Supreme Court Of Canada Expands Scope Of 'Wilful Misconduct' Marine Exclusion – No Intent Required

In a 4-1 decision,1 the Supreme Court of Canada recently held that a statutory exclusion for loss attributable to "wilful misconduct" of the insured does not require proof that the insured intended to cause the loss. Rather, the Court held that it is sufficient if the insured had a "duty to know" and acted recklessly in the face of that duty, even if the insured in fact subjectively believed that there was no risk of harm.

In a strong dissenting opinion, however, Wagner J. held that a finding at trial, that the insured had no intention of causing harm, was determinative. In Wagner J.'s view, "wilful misconduct" requires proof of intent, and so the majority misconstrued the concept of recklessness by finding that it did not.

While Peracomo focuses on a specific statutory exclusion under maritime law, this decision nonetheless raises the question of whether some may argue that it has general application that expands the scope of intentional acts exclusions found in many other policy wordings.

It also bears mentioning that the majority did not refer to any of the oft-cited basic principles of policy interpretation, but instead chose to rely on cases interpreting the term "wilful misconduct" in the context of, among other things, the now-defunct "gratutitous passenger" doctrine. The majority's reasons for doing so – and its ramifications with respect to the development of the law in this area – remain unclear.

The Facts

Réal Vallée is a crab fisherman who had fished on the St. Lawrence River near Baie-Comeau for about 50 years. He is the principal of his one-man company, Peracomo Inc., and operates the fishing boat Réalice.

M. Vallée's story begins in 2005. While fishing for crab aboard the Réalice, one of his anchors snagged something on the bottom of the river. It turned out to be a cable. It was, in fact, a fibre-optic telecommunications cable, co-owned by TELUS Communications Co. ("Telus") and Hydro-Québec, and also used by Bell Canada. Later that year, M. Vallée visited a local museum in located in a former church, where he had occasion to look at an old map or chart. It showed a line running through the area where he fished for crab. Beside the line, the word "abandoned" ["abandonné"] was handwritten. M. Vallée assumed that the line on the chart was the same cable he had snagged. As the trial judge put it,

[w]ithout giving [the matter] a second thought, [Mr. Vallée] concluded that this was what he was hooking with his anchor. He only glanced at it for a matter of seconds and cannot recall whether it was a marine chart, a topographical chart, or indeed what type of map it was at all.2

In 2006, M. Vallée snagged the cable again. This time, however, he cut the cable with an electric saw and buoyed one end of the cable. A few days later, while in the same area, his anchor caught the cable for a third time. He cut the cable again.

The Trial

Of course, the cable was not "abandoned" at all. Telus, Hydro-Québec and Bell Canada sued M. Vallée...