Insurance coverage disputes often turn on a deceptively simple question: what caused the loss? Sometimes the answer is obvious, like when a tree falls on a house after a high wind event and damages the roof. But what if a furnace fails during a cold snap, causing a pipe to freeze and burst, which then floods the building? Was the loss caused by the freezing water, the burst pipe, the failed furnace, or the extreme cold?
As you can see, the answer to this otherwise simple question can become more difficult when damage follows a sequence of events, or when two or more causes operate together. Identifying the effective cause (or causes) may determine whether the loss is covered by the policy in whole or in part, whether an exclusion applies, and whether an exception to that exclusion restores coverage. Welcome to the wonderful world of insurance law.
In Green Rise Foods Inc. v. N.V. Hagelunie, 2026 ONCA 334, a malfunctioning boiler released excessive carbon monoxide into a greenhouse while a faulty monitor failed to detect it, destroying 23 acres of tomato plants. The Ontario Court of Appeal set aside summary judgment dismissing a greenhouse operator’s coverage claim and remitted the action for trial.[1] The Court held that the motion judge had improperly treated carbon monoxide poisoning, the event immediately preceding the damage, as the cause of the loss without determining whether the loss arose from one effective cause in a chain of events or from multiple concurrent causes.[2]
Ultimately, the Court did not decide whether the loss was covered. It did, however, take the opportunity to explain why courts must identify the effective cause or causes before applying the policy’s coverage provisions and exclusions, and why the wording of an exclusion becomes especially important when covered and excluded causes may have operated concurrently.
The Loss and the Coverage Dispute
By way of factual background, Green Rise operated a commercial greenhouse in which boilers served two functions: heating the greenhouses, and generating carbon dioxide to promote photosynthesis and crop growth. The resulting flue gas contained carbon dioxide and carbon monoxide. A monitoring system was intended to detect elevated carbon monoxide levels and trigger an alarm before unsafe gas entered the greenhouses.[3]
In February 2021, Green Rise began observing damage to its tomato crop. It later discovered that an internal burner diffuser in one boiler had become displaced, causing the boiler to emit excessive carbon monoxide. The monitor also malfunctioned and failed to detect the elevated levels. The carbon monoxide entered the greenhouses through the flue-gas distribution system and Green Rise lost 23 acres of tomato plants.[4] The parties agreed that a functioning monitor would have detected the elevated carbon monoxide before the plants were poisoned.[5]
Green Rise claimed under its greenhouse horticultural policy. The policy included crop and business interruption coverage, a machinery breakdown exception within the initial grant of coverage, and exclusions addressing exhaust gas, pollution and contamination, and machinery breakdown.[6]
The insurer denied coverage on the basis that the crop damage was caused by toxic exhaust gases emitted by the malfunctioning boiler and therefore fell within the policy’s exhaust gas exclusion.[7] Green Rise commenced an action for breach of contract and moved for partial summary judgment, seeking a declaration that the loss was covered. The insurer did not bring its own motion, but asked that judgment instead be granted in its favour.
The motion judge found that the “direct cause” of the loss was the excessive carbon monoxide created by the malfunctioning boiler and left undetected by the malfunctioning monitor. He concluded that the exhaust gas exclusion applied, and alternatively, that the boiler and monitor failures constituted machinery breakdowns that prevented coverage under the initial grant.[8] The motion judge therefore dismissed Green Rise’s motion and granted “boomerang” summary judgment to the insurer.[9]
Effective Cause Is Not Necessarily the Last Event
In reviewing the decision of the court below, the Court of Appeal began from the principle that causation generally drives the coverage analysis because most coverage provisions and exclusions require a particular event or class of event to cause the loss.[10] Although insurance cases sometimes use the language of “proximate cause,” proximity does not mean closeness in time. It refers to the effective cause of the loss.[11]
The Court distinguished between two possible causal structures. First, a chain of causation involves one effective cause that produces a sequence of events culminating in the loss. On the other hand, concurrent causation involves separate causes operating together to produce an indivisible loss. The immediate physical mechanism of damage may be part of either structure, but it is not necessarily the effective cause.[12]
Two examples will help demonstrate the differences between these causal structures. A windstorm, for example, may knock out the power, causing a sump pump to stop working and a basement to flood. Although it is the water that directly damages the property, the windstorm may be the single effective cause that set the sequence in motion. This illustrates the chain of causation structure.
