Kinkade v. 947014 Ontario Inc., c.o.b. as The Silver Dollar, et al.; Omega General Insurance Company, Third Party
[Indexed as: Kinkade v. 947014 Ontario Inc.] 2014 ONSC 1599
Ontario Reports
Ontario Superior Court of Justice,
Toscano Roccamo J.
March 20, 2014
119 O.R. (3d) 536 | 2014 ONSC 1599
Case Summary
Insurance — Insurer's duty to defend — Employee of insured allegedly injuring plaintiff by negligently discharging firearm on insured's premises — Plaintiff suing insured as occupier under Occupier's Liability Act and based on his vicarious liability as employer for employee's negligence — Insured's liability insurance policy excluding claims for bodily injury arising out of use of gun — Exclusion clause not clear and unambiguous — Insurer failing to demonstrate that all claims made against insured were clearly excluded — Insurer having duty to defend action — Occupier's Liability Act, R.S.O. 1990, c. O.2.
The plaintiff was allegedly injured in a bar operated by the defendant 947 when the defendant G, an employee of 947, negligently discharged a firearm after the plaintiff became involved in a scuffle. The plaintiff sued G for negligence. [page537]
He sued 947 based upon its vicarious liability as an employer for G's negligent acts, and also as an occupier under the Occupier's Liability Act for its failure to take steps to ensure the safety of patrons. Relying on an exclusion clause in 947's liability insurance policy for claims for bodily injury arising out of the ownership or use of a gun, 947's insurer refused to defend the action or to indemnify it. 947 brought a motion to determine whether the insurer had a duty to defend it.
Held, the motion should be granted.
The insurer had failed to meet its onus to demonstrate that all of the claims made against 947 were clearly excluded. The claims in negligence and under the Occupier's Liability Act did not derive from the same conduct and the same loss excluded by the policy. The plaintiff had alleged that 947 was liable under the Act for failing to take reasonable steps to ensure the safety of patrons, by hiring incompetent staff, failing to warn the plaintiff and failing to call emergency services when the scuffle began. Those circumstances, with the exception of failure to contact emergency services, were distinct from, and long preceded, the use or ownership of a gun. The plaintiff had also alleged potentially different harms arising from the incident, in that he alleged that he suffered mental distress as a result of the scuffle, as distinct from the subsequent accidental discharge of the gun. Moreover, the exclusion clause was not clear and unambiguous. It denied coverage for bodily injury arising from the ownership or use of a gun, but failed to specify whose ownership or use of the gun, or the extent or limit of the excluded coverage. One possible interpretation of the clause was that coverage was only excluded for G and any related finding of vicarious liability on the part of 947 for G's acts.
Durham District School Board v. Grodesky (2012), 110 O.R. (3d) 76, [2012] O.J. No. 1829, 2012 ONCA 270, 290 O.A.C. 329, [2012] I.L.R. I-5312, 11 C.C.L.I. (5th) 171, 351 D.L.R. (4th) 566, 214 A.C.W.S. (3d) 953; 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
American Best Food, Inc. v. Alea London, Ltd., 168 Wn.2d 398, 229 P.3d 693 (2010); Capital Specialty Insurance Corp. v. JBC Entertainment Holdings, Inc., 172 Wn. App. 328, 289 P.3d 735 (2012); McAllister v. Agora Syndicate, Inc., 103 Wn. App. 106, 11 P.3d 859 (2000), consd
