Coverage was Not Excluded as Against Two Insureds Due to Intentional Act on the Part of a Third Insured

Coverage was not excluded as against two insureds as a result of an alleged intentional act on the part of another insured, because the claim in negligence against the two insureds was distinct and not derivative of the intentional tort claimed against the other insured.

D.E. v. Unifund Assurance Co., [2014] O.J. No. 4271, September 11, 2014, Ontario Superior Court of Justice, D.G. Stinson J.

The insureds were two homeowners who sought a declaration that the insurer was obliged to indemnify and defend them under their homeowner’s insurance policy. The matter arose after the insureds’ daughter allegedly bullied and harassed another student at school, allegedly resulting in serious and lasting psychological injuries to the student and the student’s mother. The student and her mother brought an action against thirteen defendants, including the insureds and their daughter. As against the insureds, the statement of claim alleged that the insureds were negligent by failing to prevent the alleged bullying from taking place.

The insurer denied coverage, arguing that, at its heart, the action against the insureds was for the intentional acts of their daughter, also an insured under the policy. The insureds argued that action against them was based in negligence, which was not expressly excluded under the policy.

Citing Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, the court held that the claim in negligence against the insureds was distinct and not derivative of the intentional tort claimed against her daughter.  There was no allegation that the insureds’ acts were intentional and court held that coverage should not be excluded on that ground.

The court also considered whether coverage should be excluded based on another exclusion under the policy, namely a failure to prevent physical, psychological, or emotional abuse. Applying the principle of contra proferentem and interpreting the exclusion clause narrowly, the court held that this exclusion would have applied only if the insureds had intentionally failed to act and thus permitted the alleged offensive conduct to continue.

The insurer was therefore ordered to defend and indemnify the insureds in the underlying action.

This case was originally summarized by Michael J. Robinson and originally edited by David W. Pilley.

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