Court File and Parties

Court File No.: CV-17-00586088 Date: 2018-07-11 Superior Court of Justice - Ontario

Re: Toronto District School Board, Applicant And: Ontario School Boards’ Insurance Exchange, Respondent

Before: Carole J. Brown, J.

Counsel: P. Cotter, for the Applicant A. Farrer, for the Respondent

Heard: April 4, 2018

Endorsement

[1] The Toronto District School Board (“TDSB”) brings this application for a declaration that the respondent, Ontario School Boards’ Insurance Exchange (“OSBIE”) is required to provide insurance coverage to the TDSB, and to defend the subject claim (“the Wheeler matter”) pursuant to Comprehensive Liability Policy No. SG00214.

[2] It is the position of the respondent, OSBIE, that it only provided insurance to the TDSB through December 31, 2016 and that it did not cover the subject claim brought by third parties against the TDSB pursuant to a Statement of Claim issued December 14, 2017 against a former teacher named Donald Wheeler and the TDSB. It is the position of OSBIE that insurance coverage provided by it to the TDSB was on a claims-made basis, requiring that an otherwise insured claim be within the policy period in order to engage coverage under that policy.

[3] The TDSB is the largest public school board in Canada, comprised of 550 schools throughout Toronto with more than 235,000 students. OSBIE is a reciprocal insurance exchange program comprised of a group of more than 100 subscribers. OSBIE was formed to provide protection against insurable financial loss and to provide stable insurance premiums to Ontario school boards and is, in essence, an association of members who have agreed to participate in the exchange of contracts of indemnity for certain specified classes of insurance.

[4] The TDSB had a comprehensive liability policy of insurance with OSBIE (No. SG00214) which was in force from January 1, 2016 to January 1, 2017 and provided coverage for liability for personal injury, property damage, property damage of leased property, incidental professional and incidental malpractice, environmental impairment, errors and omissions, sexual assault, and for legal expenses. Limits for all coverage except legal expenses was $24 million. The limit for legal expenses was $100,000. There was no deductible as regards sexual assault. The coverage also included the duty to defend.

[5] The subject claim fell under section 1.8, coverage H, for claims regarding sexual assault. That provision reads as follows:

“To pay on behalf of the Named Insured those sums which the Named Insured shall become legally obligated to pay as Compensatory Damages for Sexual Assault on account of Claims first made against the Named Insured during the policy period or on account of Other Notice of Claim First Received during the policy period provided the Sexual Assault first took place on or after January 1, 2007.

[6] The following relevant definitions are also contained in the policy:

5.2 CLAIM

“Claim” means:

1. A written or oral notice of intention to hold the insured responsible for Wrongful Act, Environmental Impairment, or Sexual Assault, or

2. A written or oral demand for monies or services, or

3. A series of claims resulting from the same isolated, repeated or continuing Environmental Impairment,

but does not mean a claim arising out of a dispute with organized labour or brought as an employee or union grievance or a claim for damages for discrimination, wrongful dismissal or breach of contract except one related to Wrongful Act in the administration of employment benefit programs.

5.4 COMPENSATORY DAMAGES

“Compensatory damages” means amounts awarded by a civil court to compensate for injury or damage, and does not include punitive damages or Remediation Expense.

5.14 OTHER NOTICE OF CLAIM FIRST RECEIVED BY THE INSURED

“Other Notice of Claim First Received by the Insured” means the insured becoming aware of any circumstances which could reasonably be expected to give rise to a claim for Environmental Impairment, Wrongful Act, or Sexual Assault.

5.20 SEXUAL ASSAULT

“Sexual Assault” means any inappropriate physical contact of a sexual nature perpetrated against another person or any act that forces a person to join in or be subjected to unwanted sexual contact or attention.

7.1.4 NOTICE OF ACCIDENT, OCCURRENCE, CLAIM OR SUIT

When an Occurrence or accident happens or Other Notice of Claim First Received by the insured exists or oral claim made against an Insured, written notice shall be given by or on behalf of the Insured to the Insurer or any of its authorized agents as soon as practicable, after notice thereof has been received or knowledge thereof gained by the Named Insured’s person in charge of insurance. Such notice shall contain particulars sufficient to identify the Insured and also reasonably obtainable information respecting the time, place and circumstances of the Occurrence or accident, the name and address of the injured, and of any available witnesses.

