Canadian Underwriter

‘Bodily injury expected or intended’ exclusion applies to daycare seeking liability coverage

September 29, 2021   by Greg Meckbach

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Liability insurer Northbridge does not have to cover a Prince George, British Columbia daycare owner accused of shaking a child severely enough to cause brain injury, a judge ruled last week.

A lawsuit, against the person operating the daycare, was filed in 2019. Allegations in the underlying lawsuit have not been proven in court.

In 2017, the daycare operator had a commercial general liability policy, with Northbridge General Insurance Corporation, with a limit of $5 million per occurrence.

Among the allegations are that in 2017, the individual operating the daycare shook the child and brain injury resulted. The daycare operator is also alleged to have failed to care for or adequately meet the needs of the child, caused harm through negligent or inappropriate physical handling and failed to protect the child from harm and danger. The lawsuit was filed by a litigation guardian.

Separately, the daycare operator went to court asking for a declaration that Northbridge is required to cover her in respect of any damages, costs, legal fees, disbursements, expenses and taxes incurred or to be incurred respecting lawsuit.

Northbridge argued this is a case of an intentional tort that has been “dressed up as a negligence claim”.

The policy excludes “bodily injury… expected or intended from the standpoint of the insured.”

But the daycare operator argued it is “not out of the question that a person can assault an infant without an intention to harm.”

The policy also excludes “abuse,” which is defined as “any act or threat involving molestation, harassment, corporal punishment or any other form of physical sexual or mental abuse.” The insured argued no allegation in the underlying lawsuit claims molestation, harassment, corporal punishment or any other form of physical sexual or mental abuse.

Ultimately, the BC Supreme Court ruled in favour of Northbridge.

“The claim in negligence and assault arise from the same actions and cause the same harm,” Justice Ronald Tindale wrote in Henderson v. Northbridge General Insurance Corporation, released Sept. 21.

“The underlying elements of the claims in negligence and of the intentional tort of assault are not sufficiently disparate to render the two claims unrelated.

Among the cases cited were Non-Marine Underwriters, Lloyd’s of London v. Scalera, released in 2000 by the Supreme Court of Canada.

While the Scalera case arose from a sexual assault lawsuit and Henderson v. Northbridge did not, both cases involve exclusions in liability insurance.

The Scalera case arose from a lawsuit filed in 1996 against five BC Transit bus drivers, one of whom wanted coverage from their home insurer.

Lloyd’s Canada denied the claim, citing an exclusion for “bodily injury or property damage caused by any intentional or criminal act or failure to act.” That was the policy language in 1990.

Initially in 1997, a B.C. Supreme Court judge ruled that Lloyd’s has a duty to defend one of the drivers on a home insurance policy. That decision was reversed by the B.C. Court of Appeal in a divided 2-1 ruling. The Supreme Court of Canada ruled against the claimant, upholding the provincial appeal court ruling.

In their 1998 ruling in favour of Lloyd’s, two of the three B.C. appeal court judges reasoned that most tort claims allege negligence and not intent to injure. Therefore, excluding intentional acts from coverage is in keeping with coverage historically provided by policies insuring against liability imposed by law caused by accident.

In dissent, Justice Lance Finch found that the Lloyd’s exclusion in its homeowner policy, for intentional acts, should be read to exclude liability only for injury or damage caused intentionally. “To do otherwise would exclude the vast majority of all claims, since most accidents or occurrences can be traced back to an intentional act,” Justice Finch wrote at the time.

In upholding the majority ruling in favour of Lloyd’s, Supreme Court of Canada Justice Frank Iacobucci said a court, when considering on an insurer’s duty to defend, must decide whether the harm allegedly inflicted by the negligent conduct is derivative of that caused by the intentional conduct.

“In this context, a claim for negligence will not be derivative if the underlying elements of the negligence and of the intentional tort are sufficiently disparate to render the two claims unrelated,” Justice Iacobucci wrote in Scalera, writing on behalf of himself and two other judges. Four of the judges ruled in favour of Lloyd’s but in separate reasons. All of the judges ruled in favour of Lloyd’s but disagreed on the issue of the tort of sexual battery. The majority riled that if a plaintiff alleges sexual battery, the court should conclude – for the purpose of construing exemptions of insurance coverage for intentional injury – that the defendant intended harm.


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