Category: Duty to Defend

Background

The Applicant Brett Butterfield suffered a psychotic episode while visiting a firearms store in 2019. He formed the delusional belief that the store owner, Mr. Carr, had raped and murdered his female friend. Feeling threatened, Mr. Butterfield left the store, retrieved a hunting knife, and upon re-entry began stabbing the store owner in the head and neck, yelling “you raped and killed my girlfriend”, and “murderers need to be murdered”.
Mr. Butterfield underwent two forensic psychiatric assessments following his arrest. Both psychiatrists diagnosed him with schizophrenia and concluded that he was not criminally responsible, as he had not had the capacity to appreciate that the attack was morally wrong due to his delusion. At trial, the Ontario Court of Justice found that Mr. Butterfield had committed a criminal offence, but ruled that the defence of Not Criminally Responsible (“NCR”) applied.

Mr. Carr sued Mr. Butterfield for negligence because he had attended his store and applied for a firearms licence when it was reasonably foreseeable that he would injure or kill someone due to his mental illness. At the time of the incident, Mr. Butterfield held a Condominium Unit Owners’ Policy with Intact Insurance Company (“the Policy). The Policy included third party liability insurance, under which the insurer had a duty to defend and indemnify the insured against certain claims of up to a limit of $2 million. The Policy also stated that Intact did not cover claims arising from bodily injury caused by any intentional or criminal act by an insured person. Intact denied coverage to Mr. Butterfield using this exclusionary clause, stating that although his claim fell within the scope of the Policy, it was barred because his actions had been intentional and criminal in nature.

Mr. Butterfield brought an application for a declaration that Intact had a duty to defend him in the action against him. The issue at trial was whether the exclusionary clause for intentional or criminal acts applied to Mr. Butterfield’s claim.

Analysis

Justice Braid first addressed whether an intentional act or criminal act could be claimed by the respondent insurer when the Plaintiff was only suing for negligence. Referring to case law,[1] she noted that in considering an exclusionary clause of an insurance policy, the court was not limited to the allegations found in the Statement of Claim. If the negligence claimed arose from the same harm as the intentional tort, the exclusion would be found to apply. Upon review of the Statement of Claim, Justice Braid found that the negligence claim was based on the intentional tort as the damages arose directly from Mr. Butterfield’s assault.

Justice Braid then examined whether Mr. Butterfield’s actions were criminal. She stated that ‘criminal act’ as defined in the Policy referred to any breach of the Criminal Code, regardless of the intent or lack thereof to cause harm. At his criminal trial, Mr.. Butterfield had been found to have committed the crime of aggravated assault. Despite Mr. Butterfield being exempted from conviction by reason of being NCR, Justice Braid held that Mr. Butterfield’s actions satisfied the definition of a criminal act under the Policy.

Justice Braid then examined whether Mr. Butterfield’s actions were criminal. She stated that ‘criminal act’ as defined in the Policy referred to any breach of the Criminal Code, regardless of the intent or lack thereof to cause harm. At his criminal trial, Mr.. Butterfield had been found to have committed the crime of aggravated assault. Despite Mr. Butterfield being exempted from conviction by reason of being NCR, Justice Braid held that Mr. Butterfield’s actions satisfied the definition of a criminal act under the Policy.

Lastly, Justice Braid referred to two cases in determining whether Mr. Butterfield’s assault was an intentional act under the Policy.[2] The case law stated that insurance policies, in speaking of intentional acts, referred to civil responsibility instead of criminal responsibility. The test in civil law for whether an individual with a mental disorder was responsible for their tortious act asked whether they were able to appreciate the nature and consequences of the act.[3] The inability of the individual to realize that their actions were wrong did not grant relief from liability.[4] Justice Braid found that Mr. Butterfield’s words and actions demonstrated a clear intent to harm or kill Mr. Carr with his knife. She concluded that Mr. Butterfield’s actions met the definition of an intentional act.

A janitor had a fatal slip and fall incident in the course of his work at a gallery. The deceased employee’s family members commenced actions against the gallery for damages. The gallery commenced third party claims against the janitorial company. The gallery was an additional insured on the janitorial company’s CGL policy and argued that the company and its insurer had a duty to defend it. The court held that neither the janitorial company nor its insurer owed the gallery a duty to defend. The court reasoned that the allegations of fault against the gallery made in the statements of claim did not have any bearing on the janitorial company.

In cases involving “other insurance” clauses, the clauses only apply where the policies cover the same risk. In this case, the Aviva and Intact policies covered the same insured, but one was for business risks (CGL) and the other was for personal risks (homeowner’s policy). As such, the “other insurance” clauses did not apply, both insurers were primary, and they both had a duty to defend and indemnify the insured.

A hospital employee improperly accessed a neighbour’s medical records. The employee was not in the neighbour’s circle of care. The neighbour sued the employee for mental anguish arising from intrusion upon seclusion. The hospital’s liability policy provided coverage for all employees of the hospital while acting under the direction of the hospital. The court held that the insurer owed the employee a duty to defend. The policy’s explicit provision of coverage for invasion or violation of privacy and for invasion or violation of the right of policy by definition offered coverage for highly offensive conduct, which logically must cover access to records outside of the circle of care.