Ontario court approves $150-million Aviva COVID business-interruption settlement

An Ontario court has approved a $150-million settlement of claims that Aviva wrongly denied business-interruption coverage during the COVID-19 pandemic, accepting a national compromise rather than sending the dispute to trial.

In Nordik Windows Inc. v. Aviva Insurance Co., 2026 ONSC 5875, released October 16, 2026, Justice E.M. Morgan of the Ontario Superior Court of Justice approved the settlement, its distribution protocol, class counsel fees and related orders.

The $150 million is the gross settlement amount, not the amount that will go directly to businesses. Legal costs, funding charges and other settlement expenses affect the money available for distribution. Nor is the approval a trial finding that Aviva was liable: the agreement resolves disputed claims without deciding the underlying coverage questions.

A national dispute over pandemic losses

Four Ontario businesses brought the action against Aviva Insurance Company of Canada. It began on July 3, 2020, and was certified as a class proceeding on March 22, 2023. For settlement purposes, the national class also includes members of parallel proceedings in Quebec and British Columbia.

The policies at issue were in force between March 1, 2020, and August 31, 2021. The reasons describe three kinds of business-interruption coverage: physical-loss coverage for property damage at insured premises; restricted-access coverage for income lost because of mandatory business closures; and negative-publicity coverage for income losses associated with an infectious-disease outbreak within 25 kilometres of the premises.

The class was estimated at about 49,000 policyholders, but that does not mean 49,000 businesses will receive payments or equal shares. According to the reasons, approximately 3,600 class members gave notice of their claims, and Aviva confirmed that 2,162 of that group had restricted-access or negative-publicity coverage.

The litigation had involved a carriage motion to determine who would lead it, two certification hearings, an appeal process, discovery and trial preparation. A common-issues trial had been scheduled for January 2026. The parties mediated during June, July and August 2025 and signed the settlement agreement on March 9, 2026.

Why the judge accepted a compromise

Under the Class Proceedings Act, a class-action settlement requires court approval. The question was whether the bargain was fair, reasonable and in the class's best interests, taking account of such matters as the prospects of recovery, the investigation already done, the settlement terms, objections, and the cost and duration of further litigation.

Class counsel considered the case meritorious but identified substantial risks. Individual businesses might have had to establish a local COVID-19 outbreak or an applicable closure order, with different treatment of essential and non-essential businesses complicating coverage.

Calculating losses raised further questions about policy definitions, indemnity periods, government assistance and the pandemic's wider economic effects. Aviva also argued that members who had not given notice lacked a cause of action and were out of time. Those were litigation positions being compromised, not findings adopted against those policyholders.

Even success on common issues could have been followed by appeals and individual proceedings to determine damages. Morgan accepted that a settlement avoided the uncertainty, expense and potentially years-long delay of that route. He found the agreement resulted from extensive arm's-length negotiations, informed by substantial investigation and an experienced mediator.

The objection to a 30-day recovery period

The most developed objection concerned the distribution protocol's provision for 30 days of lost business income. Roughly four per cent of the class had policies with a 60-day indemnity period; the remainder had 30-day periods. Counsel for one objector argued that the protocol should accommodate a valid 60-day claim rather than apply the same period to everyone.

The objector also questioned leaving the notice issue unanswered and argued that Aviva's regulatory reserves should have been disclosed and used to seek a larger recovery.

Morgan took the arguments seriously and credited the objector's counsel with drawing attention to matters requiring consideration. But settlement necessarily involves compromise, he said. A class proceeding is a collective case, not simply thousands of individual lawsuits being heard together for convenience, and counsel and the representative plaintiffs must negotiate for the class as a whole.

The court could approve the agreement or send the parties back to negotiations; it could not impose more favourable settlement terms of its own. The judge also rejected the suggestion that certified common issues had to be answered despite settlement. Avoiding a trial means those trial questions can remain unresolved.

On balance, the objections did not outweigh the settlement's benefits. The approval of the 30-day protocol was therefore a decision about this collective compromise, not a ruling that every 60-day policy provided only 30 days of coverage.

Fees, funding and distribution

The approved class counsel amount is $36 million plus $4.68 million in HST, totalling $40.68 million. That total already includes $259,068.20 in unreimbursed disbursements, approximately $420,000 for Quebec counsel's fees and disbursements, and about $1.036 million in interlocutory costs awarded during the proceeding. Those components should not be added to the total again.

The fee before tax represents 24 per cent of the gross settlement, below the retainer's rate of 27.5 per cent plus HST. Counsel had recorded 12,881.80 hours before work on the approval motion, with more work expected through the claims process. Morgan found the requested compensation reasonable in light of the litigation's complexity, duration, risk and result.

Each of the four representative plaintiffs will receive a $15,000 honorarium from the settlement funds. The judge found their repeated affidavits, examinations and involvement in giving instructions made a significant contribution to the result.

The Class Proceeding Fund, which provided protection against adverse costs, is entitled to a levy of 10 per cent of the net settlement after legal costs, as well as $1,621,641.05 in disbursements. The reasons estimate the levy at $10.2 million, with the precise amount to be finalized when administration concludes. It is not a fixed final deduction from which a definitive net payout can yet be calculated.

BDO Canada LLP is the settlement administrator. The approved protocol includes a process to correct incomplete claims, an appeal process for disputed BDO calculations, and a final administration report to class counsel.

The ruling approves the settlement machinery, but does not set out a payment date or determine each business's entitlement. Its practical significance is a court-approved resolution of this national insurance dispute, not a general ruling that pandemic business losses are covered under every policy.