September 30, 2015 by Don McGarvey, partner; and Kate Whittleton, associate, McLennan Ross LLP
If a party makes allegations that can be described both as intentional acts and as negligence, questions of insurance coverage and the duty to defend will no doubt arise. The issue of coverage is further complicated when intentional acts and negligence are intertwined with the allegations. The question comes down to: what is the true essence of the claim?
The Duty to Defend
As stated by the Supreme Court of Canada (“SCC”) in Nichols v. American Home Assurance Company,  1 SCR 801, the duty to defend is triggered not by actual acts or omissions, but by the allegations in the pleadings, even if those allegations are groundless, false or fraudulent. The SCC has further indicated that where a claim makes no allegations that could potentially give rise to indemnity, there is no duty to defend. The duty to defend arises only when the allegations could potentially fall within coverage.
In the well-known case of Non-Marine Underwriters, Lloyd’s of London v. Scalera,  1 SCR 551, 2000 SCC 24, the SCC endorsed the following 3-step process to determine whether a given claim could trigger indemnity:
1. Determine whether the allegations are properly pled. Courts are not bound by the legal labels chosen by the Plaintiff. In particular, one cannot frame a claim in negligence to trigger coverage where the essence of the claim rests on a foundation equivalent to an intentional act.
2. Determine whether any of the allegations are derivative in nature. The duty to defend will not be triggered simply because a claim can be cast in terms of both negligence and intentional tort. If both the negligence and intentional tort claims arise from the same acts and cause the same harm, the negligence claim is derivative and subsumed within the intentional tort. If they are sufficiently disparate to render the two claims unrelated, the claim in negligence is not derivative of the allegations of the intentional act.
3. Ask whether any of the non-derivative claims could potentially trigger the insurer’s duty to defend. Based on the SCC’s analysis in Scalera, an insurer is entitled to look at the true essence of the allegations when assessing their duty to defend. Where the essence of the allegations is such that the claim(s) in negligence derive from an intentional tort and the acts that are alleged to have been both intentional and negligent are the same acts and cause the same harm, the true essence of the claim can likely be said to relate to an intentional act causing bodily harm. The “derivative claim” question is considered further below.
The Problem of Johnson v. Aviva Insurance Company of Canada
The Scalera analysis has been applied in numerous other cases. For instance, in Sansalone v. Wawanesa Mutual Insurance,  1 SCR 627, 2000 SCC 25, a civil action was advanced against five B.C. Transit bus drivers arising out of various alleged sexual assaults. The allegations in the Statement of Claim included battery, negligent battery, negligent misrepresentation and breach of duty. In relation to those allegations, the SCC found that the insurer had no duty to defend the Plaintiff because the negligence and unintentional tort claims were entirely derivative from the battery claim and therefore excluded on the basis of an intentional act.
By contrast, the Alberta Court of Queen’s Bench in Johnson v. Aviva Insurance Company of Canada, 2014 ABQB 688, recently found that, despite allegations of both negligence and battery arising out of the same incident, an insurer was obliged to defend the claim. This determination has re-ignited the debate over whether coverage for negligence should be available when the acts that give rise to the negligence allegations are derived from intentional acts.
In 2009, the Defendant, Jeffrey Johnson, participated in a floor hockey game organized by the Calgary Sport & Social Club (“CSSC”). The Plaintiff, another participant, alleged that she was injured by Johnson during the game. The Statement of Claim originally alleged that the Defendant committed an assault and battery by “intentionally, viciously and forcibly tripping then pushing” the Plaintiff, thus causing injury. The claim was subsequently amended and while the allegations of intentional actions remained, a sub-paragraph was added to allege, in the alternative, that Johnson had been negligent in causing the Plaintiff’s injuries.
At the time, the CSSC was insured by Aviva Insurance Company of Canada (“Aviva”). The relevant policy coverage extended to any member of the CSSC participating in a sanctioned sporting event, subject to certain exclusions. Specifically, the policy contained an exclusion which stated that the policy did not apply to:
“Bodily injury” or “property damage” expected or intended from the standpoint of the insured. This exclusion does not apply to “bodily injury” resulting from the use of reasonable force to protect persons or property.
The Defendant brought an application for a declaration that Aviva was obliged to defend him in the underlying action. Aviva opposed the application on the basis that the Plaintiff’s allegations related to intentional conduct and were therefore excluded from coverage under the policy. The Defendant argued that the Plaintiff also alleged negligence, which was not excluded from the policy and therefore triggered Aviva’s duty to defend.
Aviva asserted that the substance of the Plaintiff’s claim was that she was injured when she was tripped or pushed by the Defendant during a floor hockey game. Aviva also asserted that the factual allegations were unchanged in the Amended Statement of Claim and that the only allegation present was that the Defendant committed a deliberate act by intentionally tripping and pushing the Plaintiff. It seemed clear that the negligence allegations were entirely derivative of the intentional act and the amendment to the Statement of Claim to plead negligence was an attempt only to trigger insurance coverage.
Although the Court agreed with Aviva that the original Statement of Claim only alleged an intentional act and therefore would not engage coverage, and the wording of the Amended Statement of Claim was “ambiguous” and not “ideal,” the Court stated that any doubt as to whether the pleadings brought the incident under the policy’s coverage was to be resolved in the insured’s favor.
As such, the Court found that when given the “widest latitude,” the substance of the Plaintiff’s claim was that while playing floor hockey she was injured when she was tripped and pushed by the Defendant. How the Plaintiff’s alleged injuries were sustained had not been established: whether by intentional or negligent act. It seems on this basis, the Court found that it was arguable that the pleadings gave rise to two actionable torts involving different acts based on the Defendant’s state of mind, one intentional and one non-intentional. Given this “mere possibility” that the claim for negligence could succeed, the Court found that Aviva had a duty to defend.
Although the principles set out in Scalera continue to apply, recent jurisprudence has cast some doubt on traditionally “derivative” claims. Given the Supreme Court’s description of a derivative claim, the Alberta Court of Queen’s Bench decision in Johnson v. Aviva Insurance Company of Canada is surprising. Aviva did not appeal and thus, the effect of this case may therefore add to the confusion surrounding this area as it would appear that a derivative claim in negligence that arose from an intentional act may now attract coverage. The fundamental question remains: “what is the true essence of the claim?”
Don McGarvey, Q.C. is a partner and Kate Whittleton an associate in the Edmonton office of McLennan Ross LLP. Both Don and Kate practice in the area of commercial litigation and commercial insurance. McLennan Ross LLP is a proud member of the ARC Group of Canada network of law firms.