Other cases referred to
Derksen v. 539938 Ontario Ltd., [2001] 3 S.C.R. 398, [2001] S.C.J. No. 27, 2001 SCC 72, 205 D.L.R. (4th) 1, 277 N.R. 82, 273 N.R. 356, 150 O.A.C. 1, 153 O.A.C. 310, 33 C.C.L.I. (3d) 1, [2002] I.L.R. I-4029, 15 M.V.R. (4th) 1, REJB 2001-26225, J.E. 2001-1941, 108 A.C.W.S. (3d) 893; Djepic v. Kuburovic (2006), 2006 578 (ON CA), 80 O.R. (3d) 21, [2006] O.J. No. 97, 263 D.L.R. (4th) 709, 206 O.A.C. 306, 32 C.C.L.I. (4th) 17, [2006] I.L.R. I-4473, 34 M.V.R. (5th) 1, 145 A.C.W.S. (3d) 148 (C.A.); Godonoaga (Litigation guardian of) v. Khatambakhsh (2000), 2000 5737 (ON CA), 49 O.R. (3d) 22, [2000] O.J. No. 2172, 188 D.L.R. (4th) 706, 132 O.A.C. 391, 20 C.C.L.I. (3d) 262, 2 C.C.L.T. (3d) 1, [2000] I.L.R. I-3864, 97 A.C.W.S. (3d) 526 (C.A.); Harris v. GlaxoSmithKline Inc. (2010), 101 O.R. (3d) 665, [2010] O.J. No. 1710, 2010 ONSC 2326 (S.C.J.); Monenco Ltd. v. Commonwealth Insurance Co., [2001] 2 S.C.R. 699, [2001] S.C.J. No. 50, 2001 SCC 49, 204 D.L.R. (4th) 14, 274 N.R. 84, [2002] 2 W.W.R. 438, J.E. 2001-1712, 155 B.C.A.C. 161, 97 B.C.L.R. (3d) 191, 32 C.C.L.I. (3d) 165, [2001] I.L.R. I-3993, 108 A.C.W.S. (3d) 159; Nichols v. American Home Assurance Co., 1990 144 (SCC), [1990] 1 S.C.R. 801, [1990] S.C.J. No. 33, 68 D.L.R. (4th) 321, 107 N.R. 321, J.E. 90-643, 39 O.A.C. 63, 45 C.C.L.I. 153, [1990] I.L.R. Â1-2583 at 10058, 20 A.C.W.S. (3d) 699; [page538] PCL Constructors Canada v. Lumbermens Casualty Co. Kemper Canada, 2009 32915 (ON SC), [2009] O.J. No. 2664, 76 C.C.L.I. (4th) 259, [2009] I.L.R. I-4860, 81 C.L.R. (3d) 186, 178 A.C.W.S. (3d) 438 (S.C.J.); Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, [2010] 2 S.C.R. 245, [2010] S.C.J. No. 33, 2010 SCC 33, 293 B.C.A.C. 1, [2010] I.L.R. I-5051, 406 N.R. 182, 323 D.L.R. (4th) 513, 9 B.C.L.R. (5th) 1, EYB 2010-179515, 93 C.L.R. (3d) 1, 2010EXP-3049, J.E. 2010-1683, [2010] 10 W.W.R. 573, 73 B.L.R. (4th) 163, 89 C.C.L.I. (4th) 161; Snaak (Litigation guardian of) v. Dominion of Canada General Insurance Co. (2002), 2002 44897 (ON CA), 61 O.R. (3d) 230, [2002] O.J. No. 1438, 158 O.A.C. 72, 40 C.C.L.I. (3d) 12, [2002] I.L.R. I-4088, 115 A.C.W.S. (3d) 875 (C.A.); Tedford v. TD Insurance Meloche Monnex (2012), 112 O.R. (3d) 144, [2012] O.J. No. 2821, 2012 ONCA 429, 292 O.A.C. 374, 9 C.C.L.I. (5th) 15, [2012] I.L.R. I-5302, 351 D.L.R. (4th) 239, 216 A.C.W.S. (3d) 227; Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 2003 9923 (ON CA), 68 O.R. (3d) 457, [2003] O.J. No. 4656, 234 D.L.R. (4th) 367, 41 B.L.R. (3d) 1, [2004] I.L.R. I-4258, 127 A.C.W.S. (3d) 235 (C.A.)
Statutes referred to
Occupier's Liability Act, R.S.O. 1990, c. O.2
Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 20, 21, 21.01(1)(a), (b), (2)
MOTION to determine whether an insurer had a duty to defend an action.
Paul H. Auerbach, for plaintiff.
Pasquale Santini and Sean Van Helden, for defendant.
Elizabeth Ackman, for third party.
TOSCANO ROCCAMO J.: —
Overview
[1] The plaintiff, Johnathan Kinkade (the "plaintiff"), claims damages for personal injuries he sustained in October 2010, while a patron at the premises operated by the defendant 947014 Ontario Inc., carrying on business as the Silver Dollar ("Silver Dollar"), an adult entertainment facility in Ottawa.
[2] The plaintiff has alleged that he became involved in a scuffle just as he was leaving the Silver Dollar and that, following the scuffle, he was shot in the leg with a firearm by an employee of the Silver Dollar, the defendant Timothy Gray ("Gray").
