Sansalone v. Wawanesa Mutual Insurance Co., 2000 SCC 25, [2000] 1 SCR 627

Sansalone v. Wawanesa Mutual Insurance Co., [2000] 1 S.C.R. 627

Nicodemo Sansalone                                                                         Appellant

v.

Wawanesa Mutual Insurance Co.                                                     Respondent

Indexed as: Sansalone v. Wawanesa Mutual Insurance Co.

Neutral citation: 2000 SCC 25.

File No.: 26708.

1999: October 14; 2000: May 3.

Present: L’Heureux‑Dubé, Gonthier, McLachlin, Iacobucci, Major, Bastarache and Binnie JJ.

on appeal from the british columbia court of appeal

Insurance — Homeowner’s insurance — Insurer’s duty to defend — Plaintiff bringing action against insured alleging battery, negligent battery, negligent misrepresentation and breach of fiduciary duty — Policy containing exclusion for bodily injury caused intentionally by the insured — Whether insurer has a duty to defend.

Insurance — Homeowner’s insurance — Insurer’s duty to defend — Optional endorsement for day care coverage containing exclusion for sexual molestation — Whether exclusion in endorsement implies coverage in general coverage provisions.

Torts — Intentional torts — Battery — Evidence — Burden of proof — Consent — Whether plaintiff must prove lack of consent.

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 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. In the policy, the respondent agreed to “defend any action against [the insured] alleging bodily injury or property damage and seeking compensatory damages” arising from the insured’s personal actions, excepting “bodily injury or property damage caused intentionally by [the insured] or at [the insured’s] direction.” The appellant did not purchase an optional endorsement for Day Care Coverage, which expressly excluded claims for sexual molestation. The British Columbia Supreme Court granted the appellant a declaration that the policy required the respondent to defend him against the plaintiff’s action. The Court of Appeal allowed the respondent’s appeal. The issues on this appeal were substantially the same as in Non-Marine Underwriters, Lloyd’s of London v. Scalera, [2000] 1 S.C.R. 551, 2000 SCC 24.

Held: The appeal should be dismissed.

Per L’Heureux-Dubé, Gonthier, McLachlin and Binnie JJ.: For the reasons given in Scalera, the plaintiff’s claims could not trigger coverage under the policy. Accordingly, the respondent has no duty to defend. While there is substantial agreement with Iacobucci J.’s reasoning, his approach to the tort of battery in the sexual context is disagreed with.

Per Iacobucci, Major and Bastarache JJ.: For the reasons given in Scalera, the respondent has no duty to defend the appellant because the plaintiff’s statement of claim makes no allegation that could potentially give rise to indemnity under the insurance contract. Since the duty to defend applies only to potentially indemnifiable claims, the respondent has no such duty.

The optional day care endorsement in the appellant’s policy should not be used to interpret the more general coverage provisions. An explicit exclusion for sexual torts in one context does not imply that they are to be covered in all other contexts.

Cases Cited

By McLachlin J.

Followed: Non-Marine Underwriters, Lloyd’s of London v. Scalera, [2000] 1 S.C.R. 551, 2000 SCC 24.

By Iacobucci J.

Referred to: Non-Marine Underwriters, Lloyd’s of London v. Scalera, [2000] 1 S.C.R. 551, 2000 SCC 24; Co-operative Fire & Casualty Co. v. Saindon, [1976] 1 S.C.R. 735; Bazley v. Curry, [1999] 2 S.C.R. 534; Jacobi v. Griffiths, [1999] 2 S.C.R. 570.

Statutes and Regulations Cited

Insurance Act, R.S.B.C. 1996, c. 226, s. 28.

APPEAL from a judgment of the British Columbia Court of Appeal (1998), 158 D.L.R. (4th) 385, 106 B.C.A.C. 268, 172 W.A.C. 268, 48 B.C.L.R. (3d) 143, 2 C.C.L.I. (3d) 1, [1998] 9 W.W.R. 209, [1998] I.L.R. ¶I-3568, [1998] B.C.J. No. 834 (QL), allowing an appeal from a decision of the British Columbia Supreme Court (1997), 32 B.C.L.R. (3d) 162, 42 C.C.L.I. (2d) 148, [1997] I.L.R. ¶I-3430, [1997] B.C.J. No. 38 (QL). Appeal dismissed.

David P. Church and Ian G. Schildt, for the appellant.

Mark M. Skorah and Julie K. Lamb, for the respondent.

The judgment of L’Heureux-Dubé, Gonthier, McLachlin and Binnie JJ. was delivered by

1                                   McLachlin J. – I have read the reasons of my colleague Iacobucci J. in this appeal. Although I agree with his disposition of the appeal and with much of his reasoning, I cannot agree with his approach to the tort of battery in the sexual context, for the reasons I gave in the companion appeal Non-Marine Underwriters, Lloyd’s of London v. Scalera, [2000] 1 S.C.R. 551, 2000 SCC 24.

