Godonoaga, a minor by his litigation guardian et al. v. Khatambakhsh et al.; Allstate Insurance Company of Canada, Third Party [Indexed as: Godonoaga (Litigation guardian of) v. Khatambakhsh]
49 O.R. (3d) 22
[2000] O.J. No. 2172
Court of Appeal for Ontario
Finlayson, Labrosse and Goudge JJ.A.
June 12, 2000
Insurance -- Exclusion clauses -- Tenants policy excluding coverage for claims arising from bodily injury "caused intentionally by you or resulting from your criminal acts or omissions" -- Named insureds' sons assaulting child -- Child's mother and child bringing action against sons for damages for assault -- Plaintiffs also suing parents for negligence in failing to instill acceptable values in their sons and failing to supervise them -- Parents and sons separate insureds under policy -- Claim in negligence not falling within exclusion clause in policy -- Fact that pleadings alleged intentional assaults by sons not disentitling parents to coverage -- Insurer obliged to defend insureds.
The infant plaintiff was assaulted after school by a group of students, including one of the defendants. The defendant's mother witnessed the assault and sent her other son to join in beating up the infant plaintiff, who was seriously injured. The infant plaintiff and his mother brought an action against the two boys for damages for assault and battery. They also sued the boys' parents for damages for negligence, pleading that they were negligent in failing to instill reasonably acceptable values in their sons and, alternatively, if they did properly instruct their sons, in failing to supervise them. A tenant's policy issued by the insurer to the parents excluded coverage for "bodily injury caused intentionally by or at your direction or resulting from your criminal acts or omissions". By a third party claim, the parents sought a declaration that they were insured under the tenant's policy in respect of the claim for alleged failure to supervise their children. They also sought an order that the insurer was obliged to defend them in the main action and indemnify them against any judgment in that action. They brought a motion for summary judgment. The motion was dismissed. The parents appealed.
Held, the appeal should be allowed.
The parents were the named insured persons under the policy. Their children qualified under the definition of "insured" as "the relatives of either or any person under 21 in your care". Accordingly, as provided in the definition section of the policy, the phrases "you" and "your" in the coverage section referred to all four members of the family. However, this did not mean that the references to "you" and "your" in the exclusion clause embraced all four of the insured defendants, with the result that if any one of the four was excluded from coverage, all four were excluded. A proper interpretation of the policy was that the parents and the two children were each separately insured to the face value of the policy. The insurer did not have to respond to the claims against the two sons because their separate policies excluded claims arising from bodily injury caused intentionally by them. However, the parents were in a different position under their separate policies. They were sued in negligence, which was not an excluded claim, and the fact that the pleadings alleged intentional assaults by their sons did not disentitle them to coverage.
APPEAL by the defendants from a judgment of Pitt J. ([1999] I.L.R. 1-3733 (S.C.J.)) dismissing a motion for summary judgment.
Bluebird Cabs Ltd. v. Guardian Insurance Co. of Canada (1999), 1999 BCCA 195, 66 B.C.L.R. (3d) 86, 173 D.L.R. (4th) 318, [1999] I.L.R. 1-3688 (B.C.C.A.); Non-Marine Underwriters v. Scalera (2000), 2000 SCC 24, 185 D.L.R. (4th) 1, [2000] S.C.J. No. 26; Sheppard v. Co-operators General Insurance Co. (1997), 1997 2230 (ON CA), 33 O.R. (3d) 362, [1997] I.L.R. 1-3437 (C.A.), consd Other cases referred to Sansalone v. Wawanesa Mutual Insurance Co. (2000), 2000 SCC 25, 74 B.C.L.R. (3d) 21, 185 D.L.R. (4th) 57, [2000] 5 W.W.R. 21, [2000] S.C.J. No. 27 Statutes referred to Family Law Act, R.S.O. 1990, c. F.3, ss. 61-63, Insurance Act, R.S.O. 1990, c. I.8, s. 132 Negligence Act, R.S.O. 1990, c. N.1
Zoran Samac, for appellants, Bijan Khatambakhsh and Fatima Khatambakhsh. Brad G. Hartley, for respondent, Allstate Insurance Company of Canada.