[3] The essence of the plaintiff's claim against Gray is for bodily injury arising from Gray's negligent discharge of a firearm. The claim against the Silver Dollar is based upon its vicarious liability as an employer for the negligent acts of Gray. In addition, the plaintiff pleads and relies upon a statutory cause of action under the Occupier's Liability Act, R.S.O. 1990, c. O.2 for the failure of the Silver Dollar as an "occupier" to take steps to ensure the safety of patrons, including the plaintiff, while on its premises. [page539]
[4] The Silver Dollar asserts that the majority of the plaintiff's claims against it are covered by a comprehensive general liability policy ("CGL") issued by the Omega General Insurance Company ("Omega") to the Silver Dollar, for the period between June 29, 2010 and June 29, 2011. As such, Omega has a duty to defend the action against the Silver Dollar.
[5] Omega takes the position that the plaintiff's claims are not covered by the policy as it expressly excludes claims for bodily injury arising out of the use of a gun and, as such, Omega has no duty to defend or indemnify the Silver Dollar in these proceedings.
[6] The Silver Dollar has commenced a third party claim to compel Omega to defend the claims against it and for indemnity in the event that it is found liable in whole or in part to the plaintiff.
The Issues
[7] The Silver Dollar brings a motion under rule 21.01(1)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for a determination of the following issues:
(1) whether Omega has a duty to defend with respect to the claims advanced by the plaintiff in these proceedings; and
(2) whether the Silver Dollar has the right, in all of the circumstances, to control its defence by choosing and instructing counsel of its choice in the defence of the action.
[8] Omega similarly moves under rule 21.01(1)(a) for a determination of the first issue, and for an order under rule 21.01(1)(b) striking the third party claim on the grounds that it discloses no reasonable cause of action.
[9] In the course of argument, counsel agreed that in the event that the coverage question is determined in favour of the Silver Dollar, there would be no need to pursue the third party claim, and that the second question posed by the motion brought by the Silver Dollar would be resolved by an order of the kind made by Thorburn J. in PCL Constructors Canada v. Lumbermens Casualty Co. Kemper Canada, 2009 32915 (ON SC), [2009] O.J. No. 2664, 81 C.L.R. (3d) 186 (S.C.J.), at paras. 93 and 94, where the insurer was directed to appoint separate counsel for the defence and coverage issues with the following conditions:
(a) the insurer was to assign the claim to claims staff who had no previous involvement in the matter;
(b) defence counsel must not have acted for either party in the past five years; [page540]
(c) there could be no discussions about the case between defence counsel and coverage counsel;
(d) defence counsel was to provide identical concurrent reporting to both the insurer and the insured.
[10] Having agreed to resolve the second issue raised by the Silver Dollar's motion, the motion proceeded only on the question of Omega's duty, if any, to defend the action brought against the Silver Dollar.
The Background Facts
[11] Under rule 21.01(2), where, as in the case before me, a motion proceeds without leave to admit evidence or without the consent of the parties to admit evidence, the court must be guided by the allegations made in the pleadings and by documents specifically referred to in the pleadings: Harris v. GlaxoSmithKline Inc. (2010), 101 O.R. (3d) 665, [2010] O.J. No. 1710, 2010 ONSC 2326 (S.C.J.).
The Pleadings
The claim as against Gray
[12] The claim as pleaded against Gray asserts that, at all material times he was employed by the Silver Dollar as a member of its security and/or cleaning staff, when on October 24, 2010, as the plaintiff and his party were leaving the premises, a scuffle broke out involving one or more members of the plaintiff's party. As the plaintiff went to assist a member of his party, Gray is alleged to have brandished a handgun and shot the plaintiff in the right leg without warning, cause or provocation. As a result, it is alleged that the plaintiff suffered permanent and serious injuries. Gray is alleged to have been charged and convicted of one or more criminal offences arising from the shooting: paras. 4, 6, 7 and 8 of the statement of claim.
[13] The claim as pleaded against Gray asserts that he negligently and/or recklessly discharged the gun injuring the plaintiff.
[14] Paragraph 9 of the statement of claim lists the particulars of the claim against Gray, as follows:
AS TO THE NEGLIGENCE AND/OR BREACH OF DUTY OF GRAY:
(a) He accidently discharged a handgun in a crowded area;
(b) He was reckless as to the safety of those around him;
(c) He failed to warn the plaintiff before firing the handgun; [page541]
(d) He brought a handgun to his place of employment when he knew or ought to have known that doing so would place patrons of the Silver Dollar at risk of injury;
(e) He failed to call the police or other emergency services when the scuffle broke out;
(f) He failed to take sufficient or any steps to ensure that the handgun was not discharged accidently;
(g) He was intoxicated by alcohol or drugs;
(h) He did not have proper training for possession or use of a handgun; and/or
(i) In the alternative, he intentionally fired a warning shot but did so negligently and, in particular, in the direction of the Plaintiff.