[7] The TDSB first became aware of allegations against one of its teachers, Donald Wheeler, regarding alleged sexual assaults on January 4, 2016. These allegations were being investigated by the police. On November 2, 2016, after a number of court appearances by Donald Wheeler the TDSB sent an email and included a chart containing information concerning the allegations. The email, sent to Teresa Drijber of OSBIE, stated as follows: “Attached is a listing of sexual assault cases that are in court, currently being investigated, investigations completed and the court cases completed, i.e. four different tabs/worksheets. They are being sent to protect our rights of coverage under the liability policy.”

[8] One tab contained the information concerning the allegations against Donald Wheeler, which included the following information:

a) Respondent’s Name: Donald Wheeler

b) Respondent’s Position: Elementary Teacher

c) Assigned Location: Parkdale Junior & Senior PS

d) Date initially reported to Investigation Department: January 4, 2016

e) Investigator: Kathy Small

f) Complainant Who Initiated Allegations: Blank

g) Nature of Allegations: sexual assault – students, sexual interference (x10), supplying liquor to a minor (x2), harassment

h) Outcome of Criminal Charges: Various court dates are included between January 21, 2016 and December 16, 2016

[9] By email of November 9, 2016, OSBIE responded, denying coverage for the Wheeler matter on the ground that they had not received sufficient notice of a claim and that the spreadsheet did not constitute notice. Nor was notice given in a timely fashion according to the respondent.

[10] On August 8, 2017, the TDSB notified OSBIE regarding a potential civil claim with respect to the Wheeler matter, namely correspondence from a lawyer who advised that he was representing plaintiffs A. R. et al and T. S. et al. A claim was issued and served thereafter on January 4, 2018, based on the matters set forth in the original spreadsheet.

[11] The respondent has continued to deny coverage on the ground that it did not receive sufficient notice in a timely manner and, given that this is a claims-based policy, within the policy period. It has denied coverage on the basis that nowhere in the email or spreadsheet originally provided by the TDSB did it suggest that there was any claim actually being advanced or alleged in relation to the Wheeler matter by anyone, nor had anyone indicated an intention to hold TDSB responsible for any tort in relation thereto by that date. Further, the email of November 2, 2016 was sent approximately 10 months after the TDSB first became aware of the criminal charges related to Donald Wheeler.

[12] It is the position of the applicant that notice as regards the criminal charges constituted circumstances which could reasonably be expected to give rise to a claim for sexual assault and that said criminal charges, including sufficient detail to permit investigation, had been communicated to OSBIE within the policy period pursuant to section 5.14. The applicant submits that section 7.4.1 of the policy requires that when Other Notice exists, the TDSB must provide written notice to OSBIE as soon as possible, after notice has been received or knowledge gained by the named insured’s person in charge of insurance. The notice is required to contain particulars sufficient to identify the insured and also reasonably obtainable information respecting the claim.

[13] Pursuant to section 7.4.2, where a claim is made or other notice received by the TDSB during the policy period, the claim is within the policy period even if reported to OSBIE after the expiry of the policy, subject to the reporting required by section 7.4.1.

[14] It is the position of the applicant that the TDSB had notice of the criminal charges on or about January 4, 2016 and provided a chart with said information to OSBIE on November 2, within the policy period. It is further its position that sufficient information was provided to OSBIE to permit it to investigate.

[15] The TDSB further takes the position that if the notice is found not to have been provided as soon as practicable or that it was not sufficient, TDSB is entitled to relief from forfeiture pursuant to section 129 of the Insurance Act, and relies on the cases of Elance Steel Fabricating Company v. Falk Brothers Industries Limited, 1989 CanLII 38 (SCC), [1989] 2 S.C.R. 778; Minto Construction Limited v. Gerling Global General Insurance Co. (1989) 1978 CanLII 1441 (ON CA), 19 O.R. (2d) 617 (Ont. S.C.). It takes the position that such circumstances would constitute imperfect compliance and not non-compliance of the policy.

[16] It is the position of OSBIE that in order to engage an insurer’s duty to defend in respect of a claims-made policy, it is necessary that there be communication by a third party during the policy period of the intention to hold the insured responsible for damages. In circumstances such as this, where no such intention is communicated during the policy period, the insurer has no duty to defend.