The judgment of the court was delivered by
1FINLAYSON J.A.: -- The appellants Bijan Khatambakhsh and Fatima Khatambakhsh (the "appellants") appeal from the summary judgment of the Honourable Mr. Justice Pitt of the Superior Court of Justice, dated July 8, 1999 [reported [1999] I.L.R. 1-3733], and the respective costs addendum released on September 15, 1999, which collectively ordered as follows:
(a) a declaration that the respondent third party insurer is under no duty to defend the appellants in respect of the claims against them in the main action herein;
(b) that the appellants' motion for summary judgment is dismissed;
(c) that the appellants pay costs associated with the summary judgment motion, up to the beginning of the hearing, on a solicitor-and-client scale, fixed in the amount of $2,450.27, payable within 60 days of the release of the endorsement on costs;
(d) that there be no costs for the remainder of the motion.
2The action as pleaded involves claims for personal injuries. The injuries arose out of alleged assaults committed against the minor plaintiff, Igor Godonoaga ("Igor"). The defendants to the action are the appellants and their minor children, Maher Khatambakhsh ("Maher") and Houman Khatambakhsh ("Houman"). The alleged assaults occurred on April 17, 1998.
3By the third-party claim, the appellants sought a declaration that they are insured under a tenant's policy (the "policy") from the respondent third party, Allstate Insurance Company of Canada ("Allstate"). The appellants argue that this policy insures them in respect of the claim against them for alleged failure to supervise their children, Maher and Houman. They also sought an order that Allstate defend the appellants in the main action and indemnify them against any judgment in the action. Finally, they sought an order that the appellants be permitted to appoint counsel of their choice to represent them in the main action.
4Allstate denied coverage to the appellants on the basis of a clause in the policy. Allstate asserts that the clause excludes coverage for claims arising from bodily injury or property damage caused intentionally by, or at the direction of, the insureds, or resulting from their criminal acts or omissions.
5The facts pleaded by the plaintiffs as they relate to this appeal are that Igor, who emigrated from Russia with his mother, Galina Godonoaga, was enrolled in a school under the jurisdiction of the defendant Toronto Board of Education. From the date of his enrolment, Igor began experiencing problems with a group of Iranian students who constantly teased, bullied, harassed, and, on several occasions, beat him up. He was approximately nine years old at the time.
6One day, on leaving the school building but while still on school property, Igor was set upon by a group of roughly six Iranian students from the school, including the defendant Maher. He was pushed and shoved for approximately 20 minutes. Maher was particularly violent. He kicked and hit Igor several times while shouting obscenities at him.
7Maher's mother, the appellant Fatima, witnessed this scene from the balcony of the appellants' apartment. She sent her other son, the defendant Houman, who was about 15 years old, to join in beating up Igor. Houman attacked Igor with a broken hockey stick that he brought from home for that purpose, and beat him about the head and body. Igor was rendered unconscious and suffered serious injuries.
8Some other children found the unconscious Igor and lifted and dragged him toward his home. The father of Maher and Houman, the appellant Bijan, witnessed this activity, and when the children passed the appellants' apartment he went down to speak to them. He then accompanied Igor and the other children to Igor's home. While at the home, he obstructed members of Igor's family from calling an ambulance by tying up the telephone so that he could speak to his wife Fatima.
9The first plaintiff in the action is Igor, personally, by his mother Galina as litigation guardian. The second plaintiff is Galina as a claimant under Part V of the Family Law Act, R.S.O. 1991, c. F.3 (ss. 61-63). They sue for special, general and exemplary damages against the Toronto Board of Education, the principal of the school in question, the appellants, and the appellants' two children.
