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Case Summary: Co-operators General Insurance Company v. Kane
Defence + Indemnity

Where the policy excludes coverage for intentional acts, allegations of negligence relating to the same claim will not be excluded from coverage if “it is possible that they were not committed with the same intention or state of mind, being to injure the complainant”.  

Co-operators General Insurance Company v. Kane, 2017 BCSC 1720 per Fitzpatrick, J. [4252]

Co-operators General Insurance Company (“Co-Operators”) insured Kane under a standard printed form "Home Insurance Policy" for a one year period following an effective date of July 4, 2015 (the "Policy"). In addition to the usual dwelling and personal property coverage, the Policy provided liability coverage:

Under “Liability Coverage”, there is a reference to:

… coverage including legal liability for unintentional bodily injury to others …. arising out of … your personal actions ….

The relevant “Legal Liability Coverage” provisions of the Policy provide:

The limit of insurance [$2 million] … is the maximum amount we will pay for all compensatory damages in respect of any one accident or occurrence other than as provided under Additional Agreements. We will pay all sums which you become legally liable to pay as compensatory damages because of unintentional bodily injury …

Personal Liability
We will pay all sums which you become legally liable to pay as compensatory damages because of unintentional bodily injury … arising out of:
Personal Actions
your personal actions anywhere in the world …

The “Definition” provisions of the Policy provide:

Bodily Injury: bodily injury, sickness or resulting death.

Legal Liability or Legally Liable: responsibility which courts recognize and enforce between persons who sue one another.

Occurrence: an action or non-action causing loss, injury or damage. All losses, injuries or damages arising out of the same general conditions will be considered as arising out of one single occurrence, regardless of the number of claimants.

In addition to providing coverage, pursuant to the Policy, Co-operators is required to defend Mr. Kane in relation to any claim for which coverage is provided. The Policy provides under “Additional Agreements”:

If a claim is made against you for which you are insured under the Legal Liability Coverage of this policy, we will defend you at our cost using a lawyer of our choice. We reserve the right to investigate, negotiate and settle any claim or suit if we decide such course of action is appropriate.

The Action:

On July 1, 2016, Kuechle, a resident of New York, filed a Complaint against Kane in New York. She alleged that she had certain interactions with Mr. Kane, within the relevant period of coverage under his policy.
Ms. Kuechle alleged four separate “Causes of Action” against Mr. Kane, all arising from events on December 27, 2015: 

1. "First Cause of Action": Mr. Kane’s hotel room, he “inflicted a battery” upon Ms. Kuechle which “physical battery” was “unconsented to”. Ms. Kuechle alleges that as a result of the “unwanted, unconsented to, violent, and offensive in nature physical battery” inflicted upon her, she suffered:

… bodily injury including lacerations, extensive bleeding requiring multiple surgeries and blood transfusions, and serious emotional trauma …
… serious, permanent and painful personal injuries …

2. “Second Cause of Action”: Mr Kane “…intentionally and/or recklessly engaged in extreme and outrageous conduct towards [Ms. Kuechle] in a manner so shocking and outrageous that it exceeded all reasonable bounds of decency” … as a result of Mr. Kane’s “shocking and outrageous conduct” toward her, she suffered “severe emotional distress” and “serious, permanent and painful personal injuries.”

 3. “Third Cause of Action”: Ms. Kuechle alleged that Mr. Kane “engaged in conduct unreasonably endangering” Ms. Kuechle’s “physical safety by causing her to suffer lacerations, bleeding, multiple surgeries and blood transfusions.” She alleged that as a result of Mr. Kane’s conduct unreasonably endangering her physical safety, she suffered “severe emotional distress, and serious, permanent and painful personal injuries”; and 
4. “Fourth Cause of Action”: On December 27, 2015, [Mr. Kane] negligently caused serious, permanent and painful personal injuries to [Ms. Kuechle].

As a direct and proximate result of the negligence of [Mr. Kane], [Ms. Kuechle] was caused to suffer bodily injury including lacerations, extensive bleeding requiring multiple surgeries and blood transfusions, and severe emotional trauma, all to her detriment.
As a result of [Mr. Kane’s] negligence [Ms. Kuechle] suffered serious, permanent and painful personal injuries by reason of which [Ms. Kuechle] will suffer damage in excess of the jurisdictional limits of all lower courts which would otherwise have jurisdiction.
Kane’s New York counsel forwarded copies of the Complaint to Co-Operators. A few months later, Co-operators’ coverage counsel wrote to Mr. Kane’s counsel denying coverage under the Policy, for both defence and indemnity. They stated:
“As Mr. Kane seeks coverage in respect of an alleged intentional act, there is no coverage under Mr. Kane's policy for this claim. The policy only provides coverage for unintentional bodily injury. Alternatively, claims arising from or in relation to sexual, physical, psychological or emotional abuse, assault, molestation or harassment are excluded from coverage.”
Co-operators stated that the remaining allegations were derivative of the allegations found in the First Cause of Action. Assuming that its coverage decision would be in dispute, Co-operators filed a petition seeking a declaration that it was not required to defend or indemnify Mr. Kane in respect of the Action. Mr. Kane filed a cross-petition seeking coverage and costs.
Issue: Whether Kane’s insurer, Co-operators General Insurance Company (“Co-operators”), was under an obligation to defend a lawsuit brought against him in New York State.
HELD: The Court granted a declaration that Co-operators was under an obligation to pay for the defence of Kane.

1. The Court agreed with Co-Operators that there was no coverage for the First Cause of Action as battery is an intentional tort and not a tort resulting in unintentional bodily harm.

2. The Court went on to disagree with Co-Operators that the remaining causes of action were derivative of the intentional tort alleged in the first cause of action (using the second step of Non-Marine Underwriters, Lloyd's of London v. Scalera 2000 SCC 24 “Scalera” analysis):

a. It was stated that “allegedly negligent acts should not be considered the same as allegedly intentional acts for the purposes of the derivative claim analysis “if it is possible that they were not committed with the same intention or state of mind, being to injure the complainant”” [para 46]. 

 b. A “presumption of harm does not apply in other circumstances where an intent to harm must still be alleged and proven” [para 45].

c. The derivative claim analysis will only exclude a defence if there is no possibility that the insured will be found liable in negligence because all of the allegations made depend on a finding that the complainant was intentionally injured in order to be successful.

i. "On their face, none of the Second to Fourth Causes of Action require the same intent to cause injury as alleged in the First Cause of Action, as was relevant in Scalera.” [para 60].

d. The facts of the incident were unclear in the New York pleading and the Court struggled to assume the Second to Fourth actions were part of the same central events as the first action. The Court found that the alternate cause of action in the Second to Fourth Actions were “sufficiently separate, disparate and distinct such that they are not derivative of the battery in the First Cause of Action” [para 68].

3. It was also found that Co-operator’s exclusion clause policy did not apply as the Complaint did not clearly and unambiguously allege “abuse”.

4. The Court followed a recent BC case law which found that where an insured is required to litigate the issue as to whether his insurer is required to defend him, solicitor and own client costs may follow. Co-Operates was thus ordered to pay costs on a full indemnity or solicitor and own client basis. It was stated that “where the policy intended full indemnity in relation to defence costs, it follows that any expenditure by the insured in enforcing that objective would, if successful, be followed by a costs award that similarly achieved that objective.” [para 89]