Ontario Court of Appeal affirms that the “true nature of a claim” will impact duty to defend

Introduction

In Butterfield v Intact Insurance Company, 2023 ONCA 246, the Ontario Court of Appeal affirmed that Intact Insurance Company (“Intact”) did not have a duty to defend Mr. Butterfield (the “Appellant”) against a negligence claim because the policy’s intentional tort exclusion clause barred coverage. Specifically, the court held that the exclusion clause applied, as the negligence claim at issue was derivative of an intentional tort.

Background facts

In March 2019, the Appellant had a psychotic break in a firearms store, resulting in him stabbing the owner of the store (the “Incident”). The store owner sued the Appellant for negligence (the “Claim”) after he was found not criminally responsible (“NCR”) upon being diagnosed with schizophrenia. The Appellant held a Condominium Unit Owners policy with Intact which provided third party liability coverage, and contained the following exclusion clause:

“We do not insure claims arising from:

…

6. bodily injury or property damaged caused by any intentional or criminal act or failure to act by:

a) any person insured by this policy; …”

Intact initially denied coverage of the Claim on the basis that the Incident involved an intentional and criminal act.

Analysis

The Appellant brought an application for a declaration that Intact had a duty to defend him against the Claim.

The store owner alleged that the Appellant had a history of mental illness and was aware that he was suffering mentally prior to the Incident; he was therefore negligent in attempting to purchase and possess a firearm when he was experiencing a period of lucidity because it was reasonably foreseeable that there was a risk that he was capable of injuring or killing someone.

The Appellant argued that the Claim ought to be covered by Intact because it contained allegations of negligence, and did not explicitly mention intentional or criminal acts. Additionally, the alleged negligent acts at issue occurred prior to the Incident, and should therefore be addressed separately from the Incident, as the stabbing itself was intentional and criminal.

Although the Claim was grounded in negligence, the application judge found that the negligence arose from the same harm as the intentional tort of assault. Although assault was not pled, the court is not bound by the claims explicitly pled in parties’ pleadings – the court has the discretion to determine the true nature of the claim at issue.  Furthermore, the judge relied on the Supreme Court of Canada decision, Non-Marine Underwriters, Lloyd’s of London v Scalera, 2000 SCC 24, which held that a claim for assault or battery cannot be converted into a negligence claim solely to ensure that it would be covered by an insurer.

The application judge found that the true nature of the claim was an intentional tort, from which the negligent claim was derivative, as the wrong that the store owner suffered from flowed directly from assault.

Therefore, the application judge found that the intentional tort exclusion clause applied and Intact did not owe a duty to defend or indemnify the Appellant against the Claim.

Ontario Court of Appeal

The Appellant appealed on three alleged grounds, however consideration was only given to one issue: whether the application judge erred in finding that the alleged negligence claim is derivative of an intentional tort. The Court of Appeal found that the application judge did not err in her assessment that true nature of the Claim was derivative of an intentional tort. Furthermore, the Court of Appeal agreed that the exclusion clause applied, as the Claim arose from an intentional act which caused bodily injury. The Appellant’s appeal was dismissed accordingly.

Practical considerations

Insurers ought to consider the surrounding circumstances of a claim when assessing coverage, as the court has the discretion to determine the true nature of the claim at issue, and is not bound by the four corners of a claimant’s originating pleadings when doing so. The surrounding circumstances and all facts at hand ought to be assessed when determining the basis of a claim when conducting a coverage review.

Should you have any questions or concerns, please do not hesitate to reach out to a member of Miller Thomson’s Insurance Defence group.