Durham District School Board v. Grodesky et al.; ING Insurance Company of Canada, Third Party [Indexed as: Durham District School Board v. Grodesky]
110 O.R. (3d) 76
2012 ONCA 270
Court of Appeal for Ontario,
Sharpe, Blair and Juriansz JJ.A.
April 27, 2012
Insurance -- Insurer's obligation to defend -- Clause in homeowner's policy excluding claims arising from bodily injury or property damage "caused by any intentional or criminal act or failure to act" -- Plaintiff suing defendant and his son for damages caused by son setting fire to school property -- Claim against defendant based on negligent supervision of son -- Exclusion clause not applying -- Words "intentional or criminal" modifying phrase "act or failure to act" -- Only intentional or criminal failure to act excluded -- Negligence claim not derivative of intentional tort claim against son -- Insurer having obligation to defend defendant.
The plaintiff sued the defendant, his wife and his son, claiming that the son set a fire at a high school that caused extensive property damage. The plaintiff alleged that the defendant and his wife negligently failed to provide a curfew for their son, to properly and adequately supervise and discipline him, and to instill in him a respect for private and public property. The defendant advanced a third party claim against his insurer for indemnification under his homeowner's insurance policy. The insurer brought a motion for a determination that it was not obligated to defend the defendant, relying on a clause in the policy which excluded claims arising from bodily injury or property damage "caused by any intentional or criminal act or failure to act". The motion judge found that any failure to act, [page77 ]not just an intentional or criminal one, triggered the exclusionary clause. The motion was granted. The defendant appealed.
Held, the appeal should be allowed.
The words "intentional or criminal" in the exclusion clause modify the phrase "act or failure to act"; only an "act or failure to act" that is intentional or criminal is excluded. The motion judge erred in finding that the plaintiff's negligence claim was excluded. Moreover, while the negligence claim caused the same harm as the intentional tort allegedly committed by the son, it was not derivative of the intentional tort claim and should not be subsumed under it for the purposes of applying the exclusion clause. APPEAL from the decision of Gunsolus J., [2011] O.J. No. 3533, 2011 ONSC 3286, 100 C.C.L.I. (4th) 145 (S.C.J.) that the insurer was not required to defend the defendant.
Cases referred to P. (G.) v. J. (D.), 2000 50975 (ON SC), [2001] O.J. No. 313, [2001] O.T.C. 52, 26 C.C.L.I. (3d) 76, [2001] I.L.R. I-3927, 102 A.C.W.S. (3d) 1152 (S.C.J.), not folld Non-Marine Underwriters, Lloyd's of London v. Scalera, [2000] 1 S.C.R. 551, [2000] S.C.J. No. 26, 2000 SCC 24, 185 D.L.R. (4th) 1, 253 N.R. 1, [2000] 5 W.W.R. 465, J.E. 2000-935, 135 B.C.A.C. 161, 75 B.C.L.R. (3d) 1, 18 C.C.L.I. (3d) 1, 50 C.C.L.T. (2d) 1, [2000] I.L.R. I-3810, 96 A.C.W.S. (3d) 479, apld
William F. Kelly, for appellant Todd James. Derek V. Abreu, for respondent ING Insurance Company of Canada.
The judgment of the court was delivered by
[1] JURIANSZ J.A.: -- This is an appeal from the decision of Gunsolus J. of the Superior Court of Justice, dated May 31, 2011, holding that the respondent, ING Insurance Company of Canada ("ING"), was not required to defend the appellant Todd James for the claims against him brought by the Durham District School Board ("School Board"), and ordering the dismissal of the appellant's third-party action against ING.
(1) Background
[2] The plaintiff, Durham District School Board, has brought a claim naming several defendants, including the appellant, his wife ("Jane Doe") and his son. The School Board claims that the son, Colten Todd Douglas James, set fire to the contents of the Cartwright Central High School's plastic recycling bins, which then spread to the school building, causing extensive property damage. The School Board's claim against the appellant is set out in para. 9.D of the statement of claim as follows: [page78 ]
As to the negligence of the defendants Todd James and "Jane Doe" James:
(a) They failed to provide a curfew for the defendant Colten Todd Douglas James;
(b) They failed to enforce a curfew for the defendant Colten Todd Douglas James;
(c) They failed to properly and adequately supervise the defendant Colten Todd Douglas James when they knew or ought to have known that he had a propensity for getting into mischief;
(d) They failed to properly and adequately supervise the defendant Colten Todd Douglas James when they knew or ought to have known that he had a propensity for setting fires;
(e) They failed to properly and adequately discipline the defendant Colten Todd Douglas James for inappropriate behaviour;
(f) They failed to properly and adequately instill in the defendant Colten Todd Douglas James a respect for private and public property.
[3] The appellant advanced a third party claim against ING for indemnification under his homeowner's comprehensive form insurance policy.
[4] ING brought a motion for determination that it was not obligated to defend the appellant, and that therefore the third party action should be dismissed. In bringing its motion, ING relied on the following exclusion clause in the appellant's homeowner's policy:
We do not insure your claims arising from (6) Bodily injury or property damage caused by any intentional or criminal act or failure to act by: (a) any person insured by this policy; or (b) any other person at the direction of any person insured by this policy. (Emphasis added)
(2) Decision Below
[5] The motion judge interpreted [at para. 3] the School Board's statement of claim to specifically allege that the appellant "failed to act in terms of providing/enforcing a curfew, supervising, disciplining and instilling in [his son] a respect for private and public property" (emphasis in original).