[17] It is the position of OSBIE that even notice of a general belief that claims might one day be presented does not amount to a claim made during the policy period which would trigger a duty to defend. That liability only arises if there is, in fact, a claim and the claim is actually made during the policy period. They argue that, in this case, the plaintiffs never communicated any intention to hold the TDSB responsible for any damages they might have suffered and the TDSB, for its part, did not communicate notice of any claim during the policy period as no claim was made until the statement of claim was received in 2017.

[18] It is the position of OSBIE that the claim is defined in the policy as “a written or oral notice of intention to hold the insured responsible for Wrongful Act, Environmental Impairment or Sexual Assault”. Since neither the TDSB nor the plaintiffs communicated during the policy period any intention to claim damages for negligence, OSBIE’s duty to defend is not engaged.

[19] OSBIE takes the position that it was prejudiced by late reporting (November 2, 2016) as it was precluded from investigating the matter. It takes the position that it was unable to investigate the matter until after Donald Wheeler pled guilty to assault charges in December 2016. It further takes the position that the first notice of a claim came on August 8, 2017 from the lawyer for the plaintiffs, after the policy had expired on December 31, 2016 and, as such, there was no coverage, as the policy responds on a claims-made basis.

The Law

[20] In interpreting this policy in the context of the issues engaged, I am cognizant of and have taken into account the general principles of insurance contract interpretation set forth in Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, [2000] 1 S.C.R. 551, at paras. 67-89, and Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, [2001] 2 S.C.R. 699.

Issues

[21] The issues for this Court to determine are as follows:

1. Whether proper notice was given as regards the Wheeler matter pursuant to the policy of insurance;

2. Whether the claim was reported in a timely manner pursuant to the policy of insurance;

3. If the answer to 1 and/or 2 is no, whether relief from forfeiture pursuant to section 129 of the Insurance Act is available;

4. Whether the subject claim is covered pursuant to the policy; and

5. Whether the insurer has a duty to defend.

Analysis

Was Proper Notice Given as Regards the Wheeler Matter Pursuant to the Policy of Insurance?

[22] The policy of insurance includes coverage under “H” regarding Sexual Assault and states as follows:

“To pay on behalf of the Named Insured those sums which the Named Insured shall become legally obligated to pay as Compensatory Damages for Sexual Assault on account of claims first made against the Named Insured during the policy period, or on account of Other Notice of Claim First Received during the policy period, provided that the Sexual Assault took place on or after January 1, 2007.”

“Claims” are defined to mean (1) a written or oral notice of intention to hold the insured responsible for Wrongful Act, Environmental Impairment, or Sexual Assault, or (2) a written or oral demand for monies or services, or (3) a series of claims resulting from the same isolated, repeated or continuing Environmental Impairment, but does not mean a claim arising out of a dispute with organized labour or brought as an employee or union grievance or a claim for damages for discrimination, wrongful dismissal or breach of contract except when related to Wrongful Act in the administration of employee benefit programs.

“Other Notice of Claim First Received by the Insured” is defined as “the insured becoming aware of any circumstances which could reasonably be expected to give rise to a claim for Environmental Impairment, Wrongful Act or Sexual Assault”.

[23] The respondent denies coverage on the basis that no notice of a claim was received within the policy period and, indeed, no claim was commenced until December 2017. It states that there was no indication of an intention to claim damages nor any claim for damages commenced within the policy period and, therefore, no coverage is available. The respondent submits that insurance coverage provided by it to the TDSB was on a claims-made basis, requiring that an otherwise insured claim be made within the policy period in order to engage coverage under that policy.

[24] However, the policy, by its precise words, is not to be read that narrowly. The policy indicates at section 1.8 that the Insurer will pay on behalf of the Named Insured sums which the Named Insured shall become legally obligated to pay as compensatory damages for sexual assault, inter alia, on account of Other Notice of Claims First Received, as defined at section 5.14, where the insured becomes aware of any circumstances which could reasonably be expected to give rise to a claim for sexual assault [my emphasis]. The provisions of the policy do not require that a Named Insured be aware of an intention on the part of the plaintiff to claim damages or a claim for damages. It stipulates that the Insurer is to pay on behalf of the Named Insured compensatory damages for sexual assault, including in a situation where the insured becomes aware of any circumstances which could reasonably be expected to give rise to a claim for sexual assault. In my view, this means that an Insured need only become aware of circumstances which could reasonably be expected give rise to a claim. This is sufficient to trigger policy coverage where a claim is subsequently made (section 5.14). In this regard, I reject the respondent’s position that a claim must have been made during the policy period. The policy clearly stipulates that coverage is afforded where the insured becomes aware of any circumstances which would reasonably be expected to give rise to a claim. Thus, a claim having been commenced is not a prerequisite to triggering of coverage pursuant to section 5.14 of the policy.

