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Salus sues insurers for $55 million claiming botched residence repairs

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Salus sues insurers for  million claiming botched residence repairs

Salus CEO Mark MacAuley estimates it will cost $7.5 million to fully restore the building, but says the insurance companies are offering $3.2 million.

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A faulty exhaust vent and a bone-chllling winter night spelled catastrophe for Ottawa Salus.

Now the Ottawa charity that provides affordable housing for people with mental health needs or substance abuse problems is suing its insurers. The statement of claim, filed in late May in the Ontario Superior Court of Justice, alleges the corporation’s four insurers gave bad advice and were slow to respond after a devastating flood at a Salus apartment on Scott Street at Athlone Avenue.

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The flood occurred on Feb. 3, 2023, when the overnight temperature in Ottawa plunged to -33.3 C. According to the statement of claim, frigid air flowed back into the duct work of an unoccupied fourth-floor apartment through an improperly installed exhaust vent lacking “double return air springs” that would have prevented the back draft. The cold air froze the pipe for the fire sprinklers, which burst, flooding the building with 20,000 litres of water before Ottawa firefighters could shut it off.

The statement of claim, which has not been proven in court, alleges the insurers were slow to respond, then recommended a restoration company that Salus alleges wasn’t capable of handling such a big cleanup job. Salus eventually brought in a second company to complete the remediation. But, by then, there had been significant mould buildup that further delayed repairs, the statement of claim alleges.

It was not until July 2023 that work to remove mould began, and the job wasn’t finished until the fall.

“This delay has caused over 40 extremely vulnerable members of the community to remain in temporary inadequate housing and has presented significant challenges for Ottawa Salus to provide services to its clients. All this at a time when there are several thousand people in shelters and on the streets of our nation’s capital,” the lawsuit alleges.

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It also alleges that Ottawa Salus “has suffered a loss of reputation as a capable, competent charity that is able to provide a much-needed and valuable service to at-risk members of the community” and that it has lost government funding “due to inability to provide housing and other services at the building.”

On Tuesday afternoon, Salus CEO Mark MacAuley accused the insurance companies of “bully tactics.” He estimates it will cost $7.5 million to fully restore the building, while the insurance companies are offering $3.2 million, leaving a $4.2-million shortfall.

The insurers “are putting all the onus on Salus and Salus has to accept the risk that they may or may not pay that at the end of the claim,” MacAuley said. “It puts an incredible financial burden on the organization, both financially and operationally, because it’s taking dollars away from what we might be able to use in other supports for clients.”

All 40 displaced tenants have since found permanent housing, either in other Salus buildings or with other agencies. MacAulay said it would be at least next February before the Scott Street building could reopen.

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Ottawa Salus
An exterior photo of the Ottawa Salus property on Scott Street after a pipe burst in February 2023. Photo by Tony Caldwell /Postmedia

Salus is also claiming a loss of rent revenue, which it says will be $567,936 over two years. The insurers have offered to pay $337,600.

“The needs of the occupants of the Building are urgent,” the statement of claim says. “The delay in housing the occupants has had and will continue to have a significant negative human impact. The residents of the Building are all at-risk members of the community suffering from serious mental illness and/or substance use disorders. The housing and shelter system in Ottawa is cracking at the seams and the Subscribing Insurers’ action and inaction has and continues to increase the risk to an already marginalized and often traumatized members of the community.”

In all, Salus is claiming $15 million in damages, $15 million for negligence, $15 million in restitution, $5 million for damage to its reputation and $5 million in punitive damages.

The defendants have 21 days to file their responses.

Salus insured the building through a subscription policy with four different companies. The statement of claim names all four, with Intact Insurance holding most of the risk at 47 per cent, with 20 per cent held by Temple Insurance Co., 18 per cent by Lloyd’s Underwriters and 15 per cent by Liberty Mutual Insurance Co.

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In an emailed statement Tuesday, Intact Insurance said it could not comment on the specifics of the case because it was before the courts.

“However, what we can say is that we have been working closely with Ottawa Salus on this matter and have already provided them with multi-million dollar payments so that they could start the remediation process,” David Barrett, director of media, social and owned channels for Intact Financial Corporation, wrote in an email.

“This value was determined based on a thorough assessment of damages conducted by independent experts. In terms of outstanding matters, we have been actively participating in mediation efforts and have offered arbitration so that we can reach a resolution as soon as possible.”

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