A few years ago, I wrote an article about the Manitoba Court of Appeal’s decision in Urbanmine Inc. v. St Paul Fire and Marine Insurance Co., 2017 MBCA 42, which concerned an insurers’ duty to defend an action arising from an alleged theft of a half-million pounds of nickel from a mine in Thompson. The Court’s reasoning reflected that allegations of theft or fraud should not usually attract liability coverage because they arise from actions that are, by their very nature, intentional (i.e. theft and fraud both involve the intentional and wrongful taking of someone else’s property, which cannot be done negligently or accidentally).
Last month’s decision in Reeb v. The Guarantee Company of North America, 2019 ONSC 1584, illustrates the other side of that same analytical coin. The Reeb coverage saga is interesting for a variety of reasons, not the least of which is the substantive issue of how we consider the intentional act exclusion in grey area cases.
In Reeb, the underlying action arose from an unfortunate incident of ostensibly playful mischief. The plaintiff and the central defendant, both 14 years of age at the time, were roughhousing with pellet guns when the latter shot the former in the eye causing permanent damage. Of course, the injured boy sued. His pleadings described the pellet gun incident as follows:
… At some point during the game, [the plaintiff] called for a time-out to signify to [the defendant] to stop shooting. [The defendant] ignored the call to stop the game and took one last shot. The pellet struck [the plaintiff] in the eye and caused him to suffer serious and permanent injuries, including the loss of vision in his left eye.
The alleged tortfeasor (a minor) sought coverage under his separated parents’ respective homeowners’ policies, as well as the homeowners’ policy of his fathers’ new wife. One insurer accepted a duty to defend, subject to a reservation of rights. The other two denied coverage, triggering lengthy dispute fraught with conflicts of interest, changes of counsel, and other procedural twists.
By the time the young defendant’s duty to defend application was heard, the underlying action had progressed significantly. In support of their denial of coverage, the two insurers filed the underlying discovery transcripts and other extrinsic evidence, which they asserted was admissible to prove the boy’s intentional act. The insurers argued that “… [the] answers by [the alleged tortfeasor] to questions on discovery … make it clear he intended to cause an injury and the fact that he did not mean to shoot [the Plaintiff] in the eye is unimportant.” Relying upon elements of the Supreme Court of Canada’s decision in Non-marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, the two insurers argued that the Court “… must look beyond the label of negligence to the true substance of the act and that I should utilize the extrinsic evidence to determine that the claim is based on an excluded intentional tort.” Justice Thomas unequivocally rejected that argument, explaining:
That the allegations in Scalera were distinguishable. Although framed in negligence, they were of a type that could not be unintentionally carried out (i.e. as in Urbanmine): “It is important to understand that Scalera considered allegations of sexual touching of children by two bus drivers. The bus drivers sought coverage under their homeowners’ policies. There could never be negligent sexual abuse and so on its face the claim in negligence simply could not survive.
To rely upon the Scalera analysis, the Court would have to find “… on the basis of the pleadings that [the young alleged tortfeasor’s] liability could only be the result of an intentional act. That finding being made in the context of two 14-year olds playing a game with a “BB” gun. … I cannot come to that determination at this stage.”
On one hand, the outcome in Reeb isn’t shocking given the alleged tortfeasor’s young age and implied inability to fully appreciate the consequences of his actions. On the other, would the coverage issue have been decided differently if the underlying parties were more experienced adults? Or if the impugned event was infused with elements or anger and malevolence?
The outcome in Reeb is interesting to compare against Sirois v. Saindon, where the Supreme Court of Canada considered a neighbour dispute in which one fellow raised and waived his lawnmower in the other’s face. The underlying plaintiff lifted his hand in defence and was cut by the rotating blade. Speaking for the dissenting minority, Laskin C.J. considered the matter in much the same way as did Justice Thomas in Reeb, explaining:
12 I have already alluded to the trial Judge's finding that the insured in deliberately raising the lawn mower "knew or ought to have known that this act on his part was a very dangerous one". ... The New Brunswick Court of Appeal properly disposed of the matter by pointing out that injuries which arise out of the commission of a criminal act are not, by reason of that fact alone, loss or damage that was intentionally brought about.
By contrast, the majority of the Supreme Court of Canada approached the matter thusly:
24 The respondent's action did indeed have the result of "scaring" [the plaintiff] to such extent that he raised his hands in an automatic gesture to shield his face. The fact that the lawnmower tipped when put to such an unnatural use was an eminently foreseeable development and one which the respondent ought to have known to be a part of the danger to which he was exposing his neighbour. The immediate cause of [the plaintiff’s] injury was a combination of his gesture of self protection and the tipping of the lawnmower but, in my opinion, these two circumstances flowed directly from the respondent's deliberate act in raising the lawnmower as he did, which was the dominant cause of the occurrence. …
29 It will be seen that I take the view that the personal damage sustained by [the plaintiff] was intentionally caused within the meaning of [the intentional act exclusion] in the policy and also that the insured's actions constituted a violation of the criminal law committed by him with intent to bring about loss or damage, although the precise damage was not anticipated.
If an ostensibly intentional act has an unintended consequence, should the parties’ age, experience, and emotional state matter? I say probably so. In any event, over the past decades the Courts’ treatment of such matters has evolved significantly. In my view, we have to take in the entire picture when considering coverage for intentional acts.