I May Take No Position On What You Say, But Our Insurer Will Defend Your Right To Say It

I May Take No Position On What You Say, But Our Insurer Will Defend Your Right To Say It1

The Difference Between an Insurer's Duty to Defend and the Duty to Indemnify

A recent decision of the Ontario Superior Court of Justice, MacFarlane v. Canadian Universities Reciprocal Insurance Exchange, 2019, 2019 ONSC 4631, answered the question of whether a universities' 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.

Nonetheless, this case may make the rounds and be used to bolster arguments that, by extension, the university too must defend a professor accused of defamation while acting in the course of their employment and also take ultimate financial responsibility for any damages that may be awarded against the professor. However, citing this case for such a proposition would not be appropriate, as the Court itself states in a footnote in the judgement "Both sides agree that [the duty to defend] is a broader and different duty than the duty to indemnify, which is not being decided at this time".

Background

Dr. M is employed at the University of Windsor. Prof. C was terminated from the University and found employment elsewhere. The termination was subject to a Non-Disclosure Agreement (the "NDA") between Prof C and the University. Following the termination, Dr. M made various allegedly defamatory statements against Prof. C to three contexts, including to Prof C's new employer, warning them that Prof C was a sexual predator (the "Warning Statements"). The Warning Statements related to unproven allegations of sexual misconduct/harassment involving students at the University of Windsor. Prof. C. brought a defamation action against Dr. M. for the Warning Statements (the "Defamation Action").

The University's insurer, Canadian Universities Reciprocal Insurance Exchange ("CURIE"), provides coverage - defence and indemnification - to employees of the University facing defamation claims but the insurance policy excludes coverage where claimed acts...