May 23, 2019 by Greg Meckbach
Canada’s top court said today it will not hear an appeal from Aviva Canada of a ruling in favour of a New Brunswick church diocese.
L’Évêque catholique romain de Bathurst, a diocese that oversees Roman Catholic parishes in the northeastern part of the province, earlier paid $7 million in settlements to dozens of survivors of sexual abuse.
The diocese had liability insurance policies with Canadian General Insurance Company and Commercial Union Assurance Company between 1957 and 1983. The successor insurer is Aviva Canada. A coverage dispute ensued.
Initially, in its 2016 ruling in Aviva Insurance Company of Canada v. L’Évêque catholique romain de Bathurst, the Court of Queen’s Bench of New Brunswick ruled partly in favour of Aviva.
That ruling was overturned in 2018 by the New Brunswick Court of Appeal. Aviva applied for leave to appeal to the Supreme Court of Canada, which announced May 23 it is dismissing Aviva’s application with costs.
As a result, the unanimous appeal court decision now stands.
Aviva argued that the $7-million settlement costs are not covered because the settlements resulted from a conciliation process. Because of how the conciliation process was conducted, the costs were not liabilities imposed by law, Aviva argued.
Dozens of priests were accused and one in particular was sentenced in 2010 to eight years in jail. Soon after, a Nova Scotia firm advertised in newspapers seeking potential claimants, wrote Chief Justice of New Brunswick Marc Richard for the appeal court.
Monsignor Valéry Vienneau, then Archbishop of the Roman Catholic Diocese of Bathurst, located past liability insurance documents and sought coverage from Aviva. Initially Aviva had contributed about $16,000, in 2003, to settling one claim. After that, Aviva denied coverage. So Monsignor Vienneau sought legal advice. As a result of that legal advice, Monsignor Vienneau decided to start a conciliation process. The thinking was, the diocese could avoid the high cost of defending a lawsuit, money would go primarily to victims and survivors would not have to be “re-victimized” by an adversarial litigation process.
In total, 83 victims participated in the conciliation process 50 being compensated. Twenty-six priests were identified as having committed sexual abuse, Chief Justice Richard wrote.
In ruling that the settlement money paid by the diocese did not result from a legal liability, Court of Queen’s Bench Justice Stephen McNally noted that the sexual abuse claims settled through the conciliation process had not been subjected to any reasonable legal analysis or rigour to determine whether there was a reasonable likelihood each claim would have to be paid on account of liability imposed by law.
The diocese did not consider arguing that statutes of limitations barred lawsuits in 2010 and no legal standard of proof was applied to assess the diocese’s legal obligation to pay any individual victim’s claim, Justice McNally wrote.
But the appeal court countered that it was entirely reasonable under the circumstances for the diocese to put an alternative dispute resolution process in place.
“An insurer’s obligation to its insured resulting from a wrongful denial of coverage is a simple matter of contract law and is not dependent on the actual legal liability the insured may or may not have incurred for the claims brought against it,” wrote Chief Justice Richard. “The test is a simple one. It is whether the insured, having been denied coverage and left to its own devices, acted reasonably in the resolution of the claim(s) that should have been defended by the insurer and for which the insured would have been indemnified if it were found the insured was at law liable for the damages claimed.”
The initial trial decision was not entirely in Aviva’s favour. Justice McNally rejected Aviva’s argument that an exclusion clause for intentional acts should apply. Aviva said bishops could have foreseen that priests who were known abusers might re-offend. But Justice McNally said it does not follow that the bishops actually intended for the abuse to occur.
Justice McNally also rejected Aviva’s argument that the diocese made a material misrepresentation in applying for insurance.
During the trial, an expert witness testified that before the mid-1980s, commercial clients would not be expected to disclose incidents of sexual abuse, on the part of employees, to their insurers.
The Bathurst diocese’s liability policies with Aviva’s predecessors insured “all sums which the Insured shall become obligated to pay by reason of the liability imposed upon the Insured by law, or assumed by the Insured under contract, for damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, caused by events occurring within the Policy Period and suffered or alleged to have been suffered by any person or persons.“