Duty to Defend

If a person who has purchased liability insurance injures another person, the former’s insurance company will typically defend the insured and pay damages to the injured person. However, are instances where an insurance company can rightly refuse to defend an insured. That was what happened in the recent case of Henderson v. Northbridge General Insurance Corporation, 2021 BCSC 1841.

In that case, a day care operator was sued by the parents of a child injured while in the former’s care. The claim alleged that the day care operator was negligent in allowing the child to be injured. In the alternative, the claim alleged that the day care operator intentionally assaulted the child.

The day care operator had liability insurance with Northbridge General Insurance Corporation. Upon being advised of the claim against her, the insurance company refused to defend and indemnify her against any damages. They did so on the basis that the day care operator’s insurance policy explicitly excluded coverage for bodily injury caused by intentional acts.

The day care operator petitioned the Court for a declaration that the insurance company was obligated to defend and indemnify her against the claim.

The Court began its discussion by noting that an insurance company is required to defend a claim whether the facts alleged, if true, would require the insurance company to indemnify the insured. If there is a possibility that the claim falls within the scope of the policy, the insurance company is obligated to defend the insured. However, if it is clear that the claim falls outside the policy, there will be no duty to defend.

The problem in the present case was that the claim against the day care operator was based both in negligence and as an intentional assault. If the claim were strictly based in negligence, the insurance company would be obligated to defend the day care operator. If the claim were strictly based as an intentional assault, the insurance company would not. As such, the Court had to determine whether the allegations of negligence were subsumed by or derivative to the allegations of assault. With reference to past cases, the Court noted that a claim based in negligence will not be derivative if the underlying elements of the negligence and the assault are sufficiently disparate to render the two claims unrelated. If both claims arise from the same actions and cause the same harm, the negligence claim is derivative and it will be subsumed by the assault for the purposes of determining whether coverage exists or not.

In the present case, given that the claim based in negligence arose from the same actions and caused the same harm as the claim based in assault, the negligence claim against the day care operator was subsumed by the claim against her based in assault. As such, her insurance company was relieved from having to defend her against the child’s claim.