The Supreme Court of Canada held that in common law under a claims-made policy, the insurer has no duty to defend the actions brought against the insured where no intention is communicated by the claimants or their representatives during the policy period to hold the insured responsible for damages

Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, [2006] S.C.J. No. 21, Supreme Court of Canada

This was a claim by the Jesuit Fathers of Upper Canada (“Jesuits”) against their Insurer Guardian Insurance Co. of Canada (“Guardian”). The Jesuits claimed that Guardian had a duty to defend them pursuant to the terms of a CGL policy in actions alleging sexual abuse at the Indian Residential School which they had administered until 1958.

The Jesuits purchased an annual CGL policy from Guardian in 1988. By January 1994, the Jesuits became aware of allegations of abuse of students at the school. Counsel for one of the students, Mr. Cooper, informed the Jesuits by letter dated January 27, 1994 of his client’s claim detailing physical and sexual abuse. Counsel for the Insureds wrote to the Insurer on March 18, 1994 to raise the possibility that the Jesuits might be facing other claims in the near future. The letter identified the nature of the possible claims and the names of Mr. Cooper, in addition to nine other victims. As a result, the Insurer refused to renew the policy beyond September 30, 1994 after which numerous additional claims alleging similar allegations were made. With the exception of Mr. Cooper’s claim, the Insurer refused to defend any claims arising from the operation of the School because they were only “first made” after the expiry of the policy and were not covered by the policy.

The trial judge construed the insurance contract as a claims-made policy and found that Mr. Cooper’s claims and the claims on behalf of the nine victims mentioned in the March 18, 1994 letter to the Insurer fell within the temporal limit of the policy and that the Insurer had a duty to defend against them. The Court of Appeal upheld the decision.

The Supreme Court of Canada dismissed the appeal but found that except for Mr. Cooper’s claim, the Insurer had no duty to defend the actions against the Jesuits resulting from the administration of the school. This was a claims-made policy and the occurrence based elements of the policy did not expand the coverage available. The clause limiting the scope of the insurance coverage suggested that a claim must be actively made as opposed to merely being discovered. This interpretation of the word “claim” was consistent not only with the wording of the policy, which distinguished between an “occurrence or circumstance” and a “claim”, but also with the definition of “claim” under the common law, which requires a third party to communicate an intention to hold the insured responsible for damages. While a third party may communicate this intention through a representative, the key is that the representative be accurately communicating the intent of the claim and that this be done with the claimant’s full knowledge and approval.

Except in the case of Mr. Cooper, there was no intention communicated by former students or their representative during the policy period to hold the Insured responsible for damages and, as a result, the Insurer did not have a duty to defend the actions. The trial judge erred in concluding that there were claims made by the other nine individuals named in the March 18, 1994 letter to the Insurer because nothing in the records suggested that the person who gave the names of these individuals to the Jesuits’ investigator had the permission of these individuals to communicate an intention to hold the Jesuits responsible for injuries suffered at the School.

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