Concurrent causation, on the other hand, may involve something like an electrical fault that starts a fire while a malfunctioning sprinkler system allows it to spread. Neither event merely follows from the other. Instead, they are separate and distinct events. Nonetheless, both operate together to produce the resulting damage. The immediate physical mechanism of damage may therefore form part of either causal structure without necessarily being the effective cause.
It would be emphasized that these are not separate legal tests. They represent different ways in which the events leading to a loss may be characterized. In the windstorm example, the windstorm may be the single effective cause: it initiated the sequence that ends with the flooded basement. In the fire example, both the electrical fault and the independently malfunctioning sprinkler system may be effective causes: one starts the fire, while the other allows it to spread and produce the indivisible loss. Ultimately, the court must determine, as a matter of substance and based on the particular facts of the case, the effective cause or causes of the loss. The coverage consequences of that determination will then depend on the wording of the policy.
In this case, the motion judge had found that the loss followed several potentially causal events: the boiler malfunctioned; the monitor failed to detect the resulting emissions; excessive carbon monoxide entered the greenhouses; and the plants were poisoned. Having made that finding, the judge could not resolve causation merely by identifying the carbon monoxide as the event closest to the physical damage.[13]
Instead, a proper analysis required consideration of the boiler and monitor failures, the reasons for those failures, and whether either failure, alone or together with the carbon monoxide exposure, was an effective cause. Because the evidentiary record did not permit those questions to be answered, the Court declined to determine whether the case involved one effective cause within a chain or multiple concurrent causes. Those issues required a trial.[14]
Causation Before Exclusions
The Court also applied the familiar coverage framework recently reaffirmed in Emond v. Trillium Mutual Insurance Co., 2026 SCC 3: the insured must first establish that the claim falls within the initial grant of coverage; the insurer must then establish the application of an exclusion; and the insured may rely on an exception to restore coverage.[15]
The motion judge effectively began with the exhaust gas exclusion. The Court of Appeal held that he should first have identified the effective cause or causes and determined whether the loss fell within the initial grant of coverage. Only then could the machinery breakdown exception and the potentially applicable exclusions be analyzed in their proper order.[16]
This is an important point. If carbon monoxide was not an effective cause, the exhaust gas exclusion might not be engaged. If carbon monoxide was one of several concurrent effective causes, the court would have to decide whether the policy clearly excluded the loss despite the operation of another covered cause.
Concurrent Causes and the Wording of Exclusions
The distinction between a causal chain and concurrent causes may therefore determine how an exclusion operates. Relying on Derksen v. 539938 Ontario Ltd., 2001 SCC 72, the Court explained that an insurer may draft an exclusion broadly enough to eliminate coverage where an excluded cause contributes to a loss alongside a covered cause. That result, however, must be expressed clearly.[17]
If the loss is ultimately found to have resulted from concurrent causes, the trial judge will have to interpret the exhaust gas exclusion afresh and determine whether it clearly excludes coverage where exhaust gas is only one effective cause of the loss. The existence of an excluded cause will not, without sufficiently clear policy language, necessarily dispose of the claim.
