All Dressed Up And No Duty To Defend: Intentional Tort Claim "dressed Up" As Negligence Does Not Trigger Duty To Defend

• Law Firm: Gowling WLG
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Trials & Appeals & Compensation, Professional Negligence
• Author: Ms Belinda Bain and Luke Sabourin
• Published date: 17 May 2023

In the case of Butterfield v Intact Insurance Company¹, the Ontario Court of Appeal addressed an insurer's duty to defend and an intentional and criminal act exclusion in the context of a negligence claim against an insured. The Court of Appeal had to decide whether the application judge erred in finding that an intentional and criminal act exclusion applied such that the insured was not entitled to a defence.

The Court of Appeal upheld the application judge's decision, agreeing that the negligence claim was derivative of an intentional tort, and that the policy's intentional and criminal act exclusion clearly applied.

Background facts

The applicant, Butterfield, suffered a psychotic episode at a Waterloo firearms store and stabbed the storeowner. The police charged Butterfield with aggravated assault, but Butterfield was found not criminally responsible as he did not know what he was doing was morally wrong.

The storeowner sued Butterfield in negligence. The storeowner alleged that Butterfield was negligent by applying for a firearms licence and attending a firearms store, and that it was reasonably foreseeable that Butterfield may have harmed someone while purchasing or possessing a firearm.

Butterfield had a condominium unit owner's policy that included standard third party liability insurance up to a limit of $2 million.

The policy contained a standard intentional/criminal acts exclusion that read:

"We do not insure claims arising from.bodily injury or property damaged caused by any intentional or criminal act or failure to act by.any person insured by this policy."

Butterfield's insurer denied coverage based on the intentional/criminal acts exclusion. Butterfield brought an application seeking a declaration that his insurer owed him a duty to defend the storeowner's negligence action.

On July 13, 2022, Justice Braid of the Ontario Superior Court of Justice held that the insurer did not have a duty to defend or indemnify Butterfield.

Butterfield appealed Justice Braid's decision to the Ontario Court of Appeal.

Understanding the law behind the decision

A fundamental principle of insurance law is that policies ordinarily only cover fortuitous or contingent losses.² This is because insurance usually only makes economic sense where the losses covered are unforeseen or accidental. Allowing coverage for intentional or foreseen acts destroys the ability of insurers to spread risk rationally.³ Further, if people could insure intentional and foreseen acts...