Two cases recently issued by the Ontario Court of Appeal have found that insurers do not need to defend or indemnify homeowners or their children where the children are faced with bullying accusations.
The companion decisions of Unifund Assurance Company v. D.E. ("Unifund") and C.S. v. TD Home and Auto Insurance Company ("TD Home") overturned the trial court's decisions which found that an exclusion clause in the homeowners' policies was ambiguous, and therefore not applicable. Both decisions involved cases of under-age girls accused of bullying and harassing other children. The victims in these cases sued the children and their parents, alleging that the parents failed to take steps to prevent or remedy the continuous harassment of the victims. The parents argued that their insurer had a duty to defend and indemnify them under their homeowner insurance policies, which included liability coverage if their personal actions caused unintentional bodily injury.
In response, the insurers held that a standard exclusion clause applied. Specifically, clause 7(b) denied coverage where the claim arose from the insured's failure "to take steps to prevent sexual, physical, psychological or emotional abuse" or harassment.
In Unifund, the trial Court found that, since clause 7(b) was silent on whether it applied to only intentional or unintentional failures to take steps to prevent harassment, the clause was ambiguous. As such, the Court interpreted the exclusion clause narrowly, finding that the clause was limited to intentional failures but not situations where the failure arose through negligence. The Court therefore held that the exclusion clause did not apply and the insurers had a duty to defend. The Court in TD Home adopted the same reasoning as the trial decision of Unifund.
On appeal of both decisions, the Court of Appeal rejected the argument that clause 7(b) was ambiguous. Rather, with respect to the claim against the parents, the Court of Appeal held that clause 7(b) was "clear on its face" and applied to claims of negligence. As such, the insurers were entitled to rely on the exclusion clause and deny coverage to the parents.
Unlike TD Home, the daughter in Unifund was not a party to the application or the appeal. In TD Home, the Court of Appeal also addressed the insurer's duty to defend the daughter. In that case, the Court of Appeal noted that the claims against the daughter were that she "verbally threated and physically assaulted" the victim at school, in the community, and via telecommunications. The Court of Appeal held that clause 6(b) applied, which denied coverage where the claim arose from an intentional act causing bodily injury. Therefore the insurer in TD Home did not have a duty to defend and indemnify the daughter.
The Court of Appeal's companion decisions certainly send a clear message that children and parents of children accused of bullying will not be able to rely on a homeowners' policy with similar exclusions in arguing their insurer has a duty to defend. Nevertheless, insurers would do well to review their policies and ensure their exclusion clauses leave little room to be interpreted ambiguously.
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