to escape, which ignited and caused a fire. Although the policy specifically excluded losses from fire, the Privy Council held the insured was entitled to coverage, emphasizing that proximate cause is determined by common-sense principles and what is, in substance, the cause of the loss: at pp. 9, 15. Lord Porter concluded, at p. 15: “the cause, whether it be described as dominant or proximate or by any other of the numerous epithets which have been used, was the bursting open of the door of the tank.” In other words, the effective cause of the loss was not the most immediate event, namely, the fire, nor the event that originated the chain leading to the loss, namely, the mixing of vapours. Rather, the effective cause of the loss was the bursting open of the door of the tank.
[47] Shea v. Halifax Insurance Co., 1958 CanLII 126 (ON CA), [1958] O.R. 458 (C.A.), is another chain of causation case. There, a company’s policy insured against damage “caused solely by fire”. In the course of delivering fuel oil, the company’s trailer was badly damaged by an explosion. The explosion resulted from the oil level in the tank dropping too low, which exposed a heating tube that caused the oil to distill and form a highly combustible mixture of oil vapour and oxygen. This in turn led to a flash fire inside the tank, which generated intense heat and pressure resulting in the explosion. Schroeder J.A. held that the cause of the loss was the fire, not the explosion. He reasoned that the cause of a loss need not be “the actual instrument of destruction” and concluded that “the loss [in that case] was directly attributable to fire in its popular and well understood sense”: at p. 470.
[48] In Derksen v. 539938 Ontario Ltd., 2001 SCC 72, [2001] 3 S.C.R. 398, the Supreme Court considered causation in situations of concurrent causes. In that case, one child was killed and three were seriously injured when a base plate, left unsecured on a tow bar attached to a supply truck during a worksite cleanup, flew off the tow bar and hit a school bus. Major J. agreed with the motion judge that the accident was the result of two concurrent causes: the failure to safely clean up the work site and the failure to ensure that the truck could be operated safely: at para. 32. He rejected the argument that the single dominant cause of the loss was driving the truck with an insecure load: at paras. 30-31.
[49] In 942325 Ontario Inc., a chain of causation case, a grocery store owner sustained significant losses of its perishable food inventory when a blackout led to a loss of refrigeration at its stores. At para. 3 of its reasons, this court held that the effective cause of the loss was the blackout, not the immediate cause of the lack of refrigeration resulting from the blackout.
[50] This court cited favourably to 942325 Ontario Inc. in Caneast Foods Limited v. Lombard General Insurance Company of Canada, 2008 ONCA 368, 91 O.R. (3d) 438, aff’g (2007), 2007 CanLII 24074 (ON SC), 86 O.R. (3d) 385 (S.C.). In that chain of causation case, an insured similarly sustained substantial spoilage of a large quantity of produce following a blackout. This court again concluded that the effective cause of the loss was not the immediate cause of the lack of refrigeration but the interruption to the power supply because of a regional blackout. Borins J.A. for the court reasoned that the insured’s “refrigeration … stopped because the power to it was cut off”: at para. 24.
[51] Finally, in O’Byrne v. Farmers’ Mutual Insurance Company (Lindsay), 2014 ONCA 543, 121 O.R. (3d) 387, aff’g 2012 ONSC 468, 10 C.C.L.I. (5th) 103, a chain of causation case, this court’s coverage analysis again centred on the effective cause of the loss. In that case, a tenant had inserted a piece of cardboard into the primary control of a furnace, presumably to keep the furnace in constant hot operation while she was away. Forcing the furnace to continuously run caused the ignition component to fail, resulting in oil being pumped but not burned. This led to a significant spill causing damage to the building. One of the reasons the insurer argued that coverage did not apply was the mechanical breakdown exclusion in the policy, which provided in part that there was no coverage for “loss or damage directly or indirectly caused by ... mechanical or electrical breakdown or derangement”. The insurer argued the failure of the ignition to reignite was one of the factors that caused or contributed to the loss and, relying on Derksen for the proposition that an exclusion can be worded so as to apply to a loss with multiple causes if only one of the causes is contemplated by the exclusion, asserted the mechanical breakdown exclusion ought to apply. Justice van Rensburg disagreed for the following reasons at para. 36:In my view, the error in the appellant’s argument is in seeking to characterize the oil spill damage as a multi-causal loss. What occurred here was a chain of events set in motion by the tenant’s insertion of a piece of cardboard, which in turn bypassed the thermostat, which forced the furnace to run at an excessively high temperature, causing the ignition component to fail and oil to be pumped continuously without burning. Stated otherwise, the effective cause of the loss in O’Byrne was the tenant’s insertion of a piece of cardboard, not the mechanical failure of the ignition component.
[52] In short, as these cases demonstrate, it is critical to determine the effective cause or causes of a loss in insurance coverage disputes. In chain of causation cases, a loss arises from a series of events where there is one effective cause, sometimes, though not necessarily, the first event in the chain. In concurrent cause cases, multiple effective causes operate to bring about the loss.
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[92] Further, even if the emitted carbon monoxide is determined to be a concurrent cause falling within the exhaust gas exclusion, this exclusion does not necessarily operate to exclude coverage.
