Construction of “deliberate acts” exclusion clauses
Burnett or Grant v International Insurance Company of Hanover Ltd [23.04.21]
This article was co-authored by Lorne Folick, Lawyer, Dolden Wallace Folick LLP.
In April 2021, the UK Supreme Court in the unanimous decision of Grant v International Insurance Company (Grant) provided further clarity over the principles of interpreting insurance policy exclusions. The court determined that liability for accidental injuries arising out of “deliberate acts” is not excluded if those injuries were not deliberately intended on the part of the tortfeasor.
In this case review, we provide a brief overview of the conclusion reached by the Supreme Court and offer our initial observations from both the United Kingdom and Canada on the implications for insurers.
The plaintiff (or claimant) is the widow of Mr Grant, an intoxicated patron who confronted and was killed by a door steward after being placed in a chokehold. The door steward was prosecuted for murder but was convicted by the criminal court of a lesser offence of assault.
As the company employing the door steward went into liquidation, the plaintiff sought compensation from its insurer, International Insurance Company, under the Third Party (Rights against Insurers) Act 2010. The insurer sought to rely upon an exclusion in respect of “liability arising out of deliberate acts wilful neglect or default” of an employee, on the basis that the door steward must have intended some injury or been reckless as to causing injury.
The court was required to determine whether Mr Grant’s death was brought about by a “deliberate act” within the meaning of the exclusion.
The Supreme Court stated that insurance exclusion clauses are interpreted objectively from the perspective of a reasonable person, with the background knowledge reasonably available when the contract was entered into. The court interpreted a “deliberate act” to mean carrying out an act intending to cause injury. The court also stated that recklessness does not rise to the level of a “deliberate act”.
The court held that if the exclusion clause was intended to include recklessness, it would expect this to be clearly set out, together with what this means in the context of the clause. The judgment further commented that to include recklessness would go against the commercial purposes of the policy in seriously circumscribing the cover provided in creating a wide and commercially unlikely exclusion given the nature of this insured’s business.
Bearing in mind that the judge in the criminal proceedings had found that the neck hold was “badly executed, not badly motivated”, the Supreme Court found no intention by the door steward to injure. Accordingly, the insurers were not entitled to avoid liability under the exclusion.
This decision is another illustration of how exclusions are interpreted narrowly and how difficult they are to rely upon. If insurers wish to try and exclude cover for reckless acts or omissions, we consider this would need to be expressly stated. However, insurers will likely still in the majority of cases have a tough time proving that an act or omission was reckless rather than simply negligent.
Canadian insurers typically exclude liability for “bodily injury…expected or intended from the standpoint of the insured”. Canadian courts typically interpret such exclusions to require that the insured not only intend the action(s) that cause the injury, but actually intend to cause some kind of harm or injury, even if the injury that results is different in kind or extent than intended.
The exclusion is most commonly applied where only intentional torts are alleged, such as sexual assault or intentional battery; the courts will not typically apply the exclusion if the pleadings are equally consistent with a properly-pleaded claim of unintentional injury, for example, negligence.
Further, Canadian courts typically conclude that allegations of gross negligence or recklessness do not amount to allegations of intentional acts, for the purpose of such exclusions – the likelihood of injury must be very nearly certain before the exclusion will apply. Given the facts in Grant, a Canadian court would likely reach the same conclusions as did the UK Supreme Court.
The courts in both the UK and Canada have interpreted intentional act exclusion clauses narrowly and against the insurer. As such, insurers should consider revisiting the wording of intentional act exclusion clauses to ensure that the language is clear and unambiguous. Further, if the insurer intends to exclude intentional acts which carry an inherent risk of bodily injury, it should do so with plain and ordinary language.