A disputed $31 million fire loss at a Delta, B.C., sawmill has triggered three separate lawsuits involving Lloyd's Underwriters, Business Development Bank of Canada (BDC) and BFL Canada, with arson allegations now at the center of the coverage battle.
The case stems from an April 8, 2024, blaze that gutted Acorn Forest Products' remanufacturing facility on the Fraser River, burning a 30-meter swath through the plant despite a response from 30 firefighters in seven trucks.
Lloyd's has since voided Acorn's primary and excess policies, alleging the loss was caused by arson carried out by, or under the guidance of, the company's "directing minds," according to a report from Business in Vancouver.
In court filings, Acord and its parent company, the San Group, denied the allegation and said the London market is using arson as a pretext to avoid a nearly $31 million payout.
None of the allegations have been tested in court. Lawyers for Lloyd’s, the San Group and BDC did not respond to requests for comment, the report said.
The San Group acquired the 12-hectare Delta mill in 2022 through Acorn, financed by a $16 million loan from BDC. As a condition of that financing, BDC was to be named as primary loss payee and mortgagee on all relevant property policies, putting the Crown lender first in line in the event of a loss.
Initially, HUB International arranged coverage. In late 2023, the San Group moved its account to BFL Canada Risk and Insurance Services, which markets itself as one of the country's largest risk management and brokerage firms.
Court filings from BDC and the San Group alleged that during the transition, BFL and a former broker failed to properly name BDC on the Lloyd’s policies before the fire.
After the loss, BDC sought to collect under the policies but Lloyd’s pointed to the timing of the paperwork, asserting that certificates naming the bank were issued only after the fire and were never on file with underwriters. On that basis, Lloyd’s argued the bank has no legal interest in the $31 million in claimed losses.
BDC and the San Group have sued BFL for negligence and breach of fiduciary duty, alleging the broker held itself out as a forestry specialist but failed to meet the “standard of care of a reasonable commercial agent.” The plaintiffs are seeking business losses and damages related to the alleged failure to secure BDC’s position on the policies, the report said.
In a separate suit, BDC is also suing Lloyd’s directly. The bank disputed the arson allegation, relying on a proof‑of‑loss document prepared by Deloitte indicating that Acorn did not cause the fire through any willful act.
Even if arson were ultimately proven, BDC claimed, the standard mortgage clause in the policy exists precisely to protect lenders from the misconduct of borrowers. Canadian case law has generally treated the standard mortgage clause as creating a separate contract between insurer and mortgagee, preserving the lender’s coverage even where the insured’s claim is denied for breaches such as misrepresentation or arson.
BDC said it holds $41 million in security against the sawmill, according to the report.
A third lawsuit saw Acorn sue Lloyd’s for refusing to pay the claim. Acorn flatly denied that the fire was caused by arson, that any dishonest act occurred or that a false or fraudulent claim was submitted.
The Delta fire is not the first large sawmill loss involving the San Group and Lloyd’s.
In April 2020, a fire at the group’s San Forest Products facility in Port Alberni resulted in an estimated $24.5 million loss. Lloyd’s was also the insurer on that risk. Deloitte, the court‑appointed monitor in the San Group’s restructuring, reported that Lloyd’s denied that claim in February 2023; as of early 2026, only $1.5 million had been paid, and documents suggested any eventual payout would be capped around $5.8 million under the policy limits.
B.C.’s Office of the Fire Commissioner investigated the Port Alberni blaze, but the province’s public safety ministry has said the precise cause was never determined. Deloitte notes that coverage for that loss was “significantly limited and contested from the outset.”
The pattern of disputed claims has become a focal point in the San Group’s wider financial distress. By November 2024, the group had sought creditor protection under the Companies’ Creditors Arrangement Act, with Deloitte appointed as monitor amid claims exceeding $150 million. Royal Bank of Canada has asserted roughly $110 million, while BDC has claimed about $40 million. Despite a series of asset sales, including a Langley farm property that generated net proceeds of $2.9 million, senior lenders are still owed more than $129 million, according to the monitor’s latest report.
The Delta sawmill loss accounts for a significant share of the remaining debt and is one of two pre‑filing insurance claims the monitor has identified as potentially material to any recovery for creditors.
Deloitte has also been seeking greater insight into Lloyd’s handling of the Delta claim. Two months before the latest lawsuits were filed, lawyers for the monitor requested access to Lloyd’s internal investigation and adjudication files relating to the 2024 fire.
According to the monitor’s reports, Lloyd’s counsel declined, saying the market had already “met their obligations” and would not provide further information supporting its arson position.
With the San Group restructuring still under court supervision, any eventual recovery on the Delta and Port Alberni claims will also have a direct bearing on how much secured lenders, trade creditors and employees ultimately receive, the report said.