[93] In Derksen, Major J. rejected the argument that if a loss is caused by concurrent causes – one covered by the policy and the other excluded by an exclusion clause – there is a presumption of no coverage. He reasoned that “[w]hether a particular exclusion clause actually ousts coverage in a given case is a matter of interpretation” and underscored “the well-established principle in Canadian jurisprudence that exclusion clauses in insurance policies are to be interpreted narrowly and generally in favour of the insured in case of ambiguity in the wording (contra proferentem)”: at paras. 40, 46. An insurer must therefore clearly specify that if a loss is caused by an excluded peril, all coverage is ousted despite the fact the loss is also caused by another covered peril: at para. 47.
[94] In Derksen, there were two exclusion clauses at issue, one which excluded coverage for injury and damage arising out of the use or operation of a motor vehicle and another which excluded coverage for injury and damage with respect to which a motor vehicle liability policy was in effect. Major J. concluded that the exclusion clauses were triggered, but only with respect to that portion of the loss that was attributable to the auto‑related cause: at paras. 55, 62. He underscored that “[w]hether an exclusion clause applies in a particular case of concurrent causes is a matter of interpretation” to be made in accordance with the general principles of interpretation of insurance policies: at para. 49. Ultimately, he held that the policy covered the portion of loss attributable to non‑auto‑related negligence: at para. 63.
[95] As the causation analysis must be considered afresh, if it is determined that this is a case of multi-causal loss, it will be necessary for the trial judge to interpret the Policy language anew with the view of determining whether the exhaust gas exclusion clause applies to bar all coverage. Specifically, in accordance with Derksen, if the respondent intended for all coverage to be ousted if a loss is caused by an excluded peril, namely exhaust gas, despite the fact that the loss is also caused by another covered peril, the respondent needed to clearly specify this in the Policy. The trial judge will have to determine whether the respondent did so. This is a genuine issue requiring a trial. . SIR Corp. v. Aviva Insurance Company of Canada
In SIR Corp. v. Aviva Insurance Company of Canada (Ont CA, 2023) the Court of Appeal considered a 'causation' requirement in an insurance policy:(iii) Direct physical loss or damage is required
[96] Even if I am wrong and COVID-19 is a “catastrophe” within the meaning of Clause 14, like the application judge, I conclude that in order for SIR to be entitled to coverage under Clause 14 the Orders must be the direct cause of the damage sustained.
[97] As stated by the Manitoba Court of Appeal, in Sher‑Bett Construction (Manitoba) Inc. v. The Co-operators General Insurance Company, 2021 MBCA 10, 457 D.L.R. (4th) 111, at para. 45:Historically, recovery under an insurance policy has been limited to circumstances where the “proximate cause” of the loss is an insured peril, and “proximate cause” has been treated as synonymous with “direct cause”. As stated in Herbert Broom, A Selection of Legal Maxims, 10th ed by RH Kersley (London, UK: Sweet & Maxwell, 1939) (at p 139):
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It is a well-known rule, that in order to entitle the assured to recover upon his policy, the loss must be a direct and not too remote a consequence of the peril insured against; and that if the proximate cause of the loss sustained be not reducible to some one of the perils mentioned in the policy, the underwriter is not liable. . . . See also Chitty on Contracts, 34th ed., vol. 2 (London: Sweet & Maxwell, 2021), at 44-103; MacGillivray on Insurance Law, 15th ed. (London: Sweet & Maxwell, 2022), at 19-001.
[98] SIR contends that the absence of the word “direct” in Clause 14 is significant, especially when the very next clause, Clause 15, includes the word “direct”. In SIR’s submission, the absence of the word “direct” in Clause 14 indicates that the Orders are not required to be the direct cause of the damage sustained, namely the food and beer spoilage, for SIR to be entitled to coverage under Clause 14.
[99] For ease of reference, Clause 15 provides as follows:15. INTERRUPTION BY CIVIL OR MILITARY AUTHORITY:
This Policy is extended to include the loss sustained by the Insured during the period of time while business is affected as a result of order of civil or military authority, but only when such order is given as a direct result of loss or damage of the type insured by this policy, or threat thereof. Maximum 8 weeks. [Emphasis added.] [100] “Direct result” in Clause 15 speaks to the cause of the Order, not the cause of any loss sustained by the insured as result of the Order. It was necessary to include the word “direct” where it appears in Clause 15. It was not necessary to do so in Clause 14, because the requirement of “direct” causation was imported by the generally applicable principle of causation. The addition of the word “direct” in Clause 15 does not displace the general principle.
(iv) The Orders were not the direct cause of the food and beverage spoilage
[101] On appeal, SIR focused on whether Clause 14 required direct physical loss or damage. It made no submissions on what constitutes direct physical loss or damage.
[102] The application judge found that the Orders did not result in direct physical loss or damage to SIR’s property. I agree with her conclusion. As noted above, the affidavit evidence highlights the government orders made in Ontario, which restricted restaurants to providing delivery or take-out. Similar orders were made in other jurisdictions. Such Orders did not prevent access to the restaurants by restaurant staff. They permitted the restaurants to provide food to the public, although not through in-person dining. Any food and beer spoilage suffered was an indirect consequence of the Orders. The direct cause of the spoilage was a reduced market, the passage of time, and SIR’s inability to use the stock as initially intended.
(v) Conclusion re: Clause 14
[103] Clause 14 does not provide coverage for SIR’s losses because the Orders were not made to retard or prevent a “catastrophe” within the meaning of Clause 14. Further, any loss sustained by SIR was not as a direct result of damage caused by the Orders.
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