The claim as against the Silver Dollar
[15] In the statement of claim, at para. 9, the plaintiff also pleads as against the Silver Dollar as follows:
AS TO THE NEGLIGENCE AND/OR BREACH OF DUTY OF THE SILVER DOLLAR, ITS EMPLOYEES AND AGENTS FOR WHOSE NEGLIGENCE IT IS RESPONSIBLE IN LAW:
(j) They failed to properly or effectively screen Gray's background for a record of offences, particularly weapons offences, before hiring him;
(k) They failed to train or supervise Gray properly or at all;
(l) They failed to train or supervise their security staff, generally;
(m) They hired inadequate or incompetent employees or contractors, and/or failed to train or supervise such employees or contractors properly or at all in relation to proper security practices and protocols;
(n) They failed to call emergency services when the scuffle began;
(o) They asked or encouraged Gray to intervene when they knew or ought to have known that he lacked reasonable self-control, had a propensity for violence and/or was or might have been in possession of a firearm;
(p) They failed to take reasonable steps to ensure the safety of their patrons, including the Plaintiff;
(q) They knew of the danger posed by Gray and nevertheless failed to warn the Plaintiff;
(r) They tacitly or expressly endorsed Gray to bring handgun onto the premises; and/or,
(s) They knew or ought to have known that Gray illegally possessed a handgun and failed to call the police.
[16] In addition to a cause of action in negligence, at para. 10 of the statement of claim, the plaintiff pleads and relies on the Occupier's Liability Act.
[17] Gray has not defended the claim and has been noted in default. [page542]
The statement of defence of the Silver Dollar
[18] At paras. 8, 10 and 16 of its statement of defence, the Silver Dollar pleads that Gray was employed at the Silver Dollar as a short-order cook at the relevant times and was never employed in any other capacity by the Silver Dollar. It is further pleaded that, as a cook, he had no interactions with the patrons, only other staff.
[19] At paras. 15, 16, 17, 19 and 20 of the statement of defence, the Silver Dollar pleads that Gray was off-duty at the time of the scuffle and acting on his own volition. He was neither asked nor encouraged to intervene in the scuffle. Finally, the Silver Dollar denies that any of its employees possessed a firearm and, if they did, it was not stored on the premises. The Silver Dollar denies that it knew Gray possessed a firearm and claims that it had no reason to believe or suspect that Gray would have some propensity to use it.
[20] The statement of defence pleads, in the alternative, at para. 18, that Gray was acting in defence of third parties and used reasonable force to prevent a greater injury which he was in law allowed to do.
[21] The statement of defence as pleaded distinguishes the claim founded on vicarious liability as Gray's employer from the claim of liability that arises from its duty as occupier of the premises.
The Policy Provisions
[22] The relevant provisions of the Omega insurance policy read as follows:
The Insuring Agreement
Coverage A under the Policy insures The Silver Dollar for liability arising out of bodily injury and/or property damage. Particularly, Section 1 of Coverage A. provides:
We [Omega] will pay those sums that the Insured [Silver Dollar] becomes obligated to pay as "compensatory damages" because of "bodily injury" . . . to which this insurance applies. We [Omega] will have the right and duty to defend the Insured against any "action" seeking those "compensatory damages". However, we [Omega] will have no duty to defend the Insured against any "action' seeking "compensatory damages for "bodily injury" . . . to which this insurance does not apply.
In order to qualify for coverage, Section 1(b) of the Policy stipulates that the property damage or bodily injury must have been caused by an "occurrence", defined in the Policy as "an accident". Further, Section 1(b) requires that the alleged bodily injury or property damage must occur within the Policy Period. [page543]
[23] Section 2 of Coverage A contains a series of exclusion clauses, which limit the circumstances under which Omega would cover liability for injury or property damage. Most importantly for the purpose of the herein motion, s. 2(b)(4) (the "exclusion clause") provides:
- Exclusions
This Insurance does not apply to:
b. "Bodily Injury" . . . arising out of the ownership or use of:
(4) Guns, rifles, pistols, tasers, knives or other weapons.
