How Does an Exclusion Clause Affect the Insurer’s Duty to Defend?
In Jack-O’s Sorts Bar v. US Liability Insurance Co., 2023 ONSC 5925, United States Liability Insurance Company (“the insurer”) brought a summary judgment motion to determine whether it had a duty to defend Jack-O’s Sorts Bar and the bar’s owner, Harold Douglas Eakins (“the insureds”), in a personal injury claim.
The court determined that the Insurer did not have a duty to defend, given that the events of the incident fell within an exclusion clause of the policy.
Background
The plaintiff, Guy Kelloway, alleged that he suffered personal injuries when he was overserved at Jack-O’s Sorts Bar and subsequently fell off of his barstool. The plaintiff then alleges that the owner of the bar, Mr. Eakins, forcibly removed him from the bar, verbally and physically assaulting him.
The plaintiff’s statement of claim made several allegations of negligence, most relating to overserving alcohol to the plaintiff, but Paragraph 7(l) of the statement of claim alleges: “in the alternative, Doug intentionally assaulted and battered Guy”. At paragraph 18, the plaintiff alleges Mr. Eakins’ actions “amount to an assault and battery” upon the plaintiff.
While it was undisputed that many of the plaintiff’s claims fell within those that could be covered within the insurance policy, the Insurer relied upon a broadly worded exclusion clause which denied a duty to defend where the action is in consequence of or “in any way involving” assault or battery, in denying coverage to the Insureds.
The Insureds commenced a third-party claim against the Insurer, seeking “contribution and indemnity” pursuant to the Negligence Act and in “common law” regarding the denial of a duty to defend and indemnify.
At the eve of trial, the plaintiff filed an Amended Statement of Claim in an attempt to trigger the Insurer’s duty to defend, however the amendments ultimately did not change the Insurer’s position.
The applicable commercial general liability policy included an “Assault or Battery Exclusion”, which indicated that the insurance did not apply to:
Any “actions”, claim or demand based upon any actual or alleged “assault” or “battery”, or out of any act of omission in connection with the prevention or suppression of any “assault” or “battery”, including the use of reasonable force to protect persons or property…
This exclusion applies to all “bodily injury”… sustained by any person, including emotional distress and mental anguish, arising out of, directly or indirectly result from, in consequence of, or in any way involving “assault” or “battery”… arising out of or caused in whole or in part by negligence or other wrongdoing with respect to…
The exclusion clause defined the terms “assault” and “battery” as follows:
“Assault” means the threat of, or use of force on another that causes that person to have apprehension of imminent harmful or offensive conduct, whether or not the threat or use of threat or use of force is alleged to be negligent, intentional or criminal in nature.
“Battery” means negligent or intentional physical contact with another without consent that results in physical or emotional injury.
Analysis
The court noted that a coverage matter, such as this, was typically addressed by way of an application proceeding separate from the underlying tort action. However, a summary judgment motion was suitable, given that the determination of a duty to defend is document driven, derived from the pleadings and interpretation of the policy of insurance.
It is well-established that the pleading against the insured is what triggers the duty to defend. If the facts alleged in the pleading, if proven, would require the Insurer to indemnify, then the insurer has a duty to defend [1]. It is further established that the court should read a contract as a whole and give effect to clear policy language.
The insureds took the position that the plaintiff’s allegation of a fall from the barstool is severable from the uncovered claims (the alleged assault or battery). However, the court noted that the fall from the barstool caused Mr. Eakins to remove the plaintiff from the premises, therefore the incidents were linked. As the defined terms of “assault” or “battery” need only be part of the chain of events leading to the claimant’s injuries, any injuries arising out of the chain of events would not be covered as a result of the exclusions clause.
Decision
The court determined that summary judgment must be granted in favour of the Insurer, and dismissed the third party claim as against the Insurer. The court held that the pleadings of negligence could not be severed from the chain of events that were excluded under the exclusion clause.
[1] Panasonic Eco Solutions Canada Inc. v. XL Specialty Insurance Company, 2021 ONCA 612