A B.C. court has awarded an aspiring restaurateur almost $2,278,000 after an insurance company was found to have underpaid a loss claim following a series of unfortunate events — including significant land subsidence and a flood — that caused extensive damage and prevented the business from opening.
The plaintiff company, 1048977 B.C. LTD., was represented in B.C. Supreme Court by its principal, Trina Allam, who claimed Aviva Insurance Company of Canada breached its duty of good faith when it paid out just over $1 million in August 2016.
The initial incident was caused by construction at a neighbouring property, and was followed by a hydrogen sulphide gas escape, and flooding from burst pipes. It halted progress toward opening a restaurant and special event business at the former Chateau Cargill wedding venue in South Surrey, B.C.
Plans to build a restaurant serving nearly 300 people — where guests could sit at a “chef’s table” to watch award-winning chef Victor Bongo cook — never materialized, according to a recent ruling from B.C. Supreme Court Justice Maegen Giltrow.
“They intended this would be a fine dining experience in South Surrey, without the need to travel to Vancouver,” Giltrow wrote.
Allam alleged Aviva failed to meet its contractual obligations when it undervalued the business’s lost income. The business never opened. And delays in the repair process ultimately forced the plaintiff to sell the property in December 2017 at a below-market value of $5.9 million, she claimed.
For its part, Aviva claimed it had reimbursed Allam “in a timely manner” that adhered to her insurance policy. The insurance company denied that its conduct led to the company’s claimed losses and said Allam embarked on a “foolhardy business plan and would never have succeeded.”
Justice Giltrow disregarded that notion.
“The evidence is that at all times the plaintiff held sufficient equity in the property to cover the debt obligations registered against it with at least $1 million left over,” wrote Giltrow in her ruling.
Before the land sunk, Allam was on track to open the business within months — she hired chef Bongo, as well as an experienced chief operating officer, and a seasoned server, bartender and staff manager who had overseen a number of large events.
“I do not agree with the defendant’s characterization of the team Ms. Allam hired as ‘unsophisticated,’” wrote the judge.
Allam argued she suffered business income losses of $9.5 million from Oct. 1, 2016, to Dec. 21, 2017 — nearly $8.5 million more than the $1.065 million Aviva had paid.
Aviva claimed in court it had more than compensated Allam for her and her company’s losses.
Giltrow found the insurer relied on loss calculations it knew to be deficient and ignored Allam’s higher estimates.
The judge was also not persuaded by the insurer’s arguments that it had properly handled repairs or applied to the City of Surrey for a renovation permit. Evidence cited in the ruling suggests Aviva had applied for a permit to carry out $50,000 worth of superficial repairs, when the company estimated the true scope of the work was at least $400,000.
Giltrow found Aviva breached its duty of good faith when it failed to assess evidence of loss in a fair and balanced manner. A similar finding was handed down to the insurer for choosing not to advise Allam that it would likely cancel her policy if she chose to accept “actual cash value” of the repairs rather than repairing the property.
Giltrow declined to award the plaintiff separate compensation for Aviva’s breaches of good faith.
When it came to unpaid lost business income, the judge reviewed expert testimony on how much revenue the unrealized restaurant likely would have brought in. She ultimately decided that under a best-case-scenario, it would have earned more than $32,000 on non-event days and an additional $26,500 during events.
The judge estimated that worked out to more than $5.1 million in net income over the years the restaurant would have operated under the insurance policy.
Excluding expenses and the amount already paid by the insurance company, Giltrow ruled Aviva still owed just under $2.28 million to the plaintiff.