Position of the Parties
[24] The parties agree that, when determining whether a claim triggers coverage, the court must begin with the presumption that the facts alleged in the pleadings are true: Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, [2010] 2 S.C.R. 245, [2010] S.C.J. No. 33, 2010 SCC 33, at para. 19.
[25] As such, there is no contest that the plaintiff suffered a bodily injury arising out of an occurrence during the policy period; therefore, the Silver Dollar meets the onus upon it to establish that the claim falls within the initial grant of coverage under s. 1 of Coverage A of the policy: Progressive Homes, at paras. 29 and 51.
[26] Further, the parties agree that where, as in these proceedings, the insured establishes the facts as alleged fall within coverage, the onus rests upon the insurer to show that coverage is precluded by an exclusion clause: Progressive Homes, at para. 51.
Omega
[27] To satisfy the onus on a motion under rule 21.01(1)(a), Omega concedes that the court must be satisfied that it is "plain and obvious" that the allegations pleaded are incapable of supporting a cause of action and that the claim cannot succeed: Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 2003 9923 (ON CA), 68 O.R. (3d) 457, [2003] O.J. No. 4656 (C.A.), at paras. 35-37.
[28] The parties recite the same principles of liability insurance governing the construction of coverage under the policy, as set out in the leading case law. They nonetheless disagree on the application of the exclusion at s. 2(b)(4) of the policy.
[29] Omega argues that the claim is nothing more than a bodily injury action arising from ownership or use of a gun. Further, as a legal construct, a corporation may only act through its agents and the plaintiff has alleged that Gray was employed by the Silver Dollar, and that the Silver Dollar is in law responsible for Gray's negligence at all material times. Even if it is pleaded [page544] that Gray acted outside of his authority at the material times, Omega argues that any allegations with respect to pre-injury conduct, including failure on the part of the Silver Dollar to screen against Gray's propensity for violence, supervise or train him, are subsumed by the fact that the proximate cause of bodily injuries to the plaintiff was the discharge of the handgun, an occurrence expressly excluded by the clear and unambiguous wording of s. 2(b)(4) of the policy. Finally, Omega argues that it makes commercial sense, and falls within the reasonable expectations of the parties under the circumstances, to exclude coverage for gun violence at a commercial establishment.
Silver Dollar
[30] By contrast, Silver Dollar takes the position that, although the claims related to the use or operation of the gun, only paras. 9(r) and 9(s) and potentially (j) and (o) of the pleadings relate to the operation of the gun. The insurer would not be relieved of its obligation to indemnify Silver Dollar vis-à-vis the remaining six out of ten allegations of negligence which are unrelated to the use or ownership of a gun. These remaining allegations arise by reason of the duty owed as an occupier of the premises to ensure the safety of its patrons. The Silver Dollar asserts the exclusion clause Omega relies on does not apply to exclude all coverage to the Silver Dollar as occupier because its employees, including Gray, are separate insureds under the policy.
[31] The policy wording in the exclusion is capable of two reasonable interpretations. On the one hand, it could be read to mean that an excluded act by one insurer would vitiate coverage for all insureds even if they did not commit the excluded conduct, or, on the other hand, the policy provides coverage to many and coverage would be denied to only those who commit the excluded act. As such, the exclusion in this policy is ambiguous and must be construed against Omega.
[32] Finally, the Silver Dollar argues that it can be argued that, but for the alleged failure of the Silver Dollar as occupier of the premises to adopt protocol to ensure the safety of its patrons and its premises, by virtue of measures that should have been taken well before the events causing injury to the plaintiff, it caused or contributed to the injuries. As the insuring agreement affords coverage at s. 1 of Coverage A for loss arising out of bodily injury and/or property damage at the insured premises, Omega would have collected a premium for the risk and it would be within the reasonable expectations of the parties that the insurer fund its defence. [page545]
Legal Analysis and Conclusions
[33] The law on the duty to defend is well established. In Tedford v. TD Insurance Meloche Monnex (2012), 112 O.R. (3d) 144, [2012] O.J. No. 2821, 2012 ONCA 429, at para. 14, Hoy J.A. set out a useful summary of the principles that emerge from the case law governing the duty to defend.
The insurer has a duty to defend if the pleadings filed against the insured allege facts which, if true, would require the insurer to indemnify the insured;
If there is any possibility that the claim falls within the liability coverage, the insurer must defend;
The court must look beyond the labels used by the plaintiff to ascertain the "substance" and "true nature" of the claims. It must determine whether the factual allegations, if true, could possibly support the plaintiff's legal claims;
The court should determine if any claims plead are entirely "derivative" in nature, within the meaning of that term as set out in Scalera. A derivative claim will not trigger a duty to defend.