2                                   The scope of the exclusion clause in the appellant’s policy, and the allegations made against the appellant, are substantially the same as in Scalera. It follows, for the reasons I gave, that the plaintiff’s claims could not trigger coverage under the policy. Accordingly, the respondent has no duty to defend.

3                                   I would dismiss the appeal with costs.

The reasons of Iacobucci, Major and Bastarache JJ. were delivered by

Iacobucci J.--

I. Introduction

4                                   This appeal was heard along with the appeal in Non-Marine Underwriters, Lloyd’s of London v. Scalera, [2000] 1 S.C.R. 551, 2000 SCC 24, reasons in which are being released concurrently herewith. The facts in the two appeals are nearly identical; both appellants have been sued for damages arising from allegedly nonconsensual sexual activity with an adolescent girl (“the plaintiff”). Both respondents had issued homeowner’s insurance policies to the respective appellants. At stake in both appeals is whether the respondents have a duty to defend the appellants against the plaintiff’s suit.

5                                   For the reasons set out in Scalera, supra, I find that the respondent has no duty to defend the appellant because the plaintiff’s statement of claim makes no allegation that could potentially give rise to indemnity under the insurance contract. Since the duty to defend only applies to potentially indemnifiable claims, the respondent has no such duty and the appeal must be dismissed.

II. Facts

6                                   As set out in Scalera, this appeal arose from the plaintiff’s allegations of sexual assault against several B.C. Transit bus drivers. The plaintiff’s statement of claim alleges that between 1989 and 1992, while on duty with B.C. Transit, the appellant regularly attended at the plaintiff’s parents’ store, and became acquainted with the plaintiff. She, in turn, regularly rode on buses driven by the appellant. The statement of claim makes allegations against the appellant that are substantially the same to those in Scalera but in a different time period.

7                                   The appellant’s homeowner’s insurance policy provided general coverage in the following terms:

“Occurrence” means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

. . .

We will pay all sums which you become legally liable to pay as compensatory damages because of bodily injury or property damage to which this insurance applies. We will defend any action against you alleging bodily injury or property damage and seeking those compensatory damages, even if it is groundless, false or fraudulent. . . .

The amount of insurance is the maximum amount we will pay, . . . for all compensatory damages in any one occurrence.

You are insured for claims made or actions brought against you for:

(1)   Personal Liability: bodily injury or property damage arising out of your personal activities anywhere in the world. [Emphasis added.]

The policy also included the following exclusion clause:

Exclusions: You are not insured for claims made or actions brought against you for:

                                                                   . . .

(8)   bodily injury or property damage caused intentionally by you or at your direction;  [Emphasis added.]

8                                   Finally, the appellant’s policy included an optional endorsement for Day Care Coverage, which included the following:

If the Declarations indicate that DAY CARE COVERAGE is included, you are insured under Coverage E — Legal Liability and Coverage F — Voluntary Medical Payments for claims made or actions brought against you for bodily injury or property damage arising out of the use of your premises for day care.

You are not insured for claims made or actions brought against you for bodily injury or property damage arising out of sexual molestation, corporal punishment or physical or mental abuse inflicted upon any person by you or at your direction, by your employees or by an other person involved in any capacity in the day care enterprise. [Emphasis added.]

9                                   The appellant petitioned the Supreme Court of British Columbia for a declaration that the respondent was required under the policy to defend him against the plaintiff’s action. Smith J. granted the petition, and the British Columbia Court of Appeal allowed the appeal.

III. Judicial Decisions

A. British Columbia Supreme Court (1997), 32 B.C.L.R. (3d) 162

10                               Smith J. prefaced his analysis by noting that insurance contracts should be read broadly in favour of the insured. The exclusion clause in the insurance contract required an intent to injure, not merely an intentional act. Therefore if the exclusion clause was to apply, the insurance company would have to prove that the nature of the act alleged was such that a court could infer an intent to injure on the part of the appellant.

11                               Smith J. concluded that sexual activity was not such an act. He observed that sexual activity is not inherently harmful, that the plaintiff had alleged sexual activity that could have been perceived as consensual rather than forcible rape, and that the pleadings on their face contained allegations of negligence. As a result, since it was possible that the underlying claim could potentially be covered by the policy, the insurer had a duty to defend the suit. Smith J. therefore granted the appellant’s petition.

B. British Columbia Court of Appeal (1998), 48 B.C.L.R. (3d) 143

(i)                Hollinrake J.A., Proudfoot J.A. concurring

12                               The appeals of the respondent and Oppenheim, respondent in the companion appeal, Scalera, were consolidated at the Court of Appeal. Having accepted Co-operative Fire & Casualty Co. v. Saindon, [1976] 1 S.C.R. 735, as the leading case on point, Hollinrake J.A. dismissed Humphries J.’s suggestion that the pleadings contained a viable claim for negligence. He asked whether the injury alleged by the plaintiff was the natural and probable consequence of the appellant’s actions. Noting at para. 82 the “number of cases, both criminal and civil, before the courts in the last number of years where psychological harm is said to follow upon non-consensual sexual activity”, Hollinrake J.A. took judicial notice of the fact that harm was a natural and probable consequence of the acts alleged, and therefore found that the exclusion clause applied.