10The plaintiffs' action against the appellants' children, Houman and Maher, is for assault and battery. The action against the appellants, Fatima and Bijan, is pleaded as a negligence claim. The claim is that the appellants were negligent in failing to instill in their children reasonably acceptable values and rules for living in society, including respect for the life, person and property of others in the community. Alternatively, if they did properly instruct the children, they failed to supervise, monitor or enforce compliance with these values and rules. It is also alleged that the appellants knew or ought to have known that their children had emotional and psychological disturbances that made them dangerous to other children of the community.
11Further, in that part of the claim that the plaintiff has labelled negligence, there are specific pleadings involving both parents. It is alleged that "Fatima in particular sent Houman to beat up Igor with callous disregard to Igor's health and safety". As for Bijan, it is alleged that he "with callous disregard to Igor's health and safety prevented and delayed the ambulance from being called after it was apparent that Igor required immediate medical assistance".
12The plaintiffs also sue the Toronto Board of Education and the principal of the school, Debbie Smith, for failure to supervise and protect Igor while on school property. The Toronto Board of Education and Smith cross-claim against all the Khatambakhsh family members for contribution and indemnity under the Negligence Act, R.S.O. 1990, c. N.1.
13The relevant terms of the insurance policy provided by Allstate are as follows.
TENANT'S POLICY
SECTION I -- PROPERTY COVERAGES
DEFINITIONS
"You" and "your" mean the person(s) named as Insured on the Declaration page and, while living in the same household, his or her wife or husband, the relatives of either or any person under 21 in their care. . . .
COVERAGES
This insurance applies only to accidents or occurrences which take place during the term of this policy.
The amounts of insurance are shown on the Declaration page. Each person insured is a separate Insured but this does not increase the limit of insurance.
COVERAGE X -- Family Liability
We will pay all sums which you become legally liable to pay as compensatory damages because of Bodily Injury or Property Damage.
The amount of insurance is the maximum amount that we will pay, under one or more Sections of Coverage X, for all compensatory damages in respect of one accident or occurrence.
You are insured for claims made against you arising from:
- Personal Liability -- legal liability arising out of your personal actions anywhere in the world.
Trailers:
LOSS OR DAMAGE NOT INSURED (Applying to Section II)
You are not insured for claims arising from:
(5) Bodily Injury or Property Damage caused intentionally by or at your direction or resulting from your criminal acts or omissions;
Analysis
14The appellants concede that the policy of insurance, by reason of s-s. (5), quoted above, does not cover the plaintiffs' claims against their two sons, Houman and Maher, for bodily injury caused to Igor. They also concede that, if the claim against Fatima was limited to her participation in the assault by directing or inciting Houman to take part in it, she is a party to the assault and is excluded from coverage as well. The action against the appellant parents, however, is pleaded in negligence. Moreover, the action sounds in negligence, certainly to the extent that it relies upon the appellants' failures in the upbringing and discipline of their children, and their failure to recognize their emotional problems.
15The respondent third party, Allstate, does not contest that there is an action against the appellant parents that is properly framed in negligence. Its defence, simply, is that because the assaultive conduct of the two sons is clearly excluded from coverage under the policy, the parents are effectively excluded from coverage as well. All else aside, Allstate asserts that it is not liable for exemplary and punitive damages.
16The appellants are the named insured persons under the policy. Their two children qualify under the definition of "insured" as "the relatives of either or any person under 21 in their care" . Accordingly, as provided for in the definition section of the policy, the phrases "you" and "your" in the coverage section refers to all four members of the Khatambakhsh family who are defendants in this action.
17Allstate asserts that the terms "you" and "your" have the same meaning throughout the policy. Thus, in effect, where the exclusion states that you are not insured against bodily injury or property damage caused intentionally by or at your direction or resulting from your criminal acts or omissions, the references to "you" and "your" embrace all four of the insured defendants. In the result, if any one of the four is excluded from coverage, all four are excluded.
18I do not read the policy this way. It ignores the language in the "Coverages" section: "Each person is a separate Insured but this does not increase the limit of insurance" .
