An exclusion clause which excludes liability coverage for claims arising from failure to take steps to prevent physical, psychological or emotional harassment is clear on its face and excludes coverage for claims in negligence for failure to prevent bullying being perpetrated by the daughter of the insureds

Insurance law – Homeowner’s insurance – Interpretation of policy – Duty to defend – Exclusions – Negligent supervision of children – Intentional acts

D.E. v. Unifund Assurance Co., [2015] O.J. No. 3059, 2015 ONCA 423, Ontario Court of Appeal, June 11, 2015, J.C. MacPherson, E.A. Cronk and E.E. Gillese JJ.A

The respondents on this appeal were defendants in a lawsuit in which it was alleged their daughter and two other girls bullied a fellow student, causing her physical and psychological injuries. The claim against the respondents was in negligence for failure to control their daughter. The respondents requested their insurer, Unifund Assurance Company (“Unifund”), defend them under their homeowners’ insurance policy. Unifund refused based on two exclusions in the policy. The respondents successfully brought an application for a declaration that Unifund had a duty to defend and indemnify them. Unifund appealed.

The allegations against the respondents in the underlying action were that they knew or ought to have known that their daughter was bullying the plaintiff and failed to investigate, failed to take steps to remedy the bullying, failed to take reasonable care to prevent the bullying and harassment, failed to take disciplinary action against their daughter, and failed to discharge their duty to prevent the continuous physical and psychological harassment by their daughter. The Court of Appeal held that the application judge had correctly concluded that the plaintiff’s claims against the respondents were not derivative of the intentional tort claim against their daughter. The court defined negligence as a “failure to take proper care over something” and found that the claims against the respondents for failure to respond to the bullying were claims in negligence. The court held that the coverage for the claims against the respondents was excluded by exclusion clause 7(b) which precluded coverage for:

7.(b) failure of any person insured by this policy to take steps to prevent sexual, physical, psychological or emotional abuse, molestation or harassment or corporal punishment.

The court rejected the finding of the application judge that the exclusion clause was ambiguous because it did not specify that it applied to “negligent” failure to prevent physical abuse or molestation. In the result, the appeal was allowed and a declaration was granted that Unifund did not have a duty to defend or indemnify the respondents in the underlying action.

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