In the 2015 Court of Appeal decision in Unifund Assurance Company v. D.E., the issue of whether one's home insurance company has to defend their insured with regard to allegations of negligence in failing to stop their daughter from bullying, was addressed. The Court of Appeal overturned the application judge's decision and declared that Unifund does not have a duty to defend or indemnify the parents regarding the action.
In this case, the parents of an alleged bully had a claim advanced against them in negligence; failure to control their daughter from bullying and causing physical and psychological damage to another classmate. The parents brought an application seeking a declaration that Unifund had a duty to defend and indemnify them. The Application Judge declared that Unifund had a duty to defend and indemnify the parents. Unifund appealed based on 2 exclusion clauses in the insurance policy.
The allegations against the parents of the all of "bullying" children, including these parents were that the parents:
were negligent in that they, inter alia, knew or ought to have known that the minor defendants were bullying K.S. and failed to investigate, failed to take steps to remedy the bullying, failed to take reasonable care to prevent the bullying and harassment of K.S. by the minor defendants of which they were aware, failed to take disciplinary action against the minor defendants, and failed to discharge their duty to prevent the continuous physical and psychological harassment by the minor defendants for whom they are responsible in law.
Unifund relied on the following sections of the policy with regard to denying the duty to defend:
SECTION II – Liability Coverage
Coverage E – Personal Liability
This is the part of the policy you look to for protection if you are sued. We will pay all sums which you become legally liable to pay as compensatory damages because of unintentional bodily injury or property damage arising out of:
1. your personal actions anywhere in the world....
Exclusions – SECTION II
We do not insure claims arising from:
6. bodily injury or property damage caused by an 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;
7.(a) sexual, physical, psychological or emotional abuse, molestation or harassment, including corporal punishment by, at the direction of, or with the knowledge of any person insured by this policy; or
(b) failure of any person insured by this policy to take steps to prevent sexual, physical, psychological or emotional abuse, molestation or harassment or corporal punishment.
Unifund's position was that that the claim against the parents in negligence "flowed from or was derivative of the claim against their daughter arising out of her intentional conduct of assault, threatening and bullying; accordingly, exclusion clause 6 applied." The application judge also rejected that Clause 7(b) precluded coverage. The Court of Appeal disagreed and found that the exclusions applied and were unambiguous.
Insurance policies must be interpreted in accordance with the well-established rules of policy interpretation:
- contra proferentem - ambiguities in insurance contracts are to be construed against the insurer;
- coverage provisions should be interpreted broadly and exclusion clauses should be interpreted narrowly; and
- at least where the policy wording is ambiguous, effect should be given to the reasonable expectations of the parties.
Reid Crowther & Partners v. Simcoe & Erie General Insurance, [1993] 1 S.C.R. 252 at paras. 37 and 42 (S.C.C.)
However, in this case, the policy exclusions were not found to be ambiguous and therefore, were found to apply.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
