Non-Marine Underwriters, Lloyds of London v. Scalera
Several BC Transit bus drivers are accused of sexually assaulting a young girl. She is
suing them for negligence. Driver’s homeowner’s policy covers him for liability for
bodily injury caused by his actions, except for those caused by intentional or criminal
actions. Insurance company is refusing to defend driver.
What is the duty to defend? It is the obligation of an insurer to defend a policy holder in a
legal action where the policy holder may become liable as the result of the action. It only
comes into existence where the insurer has agreed to provide coverage for the liability
involved in that case. Example, you have insurance and are involved in a car accident that
was caused by your negligence. You injure another person and that person sues you.
Your insurance company has the duty to defend you as they provide PLPD (Public
Liability and Property Damage) insurance that would be available to be paid to this third
party if you are liable, and cover your liability.
What is the duty to indemnify? The duty to indemnify arises only where liability has been
proven. The facts of the case have been established conclusively that a particular loss
falls under the terms of the insurance contract and the insurer is bound to pay out on the
What is the intentional act exclusion? Insurance coverage does not extend to cover any
acts that occur through the intentional act of the insured person. Intention here means an
intent to do the act that caused the harm and intent to cause the harm that resulted. This
can include dangerous or reckless behaviour where the harm was a likely result of
behaviour, but it does not include negligent acts.
Why is the insurer refusing to defend? The insurer is claiming that the acts are intentional
acts and therefore covered by the exclusion clause in the contract. The insurance does not
extend to intentional acts, therefore they have no obligation to insure the driver in this
case, or indemnify any third party for injury done.
Why is the plaintiff pleading negligence? The plaintiff wants to engage the insurance
company in the action so that they could ultimately make a claim on the insurance policy
itself. The insurance policy is a much better source for compensation than the driver in
his private capacity. Plaintiffs are permitted in civil cases to plead in the alternative if
there are legitimate alternative theories about how damage could have occurred.
The decision in this case is that the insurer did not have the duty to defend. Regardless of
how the plaintiff framed her pleadings, it is impossible to regard sexual assault as
anything other than an intentional act. It is not possible to argue that you could sexually
assault a person and be unaware that the person would be harmed by the act. Therefore
this would be an intentional act if the defendant were to be found liable. Therefore there
would be no duty on the part of the insurance company to indemnify him. In the alternative, the defendant could be found not liable if he did not sexually assault the
plaintiff, in which case there would be no liability on the insurer there either. Given that
there is no result in the case that could lead to liability for the insurer, there is no duty to
The duty to defend is wider than the duty to indemnify. The duty to defend arises
whenever a lawsuit against the insured raises a claim that could potentially fall within
N.B. If I were using this case as an exam question, I would also expect you to deal with
the issue of vicarious liability. The sexual assaults took place (some of them) while the
drivers were working. All of them came to know the plaintiff through their jobs as bus
drivers. Would BC Transit be liable as their employer? I would expect you to go through
the definition of vicarious liability and discuss authorized versus unauthorized acts. I
would expect to see an analysis of these actions as to whether or not there was sufficient
connection with authorized behaviour to make the employer vicariously liable.
Coronation Insurance v. Taku Air Transport
Taku (a small local air carrier) obtained insurance from Coronation which insurance was
not renewed after a year due to Taku’s accident record. (Three accidents in one year.)
Over the next seven years, they were covered with another insurer and that policy was
also cancelled for multiple accidents. Taku reapplied to Coronation for insurance.