The trial judge must also consider the exhaust gas and pollution provisions together. The Court rejected the motion judge’s treatment of “exhaust gas” as unambiguous in the abstract. The meaning of the term must be determined in the context of the policy and the greenhouse operation, including the fact that the gas entered through a distribution system used in the ordinary crop-production process. The court must also consider what function remains for the pollution exclusion and its exception if the exhaust gas exclusion is read broadly enough to capture the same loss.[18]
The Machinery Breakdown Issue
The machinery breakdown issue itself exposed a related evidentiary problem. The policy definition required an accidental loss resulting from inherent vice or another internal cause to a machine. Although the motion judge characterized the boiler and monitor failures as machinery breakdowns, he did not determine what displaced the boiler’s burner diffuser or what caused the monitor to fail.[19] Those findings may be necessary both to identify the effective cause or causes and to decide whether the machinery breakdown provision applies.
Importantly, the motion judge also failed to identify which party bore the onus of establishing whether the machinery breakdown exception applied. The Court of Appeal did not resolve that question because it had not been squarely addressed by the parties or decided below. It remained a genuine issue for trial: one made particularly consequential by the requirement that parties on summary judgment put their evidentiary “best foot forward.”[20]
Practical Implications
Green Rise Foods offers three practical lessons for insurers, policyholders, and coverage counsel.
First, it is necessary to investigate the complete causal sequence. The final physical mechanism of damage may not be the effective cause. Failed equipment should be preserved and the reasons for each malfunction investigated through maintenance records, operator evidence, and appropriate expert analysis.
Second, it is necessary to consider and apply the policy in the correct order. The effective cause or causes must be identified before the initial grant of coverage, exceptions, and exclusions can be applied coherently.
Third, it is necessary to address concurrent causation clearly. If an insurer intends an exclusion to eliminate coverage whenever an excluded peril contributes to a loss, even alongside a covered cause, the policy language must clearly produce that result. This is particularly so given the fact that coverage provisions are construed broadly, exclusions are construed narrowly, and any ambiguity that remains after applying the ordinary rules of contractual interpretation is resolved against the insurer under the doctrine of contra proferentem. An insurer seeking to exclude coverage for a multi-causal loss must therefore say so clearly; a court will not infer that intention from uncertain or imprecise language.
The decision confirms that a complex loss cannot always be reduced to its most immediate cause. Before asking whether a policy covers, or excludes, a loss, insurers, policyholders, and courts must first understand what actually caused it. In insurance coverage disputes, the last event in the chain may be the easiest cause to identify, but it is not necessarily the one that determines coverage.
[1] Green Rise Foods Inc. v. N.V. Hagelunie, 2026 ONCA 334 at paras 1, 6 and 78.
[2] Ibid at paras 52-57.
[3] Ibid at paras 10-13.
[4] Ibid at paras 20-21.
[5] Ibid at para 21.
[6] Ibid at paras 15-18.
[7] Ibid at para 24.
[8] Ibid at paras 31-37.
[9] Ibid at para 38.
[10] Ibid at para 39.
[11] Ibid at paras 42-43.
[12] Ibid at paras 44-52.
[13] Ibid at paras 53-56.
[14] Ibid at paras 55-57.
[15] Emond v. Trillium Mutual Insurance Co., 2026 SCC 3, as cited in Green Rise Foods Inc. v. N.V. Hagelunie, 2026 ONCA 334 at paras 60-61.
[16] Green Rise Foods Inc. v. N.V. Hagelunie, 2026 ONCA 334 at paras 67-68.
[17] Ibid at paras 93-94.
[18] Ibid at paras 84-91.
[19] Ibid at paras 69-72 and 75-76.
[20] Ibid at paras 73-74 and 78.
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Matthew Nordlund
Associatemnordlund@tmlawyers.com
Matthew Nordlund is an associate at Taylor McCaffrey LLP practicing civil litigation, with a primary focus on insurance defence and construction disputes. Matthew acts for local, national, and international insurers across the full spectrum of insurance litigation.
Austin Sutherland
Associateasutherland@tmlawyers.com
Austin Sutherland is a junior associate at Taylor McCaffrey LLP, assisting on civil litigation matters with a focus on insurance defence and construction disputes.