Has The Requirement Of Fortuity In Insurance Gone To The Dogs? No, But The Ontario Court Of Appeal Says It Is Inapplicable Where An Insurer Expressly Agrees To Cover Intentional Acts

Insurance is a contractual arrangement providing a guarantee of payment in the event of a specified event or loss. Usually, only fortuitous or contingent losses are covered under a liability insurance policy. A fortuitous loss is one that is neither intentional nor inevitable. The obvious policy concern is that it would not be desirable to encourage people to injure others intentionally by indemnifying them for the civil consequences. As a result of the "fortuity principle", most liability insurance policies exclude coverage for intentional acts.

But does the fortuity principle apply to all liability insurance policies ? This was the issue before the Ontario Court of Appeal in the recent case of Ontario Society for the Prevention of Cruelty to Animals v Sovereign General Insurance Company ("Sovereign").1

In the Sovereign case, three lawsuits had been commenced against the Ontario Society for the Prevention of Cruelty to Animals (OSPCA). The respective plaintiffs had pled in their statements of claim that the OSPCA was liable for numerous intentional torts, including malicious prosecution, false arrest and imprisonment, slander, and defamation. At the material times, the OSPCA was covered by commercial general liability policies of insurance issued by Sovereign General Insurance Company. These policies were tailored to OSPCA's circumstances as "an investigative body which can lay charges...without supervision from Crown prosecutors", and explicitly providing coverage for the offences alleged in the underlying lawsuits. However, Sovereign refused to defend OSPCA, stating that the claims were uninsurable by virtue of the fortuity principle, as the plaintiffs each claimed that the OSPCA intended to cause them harm.

At first instance, the application Judge clarified that the fortuity principle serves as an "interpretive aid", uniquely applicable to insurance contracts. The fortuity principle acts to presumptively exclude intentional...