[25] I reject the submission of the respondent that because there was no mention of any claim actually being advanced or alleged in relation to the Wheeler matter, nor regarding an intention to hold TDSB responsible by that date, that coverage was not triggered. Where the insured becomes aware of circumstances which would reasonably be expected to give rise to a claim this is sufficient to trigger coverage, pursuant to the wording of the policy.

[26] Notice of circumstances reasonably expected to give rise to a claim was given pursuant to the spreadsheet which was contained under one of the tabs of the correspondence forwarded to the insurer on November 2, 2016. The cover page of that email was as follows:

Subject: New: Sexual Assault-Various

Hi Teresa,

Attached is a listing of sexual assault cases that are in court, currently being investigated, investigations completed and the court cases completed, i.e. four different tabs/worksheets.

They are being sent to protect our rights of coverage under the liability policy.

Looking forward to your response.

[27] While the respondent maintains that the applicant provided a spreadsheet containing information about a large number of unrelated incidents over a great number of years in November 2016, I note from the cover letter that there were four tabs, each with a spreadsheet, one of which related to the subject claims regarding Donald Wheeler.

[28] I am satisfied that the information contained in the spreadsheet regarding Donald Wheeler was sufficient to provide notice to the Insurer and sufficient for the Insurer to commence investigation.

Was a Claim Reported in a Timely Manner?

[29] Section 7.4.1 requires that “When an Occurrence or accident happens or Other Notice of Claim First Received by the Insured exists or oral claim made against an Insured, written notice shall be given by or on behalf of the Insured to the Insurer or any of its authorized agents as soon as practicable, after notice thereof has been received or knowledge thereof gained by the Named Insured’s person in charge of insurance. Such notice shall contain particulars sufficient to identify the Insured and also reasonably obtainable information respecting the time, place and circumstances of the Occurrence or accident, the name and address of the Insured and of any available witnesses.”

[30] Pursuant to section 7.4.2, where a claim is made or Other Notice is received by TDSB during the policy period, the claim is within the policy period, even if reported to OSBIE after the expiry of the policy, subject to reporting required by section 7.4.1. Where such a report is made in accordance with the policy terms, any subsequent claim arising out of the reported circumstances is deemed to have occurred at the time the notice was given.

[31] The insured, TDSB, first became aware of criminal allegations regarding Donald Wheeler in January 2016. After an investigation and a number of criminal court attendances by Donald Wheeler with respect to the various allegations, notice was given to the insurer, OSBIE, on November 2, 2016, some eight months after TDSB first became aware of the allegations. The applicant gave no explanation for not providing notice before then.

[32] However, it appears from the tabbed information sheet provided to OSBIE that most of the court attendances from January 21, 2016 to September 1, 2016 with the exception of a first appearance and an order that defence counsel was to file an issue sheet, were simply “To be spoken to” (TBST) appearances, with a preliminary hearing scheduled for December 16, 2016. It would thus appear that there was little if any information available until late in 2016.

[33] As such, while there is not more information available to the court, it would appear that notice was given to OSBIE as soon practicable.

[34] However, if I am wrong and notice was not given pursuant to the policy of insurance as soon as practicable after notice thereof had been received or knowledge thereof gained by the Named Insured’s person in charge of insurance, I must consider whether this constituted prejudice to the Insurer as regards any investigation of the matter. In this regard, the respondent’s affiant conceded on cross-examination that she did nothing to investigate the matter after receiving the email and attached spreadsheet on November 2, 2016. There is no evidence before the court that OSBIE attended at the preliminary hearing scheduled for December 16, 2016 in the criminal proceedings against Donald Wheeler, as part of any investigation, despite notice having been given and information about that date having been provided to OSBIE. There is no evidence to establish any prejudice to the Insurer.

Is Forfeiture Available Pursuant to Section 129 of The Insurance Act?

