B.C.’s Supreme Court has upheld that an insurer is not obligated to defend parents in a lawsuit alleging negligence for failing to stop their child from inflicting harm on others.
In Reeves v Co-Operators General Insurance Company, Bentley Reeves and Dawn Newton were named insureds in a home insurance policy obtained from Co-operators that included general liability insurance coverage. Their minor son, Isaac Reeves, was also an insured under the terms of the policy.
In a lawsuit filed Apr. 17, 2020, the litigation guardian of Zarina Salehian accused Isaac of assaulting Zarina at school in September 2019. The lawsuit named Isaac’s parents, as well as the school district and some school district employees.
Among other things, the Salehian lawsuit alleges Reeves and Newton knew their son Isaac had exhibited violent behaviour before the assault and were negligent in not taking steps to prevent the assault of Zarina. The allegations contained in the Salehian’s lawsuit have not been proven in court.
Reeves and Newton claimed their home insurance policy covered them for the lawsuit. But the Co-operators denied coverage, saying it did not have a duty to defend on the basis of a policy exclusion. The exclusion states:
“We do not insure claims made against you, nor do we provide voluntary payments under this policy, arising from or in relation to:
sexual, physical, psychological or emotional abuse, assault, molestation or harassment, including corporeal punishment by, or at the direction of, or with the knowledge of any insured [what the court refers to as the ‘With Knowledge Exception’]; or
failure of any insured to take steps to prevent sexual, physical, psychological or emotional abuse, assault, molestation, harassment or corporal punishment” [the ‘Failure to Prevent Exclusion’].”
The parents argued the policy wording was ambiguous, so the exclusion should be interpreted in favour of the insureds.
For example, the parents said “failure…to take steps” related to abuse should not be interpreted to mean negligence. Taking action requires knowledge, the parents argued, and since they did not know Isaac would assault anyone at school because they were not there, the policy exclusion should not apply to them.
Also, the parents argued, if they were not aware an assault was going to occur, they should be treated in much the same way as “innocent co-insureds.”
“Innocent co-insured” refers to a situation in which two or more people are named on a home insurance policy and one insured intentionally causes damage — a spouse burns down a building to collect insurance, for example — while the other named insureds do not.
In the arson example, the home insurance policy would not cover the arsonist, because the damage was caused intentionally and therefore not an accident. However, the innocent co-insured who did not know anything about the arson attempt would be covered under the policy, since they did not intend to cause the damage.
In Reeves, the parents argued the policy’s “failure to prevent” exclusion should not apply to them, since they didn’t intend for their son to harm anyone.
However, the court sided with Co-operators, finding the language in the policy exclusion was not ambiguous.
First, the B.C. court noted in a ruling released Dec. 23, “the [parents] seek to read into the Failure to Prevent Exclusion a requirement that they had knowledge of an event about to occur. The example given by [the parents’] counsel being that if the parents saw their son about to kick another student and did nothing, then the policy would not cover a claim against them.
“The Failure to Prevent Exclusion clearly does not say that. Liability coverage from the scenario above would also be excluded by the With Knowledge Exception.”
Second, the court ruled, “in my view, the reference [in the policy exclusion] to ‘failure of any insured to take steps’ is clear and unambiguous, even if using the lens of an ordinary and reasonable person,” B.C. Supreme Court Justice Carla Forth wrote. “The word ‘failure’ is clear and is readily understandable. It is the…parents’ alleged ‘failures’ that are the allegations made in the [lawsuit] against them.
“The word ‘steps’ is equally unambiguous. The New Oxford Dictionary of English…defines ‘steps’ as ‘a measure or action, especially one of a series taken in order to deal with or achieve a particular thing….”
“The allegations advanced against the…parents [are] that they failed to take various steps such as: the failure of the parents to anticipate another occurrence of violence, to take reasonable steps to avoid a reoccurrence of violence, and to supervise and discipline their son. These clearly fall within the concept of being a ‘measure or action.’”
Ultimately, the court did not find evidence in the policy or elsewhere supporting an interpretation of the exclusion as in an “innocent co-insured” situation. It ruled the 2015 Unifund Assurance Company v. D.E. decision in Ontario was consistent with the fact situation in Reeves.
“I am of the view that the approach taken by the Ontario Court of Appeal in Unifund and this Court in Dube applies, and there is no basis to distinguish either case,” Forth wrote. “Both of these cases found that materially the same clause as the exclusion [in Reeves] would exclude coverage for negligently failing to prevent abuse.”