Insurance is a contractual arrangement providing a guarantee of
payment in the event of a specified event or loss. Usually, only
fortuitous or contingent losses are covered under a liability
insurance policy. A fortuitous loss is one that is neither
intentional nor inevitable. The obvious policy concern is that it
would not be desirable to encourage people to injure others
intentionally by indemnifying them for the civil consequences. As a
result of the "fortuity principle", most liability
insurance policies exclude coverage for intentional acts.
But does the fortuity principle apply to all liability insurance
policies ? This was the issue before the Ontario Court of Appeal in
the recent case of Ontario Society for the Prevention of Cruelty to
Animals v Sovereign General Insurance Company
In the Sovereign case, three lawsuits had been commenced against
the Ontario Society for the Prevention of Cruelty to Animals
(OSPCA). The respective plaintiffs had pled in their statements of
claim that the OSPCA was liable for numerous intentional torts,
including malicious prosecution, false arrest and imprisonment,
slander, and defamation. At the material times, the OSPCA was
covered by commercial general liability policies of insurance
issued by Sovereign General Insurance Company. These policies were
tailored to OSPCA's circumstances as "an investigative
body which can lay charges...without supervision from Crown
prosecutors", and explicitly providing coverage for the
offences alleged in the underlying lawsuits. However, Sovereign
refused to defend OSPCA, stating that the claims were uninsurable
by virtue of the fortuity principle, as the plaintiffs each claimed
that the OSPCA intended to cause them harm.
At first instance, the application Judge clarified that the
fortuity principle serves as an "interpretive aid",
uniquely applicable to insurance contracts. The fortuity principle
acts to presumptively exclude intentional conduct from coverage.
However, an insurer may expressly agree to provide coverage for
intentional acts. In interpreting insurance policies, the
Court's objective is to give effect to the bargain reached by
the parties. As a result, the fortuity principle cannot be applied
to limit coverage if an insurance company expressly agreed to
provide coverage for intentional acts within their policy.
The Court of Appeal agreed, and stated that in contracting to
provide coverage for offences involving intentional conduct and
malice, Sovereign effectively contracted out of the principle of
By holding that there was a duty to defend the OSPCA, the Court
of Appeal reinforced that insurers will be held to their agreements
to provide coverage for intentional torts, even when that coverage
violates the fortuity principle. No absolute public policy rule
prohibits such coverage, and the question the court will ask, is
whether the parties expressly agreed in the policy to provide
coverage for intentional acts. Ultimately, the fortuity principle
is only an "interpretive aid" that assists courts
interpreting insurance contracts. As a result, insurance companies
who do not wish to provide indemnity for intentional acts must be
careful when drafting policies to ensure that the language adopted
does not stray from that restriction.
1 2015 ONCA 702 [OSPCA v Sovereign]
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