[35] In the event that notice was not given as soon as practicable pursuant to the policy of insurance, I am satisfied that section 129 of the Insurance Act is available and applicable to the circumstances of this case as regards notice and timely reporting: Walker v. Sovereign General Insurance Co., 2011 ONCA 597, 107 O.R. (3d) 225, at paras. 44-45; Nguyen v. SSQ Life Insurance Co., 2014 ONSC 6405, 41 C.C.L.I. (5th) 246.

[36] As set forth at paragraph 34, above, I do not find there to have been any prejudice occasioned by the Insurer as regards the notice given.

[37] I do not find said failure to provide notice until some eight months later, but still within the policy period, to constitute non-compliance with the policy, but rather find it to be imperfect compliance, such that relief from forfeiture is available to correct this: Elance Steel Fabricating Co., at para. 20; see also Henckel v. State Farm Mutual Automobile Insurance (1997), 1997 CanLII 12129 (ON SC), 33 O.R. (3d) 253.

Is the Claim against the TDSB Covered?

[38] The respondent takes the position that the claim against the TDSB is not covered. The respondent submits that the plaintiffs do not sue the TDSB for sexual assault, nor is it alleged in the claim that the TDSB is vicariously liable for Wheeler’s alleged sexual assault against the plaintiffs. Rather, the respondent submits that the TDSB is sued by the plaintiffs for negligence, breach of duty and breach of fiduciary duty. As such, the respondent submits that claims founded in negligence are dealt with in the Standard Insurance Policy under coverage F and are claims- based only.

[39] Coverage under F is for Errors and Omissions Liability, which stipulates: “To pay on behalf of the Insured those sums which the Insured shall become legally obligated to pay as compensatory damages on account of claims first made against the Insured during the policy period, or on account of Other Notice of Claim First Received by the Insured during the policy period, because of a Wrongful Act.” Wrongful Act, meanwhile, is defined in 5.21 as “any actual or alleged error or misstatement or misleading statement, or act or omission which constitutes neglect or breach of duty or neglect or breach of duty of the Named Insured or of an Insured, as defined in section 5.8.1 herein, in the performance of duties for the Named Insured.”

[40] The insured takes the position that the matter is not a sexual assault claim because vicarious liability is not pleaded. However, the Insurer’s affiant on this application conceded that the allegations in the Statement of Claim are in relation to sexual assault by a TDSB employee.

[41] It is the position of the applicant that there is no basis for such a restrictive reading of the Sexual Assault coverage provisions. “Sexual assault” means an inappropriate physical contact of a sexual nature perpetrated against another person or any act that forces a person to join in or be subjected to unwanted sexual contact or attention. The claim itself names the TDSB as a defendant and alleges inter alia that it failed to exercise reasonable care in supervising the teacher and students, failed to monitor staff activities and behaviour, created a situation which facilitated preying on students, failed to listen to complaints about Mr. Wheeler from other staff, had inadequate surveillance, was negligent, and breached its duty of care and fiduciary duty, resulting in the sexual assaults occurring.

[42] It is my view that all claims, including those against the TDSB, arise from the allegations of sexual assault by an employee of the TDSB and as such would be covered pursuant to section 5.20. They represent an intention to hold the TDSB responsible for sexual assault. If the insurance provisions on sexual assault do not cover this type of claim, they would offer little if any practical protection to the TDSB.

[43] I am satisfied that the claims in this action are properly covered under coverage regarding Sexual Assault.

Does the Insurer Have a Duty to Defend?

[44] If the pleadings allege facts which, if true, would require the insurer to indemnify the insured for the claim, then the insurer is obliged to provide a defence: Nichols v. American Home Assurance Co., 1990 CanLII 144 (SCC), [1990] 1 S.C.R. 801, at paras. 16-17; see also Baiden v. Canadian Universities Reciprocal Insurance Exchange, 2011 ONSC 7374, [2012] I.L.R. I-5229, at para. 16.

[45] Based on all of the above, I find that OSBIE is required to provide insurance coverage to the TDSB and to defend the subject claim.

Costs

[46] I would urge the parties to agree upon costs, failing which I would invite the parties to provide any costs submissions in writing, to be limited to three pages, including the costs outline. The submissions may be forwarded to my attention, through Judges’ Administration at 361 University Avenue, within thirty days of the release of this Endorsement.

Carole J. Brown, J.

Date: July 11, 2018