19The declaration page of the policy reads in part:
POLICY COVERAGES AND LIMITS OF LIABILITY LIMITS
Personal Property (Replacement Cost) $ 25,000
Additional Living Expenses $ 5,000
Family Liability Each Occurrence $ 500,000
Voluntary Medical Payments Each Person $ 2,000
Each Accident $ 25,000
20In my view, a proper interpretation of the policy is that the parents and the two children are each separately insured to the face value of the policy. The insurer does not have to respond to the claims against the two sons because their separate policies exclude claims arising from bodily injury caused intentionally by them. However, the parents are in a different position under their separate policies. They are sued in negligence, which is not an excluded claim, and the fact that the pleadings allege intentional assaults by their children does not disentitle them to coverage. Since the claims in negligence against the parents arise out of the same occurrence, the maximum exposure of the insurer is $500,000.
21This approach has been followed in Bluebird Cabs Ltd. v. Guardian Insurance Co. of Canada (1999), 1999 BCCA 195, 173 D.L.R. (4th) 318, 66 B.C.L.R. (3d) 86 (C.A.). Here, the court heard two appeals in which the respective plaintiffs each alleged in their statements of claim that they had been assaulted and injured by drivers employed by the taxi cab company in question. They both sued the company maintaining it was vicariously liable for the assaults. Under the terms of the insurance policy, both the taxi company and the driver were "insured" persons, but the policy excluded coverage for "bodily injury . . . expected or intended from the standpoint of the insured". There was another clause, dealing with "separation of insureds", however, which stipulated that the insurance applied "as if each named insured were the only named insured".
22In his reasons for the court, Lambert J.A. relied on the latter clause to conclude that the taxi company's policy coverage was separate from that of the drivers. He said at p. 324:
We were referred to the condition relating to "Separation of Insureds" which I have quoted. The policy applies separately to each insured. That condition must mean that in this case one must consider the application of the policy to Bluebird Cabs Ltd., the employer, entirely separately from the application of the policy to the two cab drivers.
The result is that one must ask oneself whether the bodily injuries said to have been suffered by the two victims were expected or intended from the standpoint of Bluebird Cabs Ltd. There is no basis in the pleadings or in fact for such a conclusion.
23In Sheppard v. Co-operators General Insurance Co. (1997), 1997 2230 (ON CA), 33 O.R. (3d) 362, [1997] I.L.R. 1-3437 (C.A.), this court was reluctant to expand the use of "you" and "your" beyond the coverage clause of an insurance policy, even without a clause providing for separation of insurance. After an analysis of various clauses in the policy where the two words were used, the court concluded at p. 367:
These inconsistent usages of the words "you" and "your" in the Co-operators policy suggest that it cannot be safely assumed that the word "your" in the coverage clause has its defined, extended meaning wherever it appears.
24In any event, it is self-evident that if there is any ambiguity in the policy before this court, it must be resolved in favour of the insured. As this court stated in Sheppard, supra, at p. 368:
Exclusion clauses are construed narrowly: Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., 1993 150 (SCC), [1993] 1 S.C.R. 252 at p. 269, 99 D.L.R. (4th) 741. They must use language that clearly expresses the extent and scope of the exceptions and limitations imposed and, in so far as they fail to do so, the language of the coverage clause obtains: [authorities not copied]. The language of this exclusion clause does not clearly express the extent and scope of the exception and limitation for which Co-operators contends.
