An Insurer does not have to defend an action commenced against an insured under a homeowner’s insurance policy that contains an intentional act exclusion clause if there is no basis for the allegations outside of an intentional tort.

Unrau v. Canadian Northern Shield Insurance Co., [2004] B.C.J. No. 2409, British Columbia Court of Appeal

The Unraus appealed an Order from the Supreme Court of British Columbia holding that Canadian Northern Shield Insurance Company (“Canadian Northern”) did not have to defend them in an action brought by Mr. Heathcote who was viciously beaten with a baseball bat and suffered severe personal injuries. He commenced an action against the Unraus alleging negligence in participating in crowd activity that resulted in his injuries, failing to contact the police, neighbours or others, failing to take any reasonable measures to prevent the assault, and failing to prevent reasonably foreseeable injuries.

In assessing whether Canadian Northern had a duty to defend the Unraus, the Court considered the following question:

If you take away the intentional tort, is there any basis for negligence. If the answer is ‘yes’, then there is a duty to defend.

The Court interpreted the pleadings and the insurance policy using a “generous and wide approach”. However, in the Court’s opinion, a plain reading of the allegations as framed in both the Statement of Claim and the Third Party Notice did not lead to a conclusion that the claims against the Unraus sounded in negligence, even though the allegations were labelled as such in the pleadings.

The Court noted that the only way that Mr. Heathcote could establish that the Unraus owed a duty of care to him was by proving that they participated in an activity that placed him in a position of danger. However, if this were established, it would not sound in negligence, but rather in an intentional or criminal act. With respect to the allegations of failure to act, the Court applied Non-Marine Underwriters, Lloyd’s of London v. Scalera,[2000] 1 S.C.R. 551, and concluded that even if there was a negligent component to the allegations, the negligence claim would be “derivative, and it would be subsumed into the intentional tort.”

In the result, the Court of Appeal dismissed the appeal and determined that Canadian Northern did not owe a duty to defend the Insureds in these circumstances.

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