Butterfield v. Intact Insurance Company, 2022 ONSC 4060
An Ontario court recently addressed a liability insurer’s duty to defend an insured who was found “Not Criminally Responsible” (“NCR”) under Section 16(1) of the Criminal Code in earlier criminal proceedings. Identifying that an NCR verdict is not an acquittal, Braid J. applied the policy’s exclusion for intentional acts and found that the insured was not entitled to be defended. Notwithstanding, the Court’s analysis identifies there may indeed be instances where insurers are required to defend against civil proceedings arising out of criminal acts for which the accused insured was found NCR. The distinguishing factor is which of two available branches of the Section 16(1) defence was applied by the criminal court to support the NCR finding. The first branch of the NCR defence will apply when the accused insured did not appreciate that their acts were of a nature that would or could cause harm. In such instances, it is reasonably arguable that a liability policy’s intentional act exclusion may not apply. The second branch operates when the accused insured intended to and did cause harm but did not subjectively appreciate that the acts were morally wrong. Arguably, an intentional act exclusion is more likely to be engaged in such instances. Of course, each case will turn upon its own nuances of fact and the exclusionary wording at issue.
With respect to the facts, Butterfield involves an assault in a firearms store. In the criminal proceedings that followed, the insured proved his actions arose because of symptoms of schizophrenia. He was found NCR for stabbing the store owner during an unfortunate episode in which he was unable to distinguish a paranoid fantasy from reality. After the NCR verdict, the store owner commenced civil proceedings. He said the insured was negligent for attending the store and applying for a firearms licence while lucid, when, allegedly, it was reasonably foreseeable that he could experience symptoms of schizophrenia and injure or kill someone. The insurer of the insured’s homeowners policy denied a duty to defend against these allegations, referencing an exclusion for claims arising from intentional acts, which, unfortunately, is not reproduced in the decision. (The policy also included an exclusion for criminal acts, which we do not discuss in this case summary).
Affirming Intact’s denial, Braid J. discussed the coverage implications arising from the criminal court’s NCR finding under Section 16(1) of the Criminal Code. The Court stressed that such a finding is not an acquittal and does not mean that no crime was committed by the insured. An NCR finding affirms that a crime was committed, but the accused’s “mental disorder” at the time of commission rendered them incapable of either 1) appreciating the nature and quality of the act; or, 2) of knowing that it was wrong. Braid J. observed “To be found NCR within the meaning of s. 16 means that the accused has committed the act but is not responsible. They are not found guilty or not guilty. Rather, they are exempt.”
From an insurance coverage perspective, Braid J.’s analysis identifies that intentional act exclusions will not apply automatically whenever an NCR verdict is rendered. To properly assess whether the accused insured’s coverage has been abrogated, the insurer needs to identify which of the NCR defence’s two branches were engaged by the facts and applied by the criminal court.
The first of Section 16 (1)’s two disjunctive elements identifies that an accused will be NCR if mental disorder rendered them incapable of appreciating the “nature and quality” of the harm causing act at the time of commission. Braid J. observed that, in such instances, a criminal court’s acceptance of the NCR defence is effectively a determination that accused was unable to “understand the physical consequences of the wrongful act” and there may have been no real intent to cause the harm at issue. To provide a stark example, in R. v. Chaulk,  3 SCR 1303, the Supreme Court of Canada observed, “… a person charged with murder could claim that while he consciously and voluntarily did the act of chopping, he thought that he was chopping a loaf of bread in half, when, in fact, he was chopping off the victim's head .... In such a case, the insanity claim is manifested as a denial of mens rea.” In other words, this branch of the NCR defence is a denial of harm causing intent (i.e. mens rea). From a coverage perspective, an NCR finding founded on this first branch of the defence is less supportive of a denial of coverage under a liability policy’s intentional act exclusion because, notwithstanding the voluntary nature of the harm causing action, the accused insured did not actually (i.e. subjectively) intend to cause harm to anyone.
Secondly, an insured may be found NCR if he or she intended to cause harm but was incapable of knowing that the act in question was wrong. The inquiry under this second aspect of Section 16 (1) focusses on whether the accused knew at the time they committed the act that it was morally wrong. A common example, which accorded with the facts in Butterfield is where the accused’s perceptions are affected by a paranoid delusion, causing them to act in a manner that was, while subjectively justified, objectively morally wrong. In support, Braid J. referenced the Supreme Court of Canada’s decision in R. v. Oommen,  2 S.C.R. 507, where McLachlan J. explained “It may be that the nature of the delusion is to create a subjective impression in the accused's mind that he must defend himself or himself be killed, akin to that present when the defence of self-defence is raised, but that is incidental. … the real question is whether the accused should be exempted from criminal responsibility because a mental disorder at the time of the act deprived him of the capacity for rational perception and hence rational choice about the rightness or wrongness of the act.” In such instances, the accused insured's reliance on the NCR defence is manifested not as a denial of actus reus or mens rea, but rather as a defence in the nature of an excuse or exemption based on the fact that the accused’s mental condition rendered them incapable of knowing that the intended act was, in reality, without reasonable justification.
Returning to Butterfield, Braid J. found that Intact’s denial of liability coverage was supported because the insured admitted to the criminal court that he’d intended to stab the plaintiff store owner but was under a delusional belief that the man had caused harm to a friend. In other words, the insured admitted harm causing intent and the act itself, while denying an appreciation that, objectively speaking, the stabbing was morally wrong. Braid J. observed that the criminal court’s NCR finding was “clearly made under the second arm of the s.16 defence”, which was material from a coverage perspective. On the issue of the insured’s intent to cause harm, Braid J. observed:
 [The insured] formed the intention to stab [the plaintiff] and then took several steps to fulfill his intention. He left the store and went to retrieve a hunting knife. He returned to the store with the hunting knife in hand. He walked up to [the plaintiff] and stabbed him, yelling that he needed to be murdered. [The insured’s] stated goal was to harm [the plaintiff].
 [The insured] understood the physical nature and consequences of his act. He clearly did not appreciate that what he was doing was morally wrong given the schizophrenia diagnosis, but that does not change the fact that his actions were intended to harm [the plaintiff]. [The insured’s] actions demonstrate a clear intention to injure or kill [the plaintiff] with a large knife, even if it was based on a delusional belief wherein he did not know his actions were morally wrong.
Braid J. found that the knife attack was an intentional act, thereby engaging the relevant exclusionary provision.
Notably, the Supreme Court of Canada’s discussion in R. v. Chaulk supports Braid J.’s analysis. In that case, Lamer C.J. observed that Section 16 operates “at the most fundamental level, as an exemption from criminal liability which is predicated on an incapacity for criminal intent. However, in particular cases, this basic incapacity may manifest itself in a number of different ways depending on the claims put forward by the accused.” In Butterfield, the insured’s reliance upon the second branch of the NCR defence, by its nature, admitted an intent to cause harm while contemporaneously offering an explanation that exempted him from criminal liability. That admission, while saving him from incarceration in the normal course, precluded any possibility of liability coverage. Notwithstanding, where an accused’s NCR defence relies upon the first branch of Section 16(1), it is reasonably arguable that a liability policy’s intentional act exclusion may not apply because, notwithstanding the voluntary nature of the harm causing action, the insured’s did not actually intend to cause harm to anyone.