(ii)   Finch J.A. (dissenting).

13                               Finch J.A. found that the plaintiff’s claim alleged sexual battery in the absence of her consent, and breach of duty arising from a power-dependency relationship. He found that there was no plea of negligence, since the appellant’s belief in the plaintiff’s consent could not change an intentional act into an unintentional one.

14                               The exclusion in the appellant’s insurance policy related to injuries caused intentionally, not intentional acts causing injury. Finch J.A. was not willing to infer that sexual activity between the plaintiff and the appellant would inevitably have harmful consequences. As the exclusion clause in Saindon was identical to the exclusion clause here, he found no error in the chambers judge’s refusal to infer an intention to cause harm. Therefore, he found that the case as pleaded could give rise to a finding of liability without a finding that the appellant intended to cause injury. As it was possible that liability could be imposed for claims not excluded from coverage by the policy wording, he found that the respondent had a duty to defend the action.

IV. Issues

15                               This appeal raises three issues:

1.    Do the intentional act exclusion clauses in the appellant’s insurance policy operate to relieve the respondent’s duty in this case?

2.    Was there an “accident” or “occurrence” that is sufficient to trigger coverage?

3.    Does s. 28 of the British Columbia Insurance Act, R.S.B.C. 1996, c. 226, absolve the respondent of any duty to defend the appellant?

Because of my disposition of the first issue, I find it unnecessary to address the latter two in this appeal.

V. Analysis

16                               Since I have already conducted an analysis of the law in this appeal in Scalera, supra, in these reasons I will simply address a clause unique to the insurance policy in this appeal, and then briefly summarize my conclusions in this appeal.

A. Interpretation of the Insurance Policy in this Appeal

17                               The appellant has pointed out that the insurance policy issued by the respondent has a specific exclusion for sexual torts committed in the day care context. He argues that, by expressly limiting coverage for sexual torts in the day care context, the respondent implicitly concedes that such conduct could give rise to indemnity outside the day care context.

18                               I cannot agree with this interpretation of the contract. The optional day care endorsement covers a very specific situation quite apart from the general homeowner’s coverage. The general coverage is for “activities anywhere in the world”, and excludes only injuries caused “intentionally by [the insured] or at [the insured’s] direction”.  By contrast, the day care coverage is only for injuries “arising out of the use of your premises for day care”, and extends to cover vicarious liability for the actions of employees. In short, it insures a qualitatively different type of risk, it requires a separate, optional endorsement, and it therefore should not be used to interpret the more general coverage provisions.

19                               Moreover, the special exclusion for sexual torts in the daycare context no doubt reflects the sad reality that such torts are tragically common in the day care environment. See Bazley v. Curry, [1999] 2 S.C.R. 534; Jacobi v. Griffiths, [1999] 2 S.C.R. 570. While courts should generally construe ambiguities against the insurer, I believe it would strain credibility to conclude that an explicit exclusion for sexual torts in one very specific context implies that they are to be covered in all other contexts. Instead, the specific exclusion clause no doubt represents nothing more than an excess of caution on the part of the respondent.

B. Application of the Exclusion Clause to this Appeal

20                               The applicable legal principles are set out in the reasons in Scalera, supra, and need not be repeated here. The question before the Court is whether any of the claims against the appellant alleged by the plaintiff could potentially trigger indemnity under the insurance policy issued by the respondent. Specifically, the issue is whether the insurance policy’s exclusion for “bodily injury or property damage caused intentionally by you” precludes indemnity for any of the claims against the appellant. If there can be no indemnity for even a successful claim, there is no duty to defend.

21                               The allegations against the appellant are essentially identical to those against Vincent Scalera. The plaintiff has alleged sexual battery, negligence, and breach of fiduciary duty by the appellant. As outlined in Scalera, supra, none of these claims could potentially trigger indemnity.

22                               To prove sexual battery, the plaintiff will have to show that a reasonable person should have known that the plaintiff did not validly consent to sexual activity. If she cannot show this, her claim will fail and there would be no duty to indemnify. If she can, then given the inherently harmful nature of nonconsensual sexual activity, any resulting injuries must be deemed intentional in nature. The exclusion clause would therefore apply, and there would be no duty to indemnify.

23                               The allegations of negligent battery and breach of fiduciary duty are subsumed into the sexual battery claim. These claims are based on the same facts, and resulted in the same harm to the plaintiff. The mere fact that they are pleaded as negligence does not, for the purpose of this appeal, change the intentional nature of the acts. Therefore the exclusion clause equally applies to these claims.

24                               As the foregoing demonstrates, there is no possible set of circumstances in which the respondent could be liable to indemnify any of the plaintiff’s claims against the appellant. This being so, there can be no duty to defend.

VI. Disposition

25                               For the above reasons, I would dismiss the appeal with costs.

Appeal dismissed with costs.

Solicitors for the appellant: Camp Church & Associates, Vancouver.

Solicitors for the respondent: Skorah Doyle Khanna, Vancouver.