Canadian courts have repeatedly confirmed that an insurer's duty to defend will be engaged if the pleadings allege facts which, if true, would require the insurer to indemnify the insured for the claim under the language of the policy.
Insurers must carefully consider the policy wording when assessing the duty to defend. Notably, clear policy language may exclude coverage even where relevant terms are defined in a manner which might otherwise offend their commonly understood legal definitions. This was recently highlighted by the Ontario Superior Court of Justice in Jack-O's Sports Bar v. US Liability Insurance Co., 2023 ONSC 5925 where it dismissed a third-party claim against a liability insurer, finding that it had no duty to defend the insured-bar in a mixed claim involving allegations of negligence along with allegations of intentional assault and battery.
The plaintiff-patron alleged he was overserved while attending the defendants' bar. As a result, he claimed he fell off his barstool and was forcibly ejected by the proprietor. The plaintiff alleged he was injured in the process, and he commenced an action against the bar and its owners seeking $500,000 in damages. The defendants subsequently filed a third-party claim against their liability insurer and their insurance brokerage after the insurer refused to provide a defence under the bar's commercial general liability policy.
The insurer advanced a motion for summary judgment to dismiss the third-party claim and argued there was no duty to defend the bar as the claim fell within the "Assault or Battery Exclusion" of the policy.
It was undisputed that the plaintiff's claim fell within primary grants of coverage under the policy for "compensatory damages" because of "bodily injury". However, the insurer relied on a broadly worded exclusion that denied a duty to defend where the action was in consequence of or "in any way involving" assault or battery, including whether it was caused in whole or in part by "negligence" and any "acts or omissions" of any insured or its employees.
Additionally, the exclusion defined "assault" and "battery" beyond the generally understood legal definition, and expressly included situations where the use or threat of force was alleged to be negligent rather than intentional. The plaintiff alleged his injuries were "as a direct result of the negligence of the Defendants". Most of the contentions of negligence related to allegations of overserving alcohol to the plaintiff. In the alternative, the plaintiff alleged he was "intentionally assaulted and battered" by the defendant-proprietor.
The defendants acknowledged there was no coverage under the policy for "intentional actions by the insured" in their third-party claim against their insurer. However, the defendants alleged there was coverage for their "many acts of alleged negligence", and that these claims were severable from those which fell within the exclusion clauses.
The Court rejected the insured-defendants' submissions on a plain reading of the policy.
As noted, the relevant exclusion was worded broadly and applied regardless of whether the alleged injuries arose directly or indirectly, provided that the action in any way involved an assault or battery. In other words, even if there was a valid claim in negligence arising from the fall from the barstool or the subsequent ejection from the bar, the totality of the claim plainly involved allegations of assault and battery which, as defined in the policy, also included negligence in the insured's use of force. In the Court's words, the fall from the barstool was "narrative or context" that ostensibly caused the proprietor to remove the plaintiff from the premises. As a result, the Court found there was no duty to defend.
This decision serves as a reminder for insurers to carefully review the policy wording when considering a duty to defend. Clear language may exclude coverage in mixed claims where certain allegations might otherwise be presumed to engage a duty to defend.
Similarly, clear language may exclude coverage even where the relevant terms – such as "assault" and "battery" in this case – are defined in a manner which might otherwise offend their commonly understood legal definitions.
Correspondingly, however, and as noted by the Court, insurers should consider whether exclusionary clauses may operate to nullify coverage or otherwise make it illusory. If so, an insurer may be unable to rely on such clauses. In this case, however, the Court was satisfied that the policy could hypothetically cover the claims of patrons who were overserved and fell off barstools while excluding claims involving fights, brawls and ejections.
*We note this post was publicized prior to the expiration of the relevant appeal period, and the parties may still elect to appeal.
Thank you to Christopher Argue, articling student, for his assistance in preparing this post.
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