Background
Green Rise Foods Inc. operates a large commercial greenhouse tomato operation in Ontario, which it purchased on February 1, 2021. The greenhouse used gas-fired boilers both to heat the facility and to generate carbon dioxide-enriched flue gas for distribution into the growing areas to accelerate photosynthesis. The flue-gas system included a Sercom Monitor designed to detect unsafe carbon monoxide levels and trigger an alarm before contaminated gas entered the greenhouses. Green Rise held a standard form greenhouse horticultural insurance policy issued by the respondent, N.V. Hagelunie, covering accidental physical loss to crops — but expressly excluding losses caused by “machinery breakdown” under the initial grant of coverage, and further excluding “exhaust gas” and “machinery breakdown” under the policy’s general exclusions.
Beginning February 23, 2021, Green Rise observed signs of damage to its tomato crop. Investigation eventually revealed that a displaced internal burner diffuser in one boiler had caused it to emit excessive carbon monoxide. The monitor simultaneously malfunctioned and failed to detect the elevated levels, allowing contaminated flue gas to circulate undetected for weeks. By March 17, 2021, Green Rise had confirmed the cause and lost 23 acres of tomato plants. It submitted a claim under the policy. Hagelunie denied coverage, citing the exhaust gas exclusion and the machinery breakdown exception, and later added lack of maintenance as a further basis for denial — without having inspected the boiler or monitor or requested maintenance records.
Green Rise commenced an action for breach of contract and brought a motion for partial summary judgment seeking a declaration of coverage. Justice Macfarlane of the Ontario Superior Court dismissed the motion and granted boomerang summary judgment to Hagelunie, finding that the “exhaust gas” exclusion provided a complete answer to the claim — carbon monoxide being exhaust gas within the plain meaning of the term — and that, in the alternative, the machinery breakdown exception in the initial grant of coverage applied. Green Rise appealed.
The Court’s Holding
Writing for the panel, Roberts J.A. allowed the appeal and remitted the entire action for trial. The court identified two independent legal errors in the motion judge’s analysis. First, in determining causation, the motion judge identified a series of potentially causal events — boiler malfunction, monitor malfunction, excessive CO emissions — yet then improperly focused only on the most immediate-in-time event (the carbon monoxide poisoning of the plants) when deciding which policy provisions were triggered. This was an error in principle. Insurance causation in multi-event cases requires the court to determine the effective cause or causes of the loss — the cause proximate in efficiency, not merely the cause closest in time — by applying either the chain-of-causation or concurrent-cause analytical framework. The motion judge’s failure to conduct that analysis meant his conclusions on both the exhaust gas exclusion and the machinery breakdown exception rested on a legally flawed causation finding.
Second, the motion judge erred in his alternative treatment of the machinery breakdown exception embedded in the initial grant of coverage: he failed to address who bore the onus of proving whether that exception applied, and he made no factual findings about the actual causes of the boiler and monitor malfunctions — findings that are essential before any exception or exclusion clause can properly be evaluated. The Court of Appeal declined to resolve these questions itself, because competing factual evidence about the causes of the malfunctions had not been fully tested and the correct causation analysis would require a complete evidentiary record.
The boomerang summary judgment and the cost award of $157,377.37 were set aside. The court directed that, at trial, the presiding judge must first determine the effective cause or causes of the loss using the appropriate chain-of-causation or concurrent-cause framework, then apply the relevant exception and exclusion provisions in light of that causation finding, with attention to the proper allocation of evidentiary burdens at each analytical step.
Key Takeaways
- “Proximate cause” in Canadian insurance law means the cause proximate in efficiency, not the cause closest in time to the loss; courts must ask what was, in substance, the effective cause of the event — a principle originating in Leyland Shipping Co. v. Norwich Union [1918] A.C. 350 and consistently applied by Canadian appellate courts.
- Where a loss results from a series of events, a motion judge must determine whether the case involves a chain of causation (one effective cause, which may not be the first or last event) or concurrent causes (multiple independent causes operating together), and must analyze all potentially causal events — not merely the most immediate one — before applying coverage, exception, or exclusion clauses.
- When an exception appears within the initial grant of coverage (here, the machinery breakdown carve-out), the motion judge must expressly identify who bears the onus of proof on that exception and make the necessary factual findings; leaving the onus unaddressed is reversible error.
- Boomerang summary judgment in a standard form insurance coverage dispute is inappropriate where competing evidence about the underlying factual causes of a loss has not been fully tested and the motion judge has applied the wrong legal framework.
- The correctness standard of appellate review governs interpretation of standard form insurance policies: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37; Emond v. Trillium Mutual Insurance Co., 2026 SCC 3.
Why It Matters
This decision is a significant reminder to insurers, insureds, and counsel that in any coverage dispute arising from a sequence of events, the causation analysis cannot be short-circuited by identifying whichever event in the chain most conveniently triggers a desired exclusion. The obligation to determine the effective cause — working through the chain of causation or concurrent-cause framework with reference to all potentially causal events — is a threshold requirement that must be completed before any exclusion or exception clause can properly be applied. Insurers who deny claims based on an exclusion that fits only one link in a causal chain, without first establishing that link as the effective cause of the loss, risk having their denials overturned even when the exclusionary language itself is clear and unambiguous.
The decision also has practical significance for the growing greenhouse and controlled-environment agriculture sector, where multi-component mechanical systems can produce cascading failures. The holding clarifies that a malfunctioning safety monitor may itself be a legally relevant cause of a crop loss — not a mere passive bystander — and that courts must make factual findings about all failed components before ruling on coverage. Litigants and trial courts will look to this case as a procedural roadmap for structuring causation analysis and allocating burdens when an agricultural or commercial property insurer invokes machinery breakdown provisions in response to a complex, multi-cause loss.