If the pleadings are not sufficiently precise to determine whether the claims would be covered by the policy, "the insurer's obligation to defend will be triggered where, on a reasonable reading of the pleadings, a claim within coverage can be inferred";
In determining whether the policy would cover the claim, the usual principles governing the construction of insurance contracts apply, namely: the contra proferentem rule and the principle that coverage clauses should be construed broadly and exclusion clauses narrowly: Monenco, at para. 31; Scalera, at para. 70. As well, the desirability, where the policy is ambiguous, of giving effect to the reasonable expectations of the parties;
Extrinsic evidence that has been explicitly referred to in the pleadings may be considered to determine the substance and true nature of the allegations.
[Citations omitted]
(Monenco Ltd. v. Commonwealth Insurance Co., [2001] 2 S.C.R. 699, [2001] S.C.J. No. 50, 2001 SCC 49, at paras. 28, 31, 34-36; Nichols v. American Home Assurance Co., 1990 144 (SCC), [1990] 1 S.C.R. 801, [1990] S.C.J. No. 33, at p. 810 S.C.R.; and Non-Marine Underwriters, Lloyd's of London v. Scalera, [2000] 1 S.C.R. 551, [2000] S.C.J. No. 26, 2000 SCC 24, at paras. 70, 71, 79 ("Scalera"); as cited in Tedford, supra, at para. 14. Book of authorities of Silver Dollar, Tab 2.)
[34] In Scalera, at paras. 50-52, Iacobucci J. directed that a three-part process be undertaken to determine whether a claim could trigger indemnity, and therefore, a duty to defend under the policy: [page546]
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.
[35] In Scalera, the Supreme Court of Canada concluded that a claim for sexual battery rested on a non-consensual and intentional touching of the plaintiff. In order to survive the reaches of an exclusion clause, concurrent claims of negligent battery, negligent misrepresentation and breach of fiduciary duty were examined to determine whether they arose from the same actions and whether they caused the same harm. At paras. 128, 130 and 132 of Scalera, the court found that negligent battery was not properly pleaded, as the parties had proceeded on the basis that the wrongdoer intended to have sexual contact with the plaintiff. Insofar as the claims for negligent misrepresentation and breach of fiduciary duty were concerned, without determining whether the claims were properly pleaded, it was found that these claims were entirely subservient to a sexual battery as the conduct underlying the claims served only to seduce the plaintiff and convince her to engage in sexual activity with the wrongdoer.
[36] In the proceedings before me, I find the claims as pleaded in negligence as against Gray and as against the Silver Dollar, as well as the claim against the Silver Dollar under the Occupier's Liability Act are sufficiently pleaded. Therefore, the first stage of the analytical framework proposed in Scalera raises no concerns when applied to this case. The challenge to coverage mounted by Omega arises at the second and third stages of the analysis proposed by Scalera, in that the insurer maintains that the claims in negligence and under the Occupier's Liability Act [page547] against the Silver Dollar derive from the same conduct and the same loss excluded by the policy: bodily injury arising from the ownership or use of a gun by Gray.
Are the claims against the Silver Dollar derivative or sufficiently diverse claims?
[37] At para. 85 of Scalera, Iacobucci J. laid out the reasoning which must be employed at the second and third stages of analysis of the claims set out in the pleadings.
Having construed the pleadings, there may be properly pleaded allegations of both intentional and nonintentional tort. When faced with this situation, a court construing an insurer's duty to defend must decide whether the harm allegedly inflicted by the negligent conduct is derivative of that caused by the intentional conduct. In this context, 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. If both the negligence and intentional tort claims arise from the same actions and cause the same harm, the negligence claim is derivative, and it will be subsumed into the intentional tort for the purposes of the exclusion clause analysis. If, on the other hand, neither claim is derivative, the claim of negligence will survive and the duty to defend will apply[.]
[38] In Durham District School Board v. Grodesky (2012), 110 O.R. (3d) 76, [2012] O.J. No. 1829, 2012 ONCA 270, the Court of Appeal considered a claim in which the plaintiff alleged that the defendant and his wife failed to supervise and discipline their son, who subsequently started a fire at a high school that caused extensive damage. While the insurer argued, as Omega does here, that it was not obliged to defend the claim based on wording in a homeowner's policy which excluded claims for bodily injury and property damage "caused by an intentional or criminal act or failure to act", the court allowed an appeal from the finding of the motion judge. The Court of Appeal found that the parent's failure to act triggered the exclusion clause and, at para. 14, held that:
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.
