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D.L.G. & Associates Ltd. v. Minto Properties Inc. [2014] ONSC 7287

Decided December 16, 2014

“If a contracting party covenants to obtain insurance, then that party must look to the insurance and cannot not sue a third party for damages for the risk that ought to have been insured.”

Ontario Superior Court of Justice

The Plaintiff, DLG, operated a restaurant, and signed a ten-year commercial lease with Minto. The lease included a provision that DLG maintain insurance coverage against “all risks.” A few months after signing the lease, a sewer backed up and flooded the restaurant. Minto covered the costs but declined to follow the plumber’s recommendation to install a backflow preventer. After the incident, DLG’s insurance coverage for damages for flood and sewer back-up was excluded. Minto acknowledged the cancellation and accepted to maintain the lease. One year post-loss, a second sewer back-up occurred and the restaurant was closed. Minto denied liability. DLG chose to treat the lease as terminated. DLG alleged that they were induced to enter into the lease and that Minto made negligent and fraudulent misrepresentations with regards to the plumbing. DLG also claimed against Minto for breach of contract. Minto brought a summary judgment motion to have the claim dismissed. The issue at hand was whether a covenant to insure by a commercial tenant prevented a damages claim by that tenant, based upon misrepresentations. The Court upheld the covenant to insure and dismissed the claim with the exception of the claim for misrepresentation.

Submitted to the FDCC by David A. Bertschi, a founding partner at Bertschi Orth Solicitors and Barristers LLP,

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