The Exclusion For Intentional Or Criminal Acts

Introduction

As third party liability insurance is not intended to cover an insured for intentionally caused harm, liability policies, particularly homeowner's and commercial general liability policies, invariably have some form of an exclusion for intentional or criminal acts.

This is the case notwithstanding that some liability policies, particularly older CGL policies, also addressed the issue with a limitation in the insuring agreement that the property damage must be caused by an accident. With such policies then providing a definition of "accident" which precluded intentionally caused loss or damage. Similarly, early case law including Fenton v. J. Thorley & Co.,1 provided an interpretation of the word "accident" that was consistent with an intention to exclude intentionally caused harm:

" ... [T]he expression "accident" is used in the popular and ordinary sense of the word as denoting an unlooked-for mishap or an untoward event which is not expect or designed."2

Current examples of the exclusion for intentional or criminal acts include the following:

Intact Commercial General Liability Policy (based on IBC 2100 wording)

"2. This insurance does not apply to:

1. Expected or Intended Injury

Bodily Injury or Property Damage expected or intended from the standpoint of the insured. This exclusion does not apply to Bodily Injury resulting from the use of reasonable force to protect persons or property."

ING Homeowner's Policy

"We do not insure your claims arising from (6) Bodily injury or property damage caused by any intentional or criminal act or failure to act by: (a) any person insured by this policy; or (b) any other person at the direction of any person insured by this policy;"

Interestingly, the standard CGL policy wording does not actually use the phrase "intentional or criminal acts" for what is the equivalent of the intentional and criminal acts exclusion. Rather the CGL policy references "bodily injury and property damage expected or intended from the standpoint of the insured". Clearly, it is reminiscent of language similar to that used by the House of Lords early in the last century.

Issues of the applicability of the intentional or criminal acts exclusion will arise in both the duty to defend context as well as with respect to the obligation to indemnify. As with any case that involves the interpretation of any aspect of an insurance policy knowledge of the basic principles of insurance law developed by the Supreme Court of Canada in such cases as Nichols v. American Home Assurance Co.3, Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co.4, Sansalone v. Wawanesa Mutual Insurance Co.5, Non-Marine Underwriters, Lloyd's of London v. Scalera6, Monenco Ltd. v. Commonwealth Insurance Co.7, Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada8, Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada9 and Ledcor Construction v. Northbridge Indemnity Insurance Co. 10 is essential.

Distinguishing the Intention to Commit an Act versus the Intention to Cause Harm

Because much of the law of negligence consists of the unforeseen consequences of intentional conduct, the author Gordon G. Hilliker, characterizes the intentional or criminal acts exclusion as the "intentional injury" exclusion. Negligence is covered, but intentional torts, generally, are not."11

Often it is necessary to distinguish between the intent to commit an act versus the intention to cause harm, or between intentional conduct versus intentional harm.

Hilliker cites the following example: a driver makes a right hand turn and strikes an unseen pedestrian in a crosswalk, causing the pedestrian to sustain injuries. The act of turning the vehicle is deliberate but there is no intent on the part of the driver to injure the pedestrian.

The leading case to establish that the exclusion clause must be read so as to require that the injuries be intentionally caused, in the sense that they are the product of an intentional tort and not negligence is that of Non-Marine Underwriters, Lloyd's of London v. Scalera.12

This decision addressed the question of whether the insurer had a duty to defend. In 1996, a plaintiff brought a civil action against five B.C. Transit bus drivers, including the appellant, arising out of various alleged sexual assaults that occurred between 1988 and 1992. The allegations included battery, negligent battery, negligent misrepresentation and breach of fiduciary duty. The appellant owned a homeowner's insurance policy issued by the respondent insurer. The policy provided coverage for "compensatory damage because of bodily injury" arising from the insured's personal actions, excepting "bodily injury or property damage caused by any intentional or criminal act". The Respondent insurer sought a declaration that it was not required to defend the appellant against the plaintiff's claims.

The British Columbia Supreme Court dismissed the Insurer's request for a declaration that it not be required to defend the appellant against the plaintiff's claims. The British Columbia Court of Appeal allowed the insurer's appeal and the Appellant homeowner appealed to the Supreme Court of Canada.

The Supreme Court of Canada held that the appeal should be dismissed. There were two separate judgments. One authored by McLachlin, J. (as she then was) and one by Iacobucci, J. Although the result was the same the majority decision (McLachlin, L'Heureux-Dubé, Gonthier and Binnie, JJ.) differed from the minority (Iacobucci, Major and Bastarache, JJ.) in connection with the minority's treatment of the tort of sexual battery.

In finding that the exclusion clause for intentional or criminal acts is to be read so as to require that the injuries be intentionally caused, Justice Iacobucci stated:

"There is no dispute in this case that the plaintiff's allegations fall within the general coverage provisions of the policy. All that is at stake is whether the exclusion clause applies. That...