[39] I find the same reasoning should apply to these proceedings. The plaintiff has alleged that the Silver Dollar bears liability under the Occupier's Liability Act for failure to take reasonable steps to ensure the safety of patrons, by the hiring of [page548] incompetent staff, the failure to warn the plaintiff and the failure to call emergency services when the scuffle began. These circumstances, with the exception of failure to contact emergency services when the scuffle first arose, are distinct from, and long precede, the use or ownership of a handgun. The plaintiff has also alleged potentially different harms arising from the incident, in that the plaintiff alleges that he suffered mental distress as a result of the attack, particularly the scuffle involving the plaintiff's participation, as distinct from the subsequent accidental discharge of the gun. In short, the insurer has failed to meet its onus to demonstrate that all of the claims made against the insured are clearly excluded: Scalera, at paras. 73-90.
Is the exclusion clause clear and unambiguous?
[40] In Derksen v. 539938 Ontario Ltd., [2001] 3 S.C.R. 398, [2001] S.C.J. No. 27, 2001 SCC 72, the court examined circumstances where an accident was alleged to be the result of two concurrent causes: negligent cleanup of a work site, covered by a CGL policy for "non-auto related negligence", and negligence in the operation of a truck that carried an unsecured base plate while travelling along the highway, which then flew off and went through the windshield of a school bus, killing one child and injuring three others. The insurer argued that it did not agree to cover an auto-related risk. At paras. 56 and 57, the court agreed with the motions judge that,
Absent express language to the contrary, the CGL policy should cover this risk, notwithstanding that a contributing cause (i.e. auto-related) was excluded from coverage[.]
It is a principle of construction that where there are ambiguities, the reasonable expectations of the parties be given effect[.]
[41] Adopting similar reasoning, the Court of Appeal in Snaak (Litigation guardian of) v. Dominion of Canada General Insurance Co. (2002), 2002 44897 (ON CA), 61 O.R. (3d) 230, [2002] O.J. No. 1438 (C.A.) considered circumstances where the plaintiff was attacked by another student on school property. While an action against the student was based on an intentional tort, the concurrent action was framed in negligence against the student's parents for failure to supervise, discipline and control their son. The parents and their son were insured under their homeowner's policy which excluded coverage for "an intentional or criminal act by any person or any named insured". The court dismissed an appeal from the insurer's motion for summary judgment, and held that while the insurer had no duty to defend the son, it [page549] did have a duty to defend the parents. In doing so, the court, at paras. 23 to 25, adopted the reasoning of Finlayson J.A. in Godonoaga (Litigation guardian of) v. Khatambakhsh (2000), 2000 5737 (ON CA), 49 O.R. (3d) 22, [2000] O.J. No. 2172 (C.A.) to find that the motion judge correctly concluded that the wording of the exclusion clause afforded two possible interpretation, one of which was that only the person who committed intentional conduct was excluded from coverage. Consistent with long-standing principles developed in the case law, the exclusion clause was narrowly construed against the insurer: Snaak, at para. 18.
[42] In the case before me, the exclusion clause denies coverage for bodily injury arising from the ownership or use of a gun, but fails to specify whose ownership or use of the gun, as well as the extent or limit of the excluded coverage. As the policy extends coverage for bodily injury and property loss to both the Silver Dollar and its agents and employees, one possible interpretation of the policy is that coverage is only excluded for Gray and any related finding of vicarious liability on the part of the Silver Dollar for the acts of Gray.
[43] In Djepic v. Kuburovic (2006), 2006 578 (ON CA), 80 O.R. (3d) 21, [2006] O.J. No. 97 (C.A.), the plaintiff was blinded by a bungee cord used to secure a mattress on the roof of a van that came loose. The Court of Appeal, at paras. 34 and 35, relied on reasoning from Derksen to require the defendant homeowner's insurer to defend allegations that their insured supplied a defective or damaged bungee cord not fit for the purpose intended, as conduct which lay outside the policy exclusion for injuries arising from use or operation of a vehicle.
[44] In the case before me, it is also possible to interpret the exclusion so as not to apply to a concurrent cause of injury to the plaintiff arising from a failure on the part of the Silver Dollar to warn and ward against danger to its patrons due to the lapse of security on its premises.
