Insurance Company Not Obligated to Defend Sexual Assault Claim Due to Abuse Exclusion Clause in Policy
In a recent Ontario Court of Appeal decision, the court found that an insurance company was under no obligation to defend a claim made against a martial arts school because the insurance policy excluded any claim made for abuse after one of the school’s students was sexually assaulted by an employee.
The student was a minor athlete and student of a kickboxing team at a martial arts school (the “school”). The school was responsible for supervising her while she was in their care. The accused was the co-owner and employee of the school.
The student claimed she was sexually assaulted by the accused on May 1, 2017 while they were on a return flight from Thailand after a kickboxing competition. She started an action against the school and the accused for damages.
On September 7, 2018, the accused was found guilty of sexual assault and sexual interference with a minor with whom he was in a position of trust and authority stemming from the assault on May 1, 2017.
The student sued the school, alleging that it owed her a duty of care and breached that duty of care by failing to supervise and protect her from harm, when they knew or ought to have known that there was a risk of danger or harm to the student at the hands of the accused. She also alleged that the school was negligent in its failure to supervise the student, ensure she was safe while on their premises and under their care and control, in particular on the flight from Thailand on or about May 1, 2017. She further alleged that the school failed to adequately, or at all, ensure its employees were suitable for employment around children and failed to perform the necessary background checks for their employees. Finally, the student stated that the actions of the school and the accused constitute reckless and/or intentional infliction of emotional distress.
The school had a Commercial General Liability policy with an insurance company that covered claims for compensatory damages for bodily injury or property damage except for claims that arose directly or indirectly from abuse.
The insurance company claimed that it had no duty to defend the action commenced by the student against the school. It told the school:
“[The accused] was an employee at the time of the alleged offence and is an insured under the policy. As per the exclusion […], coverage is removed for any claims arising directly or indirectly out of abuse committed or alleged to have been committed by an insured. This includes vicarious liability and claims of negligence against [the school] as they arise out of abuse.”
The school contested the denial of coverage and brought an application seeking defence of the claim and coverage from the insurance company.
The Insurance Policy
The relevant terms of the policy read as follows:
We will pay those sums that the insured becomes legally obligated to pay as “compensatory damages” because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “action” seeing those “compensatory damages”. However, we will have no duty to defend the insured against any “action” seeking “compensatory damages” for “bodily injury” or “property damage” to which this insurance does not apply…
An “Abuse Exclusion” form, which formed part of the policy provided that:
This insurance does not apply to:
Claims or “actions” arising directly or indirectly from “abuse” committed or alleged to have been committed by an insured, including the transmission of disease arising out of any act of “abuse”.
Claims or “actions” based on your practices of “employee” hiring, acceptance of “volunteer workers” or supervision or retention of any person alleged to have committed “abuse”.
Claims or “actions” alleging knowledge by an insured of, or failure to report, the alleged “abuse” to the appropriate authority(ies).
The limit of liability under the policy was $2 million.
Lower Court Decision
The application judge found that the insurance company had no duty to defend the school against the claim that it was negligent for failing to supervise the student and ensure she was safe while on the flight from Thailand on May 1, 2017.
He also held that the claim fell within the policy exclusion because it arose directly or indirectly from an act of alleged abuse.
However, the application judge ultimately held that the insurance company had a duty to defend the claim due to the allegation that the school “was negligent in its failure to supervise the [student], ensure she was safe while on their premises and under their care and control” because that specific allegation was not caught by the Abuse exclusion, and therefore would be covered by the insurance company’s policy.
The insurance company appealed.
Court of Appeal Decision
The court found that wording of the policy exclusion was clear and unambiguous and that all “claims or actions arising directly or indirectly from abuse” and or claims or actions based on “supervision or retention of any person alleged to have committed abuse” were excluded from coverage. Any claim arising from the sexual abuse was clearly excluded from coverage under the policy.
Additionally, the court found that the subject matter of the claim was the sexual abuse and all the damages claimed by the student arose from the sexual assault.
As a result, since there was no claim or action other than the claim arising from the sexual abuse that took place on May 1, 2017, which was excluded from coverage under the policy, there was no need to assess whether those claims would be covered by the policy.
As such, the court allowed the appeal, finding that the insurance company had no duty to defend the claim.
Being the victim of a physical or sexual assault is a traumatic and devastating experience for anyone, and this is magnified in situations where the victim suffers lasting or permanent physical or psychological damage. We understand that seeking help in such situations is in and of itself a difficult step, and our skilled and caring personal injury lawyers will work with you each step of the way to ensure that you are protected, well-informed and that you obtain the maximum compensation to which you are entitled.
When you meet with a personal injury lawyer at Petker Campbell Postnikoff with respect to injuries suffered in an assault or sexual assault, we will begin by reviewing the relevant details with you and work to secure all available evidence. It is important to do this as early as possible, in order to preserve physical evidence and obtain witness statements while memories are still fresh.
Another initial focus will be ensuring that you receive all necessary medical attention for your injuries, so that you can start working on recovery right away. We want to ensure that you can concentrate on what is most important – your physical and mental well-being. We will connect you with our trusted network of medical professionals so that you can get to work on healing while we handle the other details on your behalf.
Please contact us today to arrange a no-obligation consultation with our caring and experienced personal injury lawyers. To reach a member of our firm, you can call us at 519-886-1204 or contact us online. We will work to maximize your compensation while shielding you from unnecessary additional stress following a traumatic event. We offer prospective personal injury clients a free initial consultation.