A recent decision of the Ontario Superior Court of Justice, MacFarlane v. Canadian Universities Reciprocal Insurance Exchange, 2019 ONSC 4631, answered the question of whether a university's insurer had a duty to defend a professor accused of defaming a former colleague in relation to statements about unproven allegations of sexual misconduct. The decision turned on whether the professor accused of certain defamatory acts was acting on behalf of the university at the time of the alleged acts, and thus falling under the definition of an "Additional Insured" as defined by the policy. This decision was also a good reminder that a duty to defend can be easily triggered by pleadings as it is a much broader duty than an insurer's duty to indemnify.
Professor C was terminated from the University of Windsor. The termination was subject to a Non-Disclosure Agreement between Professor C and the University. Following the termination, Dr. M, who was employed at the University, made various allegedly defamatory statements against Professor C, including to Professor C's new employer, warning them that Professor C was a sexual predator. Those defamatory statements related to unproven allegations of sexual misconduct/harassment involving students at the University of Windsor. Professor C brought a defamation action against Dr. M. Dr. M sought coverage under the University's liability policy.
The University's insurer, Canadian Universities Reciprocal Insurance Exchange ("CURIE"), provided liability coverage to employees of the University facing defamation claims, but CURIE denied coverage to Dr. M on the basis that Dr. M was not an insured under the policy as defined and thus CURIE did not have any duty to defend or indemnify Dr. M.
The Key Coverage Issues
The first issue before the court was whether Dr. M was acting within her employment capacity when she made the defamatory statements and, specifically, whether she was acting in her capacity as a professor employed by the University of Windsor and making the statements on the University's behalf. If so, then Dr. M was an "Additional Insured" under the CURIE policy and entitled to coverage. Also at issue was whether the pleadings triggered CURIE's duty to defend Dr. M if she fell under the definition of "Additional Insured".
The Court's Analysis
In considering whether Dr. M had acted in her employment capacity, the Court noted that in making the defamatory statements, Dr. M identified herself as a Professor of Law at Windsor Law, used her University of Windsor email address, and made the defamatory statements to Professor C's current employers about his employment and conduct towards students while he was at the University of Windsor. The court found that Dr. M made those defamatory statements when she was acting in her capacity as a professor at the institution from which Professor C's employment had been terminated.
The Court dismissed CURIE's argument that the Non-Disclosure Agreement foreclosed the possibility that Dr. M was acting in her employment capacity. Surprisingly, the Court held that acting within one's scope of employment does not require that the act be authorized by the employer:
...A university is not an institution with a single voice or a single set of interests...While the University of Windsor may have an official position…that does not mean that others within the institution no longer speak on its behalf just because they have a different view...
 "Acting on behalf of" does not require that the specific act be authorized, instructed, permitted or approved by the University of Windsor...
 ...the fact that [the University of Windsor] signed an NDA...and may have an interest in upholding that agreement...does not mean the University...does not have an interest in protecting itself against claims by students at other universities to whom it may be found to have owed a legal and moral duty.
After determining that Dr. M was an "Additional Insured" because she was acting in her employment capacity at the University, the court went on to find that the duty to defend had been triggered by the pleadings. The threshold to trigger a duty to defend is low: the insured must prove that, assuming the facts plead in the originating lawsuit are true, there is a "mere possibility" that the claim falls within coverage, giving the "widest latitude" to the plaintiff's originating pleadings (Bacon v. McBride, 1984, I.L.R. para. 1-1776, Co-operators General Insurance Company v. Kane, 2017 BCSC 1720 at para 20). In this case, the pleadings satisfied this well established test. The court concluded there was at least a mere possibility that the claims asserted in the defamation action against Dr. M could result in coverage. Consequently, CURIE had a duty to defend Dr. M in the defamation action.
This decision provides a good summary of the law on what it means to be "acting in the scope of employment", and the law applicable to an insurer's duty to defend an insured.
This decision is another example of how courts in Canada tend to find in favour of coverage, particularly when there is room for factual interpretation. Arguably, in this case, there were facts to support that Dr. M was acting on her own accord based on personal motivation. However, this court chose to focus on facts which ultimately led to a finding that Dr. M was acting within her scope of employment.
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