25I feel obliged to comment on two decisions of the Supreme Court of Canada that were delivered after this appeal was argued. They are Non-Marine Underwriters, Lloyd's of London v. Scalera, delivered May 3, 2000, 2000 SCC 24, [2000] S.C.J. No. 26, 185 D.L.R. (4th) 1; and Sansalone v. Wawanesa Mutual Insurance Co., delivered May 3, 2000, 2000 SCC 25, [2000] S.C.J. NO. 27, 185 D.L.R. (4th) 57. Both stand for the proposition that the respondent insurer had no duty to defend the appellant because the plaintiff's statement of claim made no allegation that could potentially give rise to indemnity under the insurance contract. [See Note 1 at end of document]
26The lead judgment is Scalera. In that case, the underlying action was brought against five B.C. Transit bus drivers, including the appellant Vincent Scalera, by a young woman alleging various sexual assaults between 1988 and 1992. The liability insurance policy owned by Scalera was at issue in the appeal. The allegations of sexual assault were very detailed and claimed damages for sexual assault, sexual exploitation, intentional infliction of nervous shock, misrepresentations, negligence, breaches of duty, and breaches of fiduciary duty. No facts whatsoever were pleaded in support of the allegation of negligence.
27The court was divided on the issue of whether the plaintiff or the defendant bore the burden of proof in terms of the issue of consent to sexual activity. The court was unanimous, however, on the issue that concerns us here. In his analysis, Iacobucci J., at paras. 50-52 and 54, stated:
Determining whether or not a given claim could trigger indemnity is a three-step process. First, a court should determine which of the plaintiff's legal allegations are properly pleaded. In doing so, courts are not bound by the legal labels chosen by the plaintiff. A plaintiff cannot change an intentional tort into a negligent one simply by choice of words, or vice versa. Therefore, when ascertaining the scope of the duty to defend, a court must look beyond the choice of labels, and examine the substance of the allegations contained in the pleadings. This does not involve deciding whether the claims have any merit; all a court must do is decide, based on the pleadings, the true nature of the claims.
At the second stage, having determined what claims are properly pleaded, the court should determine if any claims are entirely 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 the alleged negligence is based on the same harm as the intentional tort, it will not allow the insured to avoid the exclusion clause for intentionally caused injuries.
Finally, at the third stage the court must decide whether any of the properly pleaded, non-derivative claims could potentially trigger the insurer's duty to defend. In this appeal. I conclude that the respondent has no duty to defend. The plaintiff has alleged three basic claims against the appellant: sexual battery, negligence, and breach of fiduciary duty.
The claims for negligence and breach of fiduciary duty fail to trigger the duty to defend not because they could not fall within coverage, but because they are either not properly pleaded, or derivative of the claim for sexual battery. As a result, they are also covered by the exclusion for injuries intentionally caused.
28On Iacobucci J.'s analysis, as applied to the case at hand, one might argue that Allstate's duty to defend the appellant parents on the plaintiff's negligence claim has not been triggered because the alleged negligence is arguably "based on the same harm" as the intentional assault committed by the appellant's children. This argument would fail on the facts in this appeal which are clearly distinguishable from Scalera. This is not a case where the plaintiff has attempted to "dress" the assaults of Houman and Maher in the guise of a negligence suit. On the contrary, the allegations of negligence constitute a separate tort and are directed against different parties. The alleged perpetrators of the assault do not claim they are entitled to a defence under the policy. The facts that support the negligence claim depend upon the fact of the assault only to the extent that it is a consequence of the negligence. Thus, this is not an attempt to represent an intentional tort as a negligent one.
29In these circumstances, the appellant parents are entitled to call upon Allstate for indemnity for any liability they should incur for compensatory damages arising from this claim. The insurer must also defend the action on their behalf, including the cross-claim by the Board of Education and the principal of the school.
30Referring back to Scalera, I am concerned with the language in para. 51: "If the alleged negligence is based on the same harm as the intentional tort, it will not allow the insured to avoid the exclusion clause for intentionally caused injuries". There is also the statement in para. 54 that the duty to defend is not triggered because the claims are "derivative of the claim for sexual battery".
31It seems to me that these statements must be confined to the facts of Scalera. The facts pleaded in Scalera give rise to a cause of action against a single insured defendant based on sexual assault only. To place the case in context, it would be interesting if the plaintiff in Scalera had brought an action against B.C. Transit and raised certain issues in tort. Would B.C. Transit's insurer be obliged to respond to a claim that the transit authority was vicariously liable for the tortious acts of Scalera? Would it be obliged to respond to a claim that B.C. Transit was negligent in failing to screen Scalera before employing him, or in failing to properly supervise and control him during the course of his employment? Put another way, if the plaintiffs in the action in appeal had sued only the parents of the two Khatambakhsh boys for negligence in their upbringing and supervision of the two boys, would there be any issue before the court at all?
