MDS INC V FACTORY MUTUAL INSURANCE CO

2021 ONCA 594, Ontario Court of Appeal, Justice of Appeal Feldman, Justice of Appeal Harvison Young and Justice of Appeal Thorburn, 3 September 2021

Insurance (business interruption) – Extension for physical damage to property of supplier – Exclusion for “corrosion” – Effect of all risks cover – Meaning of “corrosion” – Whether inability to use constituted physical damage

On 21 February 2006 MDS Inc (MDS), a health science company, agreed to buy radioscopes from the Atomic Energy of Canada Ltd (AECL) to be produced at the Nuclear Research Universal (NRU) reactor in Ontario. The radioscopes were to be sold worldwide, and were used for cardiac imaging, cancer treatments, and sterilization of medical products. On 14 May 2009, heavy water containing radioactive tritium was discovered leaking through the calandria wall of the NRU reactor. The leak was caused by corrosion. There was no damage to the reactor other than corrosion. The reactor was shut down for 15 months so that repairs could be effected. MDS, unable to obtain supplies of radioscopes for that period, suffered losses of around Can$121,248,000.