Does the policy wording pertaining to gun-related injury limit coverage to preclude a duty to defend?
[45] Omega argues that the paucity of case law in Canada on the operation of gun exclusion clauses is good cause to consider a recent decision of the Court of Appeal of Washington in Capital Specialty Insurance Corp. v. JBC Entertainment Holdings, Inc., 172 Wn. App. 328, 289 P.3d 735 (2012). In Capital Specialty Ins. Corp., the court held that the exclusion clause was unambiguous and denied JBC coverage for a shooting at the nightclub. The exclusion clause at issue denied coverage for bodily injury and [page550] property damage "that arises out of, relates to, is based upon, or attributed to the use of a firearm".
[46] As in the case before me, Omega argues that in Capital Specialty Ins. Corp., the plaintiff's claim included allegations that JBC should have provided enhanced security for firearms and was guilty of negligence with respect to the hiring, training and supervision of staff, as well as negligence for failure to provide adequate security. The Appeals Court rejected the contention that the plaintiff's claims against JBC included a concurrent and independent cause of action.
[47] Omega points [out] that, in dismissing a duty to defend at the trial level where the insurer prevailed, the Appeals Court, at para. 5, considered similar contentions made by the plaintiff in the context of an assault and battery exclusion at issue in McAllister v. Agora Syndicate, Inc., 103 Wn. App. 106, 11 P.3d 859 (2000) to find that, just as "McAllister's claim was 'based on' assault and battery in the sense that without first establishing the underlying assault, negligence cannot be proved", the court could not give the exclusion clause a strained or forced construction beyond what was fairly within the unambiguous language excluding coverage for bodily injury arising from the use of a firearm.
[48] Omega argues that such reasoning is consistent with Canadian authority and, in particular, with the reasoning of Iacobucci J. in Scalera, where the court found that both the conduct and harm caused by alleged negligent battery, negligent misrepresentations and breach of a fiduciary duty were subsumed by the exclusion clause applicable to the sexual battery.
[49] While I agree that the reasoning in Capital Specialty Ins. Corp. includes some very persuasive reasoning, I have already found that binding authority affords a contrary conclusion in this case. Moreover, in my opinion caution must be exercised before adopting the holding in Capital Specialty Ins. Corp., where the language of the exclusion clause was arguably broader in limiting coverage, and where the court of first instance received evidence from the parties, which as in the McAllister case was used to arrive at a different result from that of American Best Food, Inc. v. Alea London, Ltd., 168 Wn.2d 398, 229 P.3d 693 (2010), where the facts revealed the plaintiff suffered an exacerbation injury from post-assault conduct. The Washington Appeals Court notes, at p. 3 (QL) of the Capital Specialty Ins. Corp. case, that it was reviewing de novo a summary judgment and evidentiary decisions made by the trial judge. The decision of the trial judge was not put before me. I would note, however, that the Appeals Court upheld the trial judge's dismissal [page551] of a motion to strike portions of the evidence filed in support of the insurer's motion for summary judgment, and that the evidence admitted addressed the reasonable expectations of the parties in the case.
[50] As Omega fairly points out, the case before me is brought under Rule 21, not Rule 20, and before I import the reasoning of Capital Specialty Ins. Corp. into a determination of coverage in this case, I must be satisfied that it is "plain and obvious" that the allegations as pleaded in the proceeding before me are incapable of supporting a cause of action and that the claim cannot succeed: Transamerica Life Canada Inc. v. ING Canada Inc., at paras. 35-37. I have not been persuaded that is the case, for the reasons hereinbefore set out.
[51] In the result, the motion brought by Silver Dollar to compel Omega to defend the claim is granted, and Omega's related cross-motion is dismissed.
[52] I should add that, in the course of argument I initially reasoned that the success of the Silver Dollar on the motion would eclipse any need for ongoing proceedings in the third party claim and that it should, therefore, be discontinued or dismissed. However, the duty to defend does not necessarily give rise to a duty to indemnify, and the conflict between Omega's coverage counsel and the defence counsel appointed to represent and defend Silver Dollar may continue to exist. Therefore, the third party claim will not be dismissed and the potential conflict will be addressed by the order made on consent directing Omega to appoint separate counsel to defend Silver Dollar on conditions as previously noted.
Costs
[53] The parties agree that, in the event of a ruling in favour of Silver Dollar, costs would be fixed and payable forthwith on a partial indemnity scale in the total amount of $12,000. An order to that effect is therefore granted.
Motion granted.
End of Document