32I do not read Scalera as stating that different tort actions cannot arise out of the same occurrence. Rather, I read it to mean only that a given plaintiff cannot convert an assault and battery into an action in negligence solely to ensure that the defendant's insurer will provide the necessary "deep pocket" to make a judgment recoverable.
33The use of the term "derivative" in Scalera is problematic. In the case at hand, the plaintiff Galina is bringing an action under Part V of the Family Law Act to recover loss resulting from non-fatal injuries to her son. The statute authorizes her claim for damages arising out of her son's injuries that were caused by the "fault or neglect" of a third party, namely the parents of the children who assaulted him. It is accepted that the wrong complained of must involve tortious conduct. It is also accepted that this is a derivative action in the sense that no action can be brought unless the injured person would be entitled to maintain an action on the facts of the incident. Accordingly, I do not take the word "derivative" in Scalera to have been used in any technical sense relating to pleadings. The action by Galina against the Khatambakhsh parents in negligence is derivative in the sense that she does not have a cause of action in circumstances where her son would not have one. However, it does not follow that the Khatambakhsh parents would not have a defence to the action against them simply because their sons may not have one. In this case, the sons could readily be held liable for assault and the action in negligence against their parents dismissed. In this sense the liability of the parents is not derivative of the claims against their sons and can not constitute a reason for denying them coverage and a defence.
34The third party insurer, Allstate, has argued this case as if it was restricted to a dispute between insurer and insured as to its duty to defend the appellants under the policy. However, looking ahead to the obligation to indemnify, if it should arise, it is apparent that the plaintiffs have an interest as well. Under s. 132 of the Insurance Act, R.S.O. 1990, c. I.8, where a person has incurred a liability for injury or damage to the person of another, is insured against such liability and fails to satisfy a judgment awarding damages against the person in respect of his or her liability, "the person entitled to the damages may recover by action against the insurer the amount of the judgment up to the face value of the policy, but subject to the same equities as the insurer would have if the judgment had been satisfied" (emphasis added). I cannot accept the proposition that Igor's mother would be disentitled from recovering a judgment in negligence against the parents of the boys who injured her son because her claim is derivative of her son's claim against the boys themselves.
35In the case in appeal, it is my opinion that the third party is obliged to defend the appellants in respect of the negligence claim against them. The appellants also ask for an order that they be entitled to select their own counsel to represent them in the action, but at the third party's expense. I do not think the latter order is necessary. There was an arguable point as to insurability in this case and I do not believe there is reason to be concerned that counsel chosen by the third party will not represent the appellants appropriately.
36I would repeat, however, my response to a remark made by Allstate's counsel in appeal. The comment was that if the third party has a duty to defend the appellants on the claim for negligence, counsel cannot ignore what took place in the schoolyard. Counsel's obligation in defending the negligence suit and the claim over by the co-defendants is to mitigate and minimize the circumstances that form the underpinning of the negligence suit, namely the assault by Houman and Maher on Igor.
Disposition
37For the reasons given, I would allow the appeal, set aside the judgment of Pitt J. and grant a declaration that the appellants are insured with the third party, Allstate, under Tenants Policy No. 1 46 43564 in respect of the plaintiffs' claims against them in the main action. Further, the appellants are indemnified against any judgment, costs and interest covered by the said policy. It follows that Allstate is obliged to defend the appellants in the main action and the cross-claim by the co-defendants. The appellants are entitled to their costs, here and below.
Appeal allowed.
Notes
Note 1: Counsel were invited to submit in writing their analysis of the effect if any of these cases on the one in appeal. Both responded and their submissions have been considered.