[6] Consequently, he found that the School Board's claim against the appellant fell within the "failure to act" exclusion, and that therefore ING had no duty to defend the appellant.
[7] In reaching this conclusion, he relied on P. (G.) v. J. (D.), 2000 50975 (ON SC), [2001] O.J. No. 313, 26 C.C.L.I. (3d) 76 (S.C.J.), a case interpreting an identical exclusion clause. In P. (G.) v. J. (D.), the defendant was alleged to have been negligent in failing to act to protect a minor from sexual assault. Mossip J. concluded that, under the [page79 ]plain language of the clause, any tortious failure to act (not just an intentional or criminal one) triggers the exclusionary clause. Even though the plaintiff was only alleged to have acted negligently, the fact that a "failure to act" was alleged excluded the claim under the provision, and therefore the insurance company did not have a duty to defend.
(3) Analysis
[8] Can ING refuse to defend the appellant, under the exclusion clause, given the claim made against the appellant?
[9] The exclusion clause can be read in two ways. First, the clause can be read so that the words "intentional or criminal" modify the phrase "act or failure to act". Read in this way, the clause would only exclude an "act or failure to act" that is intentional or criminal. Alternatively, the clause can be read to exclude an intentional or criminal act, and any failure to act. Read in this way, the clause would exclude a failure to act that was merely negligent. The motion judge, following P. (G.) v. J. (D.), adopted the second interpretation of the provision.
[10] The principle that ambiguities in a contract should be resolved against the drafter and that insurance coverage clauses should be construed broadly and exclusions narrowly points to adopting the first interpretation. Moreover, the second interpretation would largely negate insurance coverage because harms resulting from negligence can typically be characterized as a failure to act. This would render the insurance coverage provided by the policy largely useless.
[11] The Supreme Court considered a similar clause in Non- Marine Underwriters, Lloyd's of London v. Scalera, [2000] 1 S.C.R. 551, [2000] S.C.J. No. 26, 2000 SCC 24. In Scalera, the clause excluded claims arising from "bodily injury or property damage caused by any intentional or criminal act or failure to act by . . . any person insured by this document" (para. 59). Iacobucci J., in his concurring reasons, observed that reading the clause to exclude negligent failures to act would lead to absurd consequences because almost any act of negligence could be excluded. He explained his approach to interpreting the clause, at para. 92:
At the outset, the wording of this clause presents a threshold issue. The respondent argues that the clause requires only an intentional act, not an intent to injure. The majority below agreed with this interpretation. However, I agree with Finch J.A.'s dissent on this point. If the respondent were correct, almost any act of negligence could be excluded under this clause. After all, most every act of negligence can be traced back to an "intentional . . . act or failure to act". As this Court made clear in Canadian Indemnity Co. v. Walkem Machinery & Equipment Ltd., 1975 141 (SCC), [1976] 1 S.C.R. 309, "negligence is by far the [page80 ]most frequent source of exceptional liability which [an insured] has to contend with. Therefore, a policy which would not cover liability due to negligence could not properly be called 'comprehensive'" (pp. 316-17). Consistent with this decision, the purpose of insurance, and the doctrines of reasonable expectations and contra proferentem referred to above, I believe the exclusion clause must be read to require that the injuries be intentionally caused, in that they are the product of an intentional tort and not of negligence. (Emphasis added)
[12] At the same time, at para. 84, Iacobucci J. cautioned against relying on the plaintiff's characterization of the claim made against the defendant because "a plaintiff may draft a statement of claim in a way that seeks to turn intention into negligence in order to gain access to an insurer's deep pockets". Whether the plaintiff uses the language of negligence or intentional torts is not the end of the inquiry. The judge must look to the actions taken by the defendant underlying the claim. Further, when there are multiple claims (e.g., when intentional torts and negligence are both alleged), the judge must decide if the negligence claim is merely derivative of the intentional claim or whether the two claims are severable, by examining the actions allegedly taken by the defendant, and deciding whether the claims are related to the same actions.
[13] In this case, the School Board's claim against the appellant for his alleged failures is drafted in terms of negligence. The trial judge described the claim as a "claim in negligence", at para. 16.
[14] Though this negligence claim caused the same harm as the intentional tort allegedly committed by the son, it is not derivative of the intentional tort claim in the sense indicated by Iacobucci J. At para. 85, he remarked that "a claim for negligence will not be derivative if the underlying elements of the negligence and of the intentional tort are sufficiently disparate to render the two claims unrelated". The elements of the intentional tort claim against the son and the negligence claim against the parents are entirely distinct. Therefore, the negligence claim is not derivative of the intentional tort and should not be subsumed under it for the purposes of applying the exclusion clause.
(4) Conclusion
[15] I would conclude that ING has a duty to defend the appellant as the School Board's claim against the appellant is not excluded by the policy.
[16] I would allow the appeal and set aside the judgment below with the appellant's costs fixed in the amount of $3,500, as agreed by counsel.
Appeal allowed.