Intentional Act Exclusion may Apply Even if Insured Failed to Understand Actions were Morally Wrong

The Ontario Court of Appeal recently released Butterfield v. Intact Insurance Company, 2023 ONCA 246, wherein the Court unanimously affirmed the application judge’s ruling (2022 ONSC 4060) that Intact did not owe its insured a defence because of the application of an “intentional act” exclusion clause.

The owner of a firearms store suffered bodily injuries when Mr. Butterfield attacked him with a knife while suffering from a psychotic delusion – specifically, the honest but deluded belief that the store owner had murdered Mr. Butterfield’s girlfriend. At his criminal trial, Mr. Butterfield acknowledged the Crown could prove the offence of aggravated assault, but he was found not criminally responsible by reason of mental disorder (“NCRMD”).

The store owner subsequently brought suit against Mr. Butterfield, grounding his claim in negligence with no express pleading of assault, battery, or any other intentional tort. Mr. Butterfield was insured by Intact through a Condominium Unit Owners Policy. Intact denied Mr. Butterfield a defence on the basis of an exclusion in the policy which excluded coverage for all “claims arising from … bodily injury or property damage caused by any intentional or criminal act … [by] any person insured by the policy.” Mr. Butterfield sought a declaration that he was owed a defence.

The application judge dismissed Mr. Butterfield’s application, finding:

1. The Court could properly look beyond the plaintiff’s pleadings to determine the true nature of the claim, which was the intentional tort of assault; and
2. In making its NCRMD finding, the criminal court had necessarily concluded that Mr. Butterfield had committed the actus reus while having the mens rea of aggravated assault, even though his mental condition rendered him incapable of knowing his acts were morally wrong.

The application judge then held that no defence was owed because Mr. Butterfield’s actions were both criminal and intentional. His actions were criminal because a necessary pre-condition to a finding of NCRMD is a finding that the criminal act had been committed. The actions were also intentional because Mr. Butterfield intended to stab the store owner, with the stated goal of harming him. Merely because he did not appreciate that his actions were morally wrong was insufficient to render them unintentional.

On appeal, the Court agreed Mr. Butterfield’s actions were intentional within the meaning of the exclusion, which brought the claim against him outside of coverage. The Court reiterated that the “actual gravamen” of the complaint is key to determining coverage, not the labels used by the plaintiff, and that in this case the negligence claim was purely derivative to the intentional tort of assault. The Court also found no error was made by the application judge in concluding that Mr. Butterfield’s acts were intentional, based upon the criminal court’s findings which indicated the insured’s actions demonstrated “a clear intention to injure or kill [the victim] with a large knife, even if it was based on a delusional belief wherein he did not know his actions were morally wrong”.

The Court of Appeal did not opine upon whether Mr. Butterfield’s actions were criminal.

Despite the holding in Butterfield, it is important to remember that first and foremost, courts will always look to the specific language of an exclusion. This is illustrated by comparison of two cases decided by the New Brunswick Court of Appeal: Chaisson et al. v. Intact Insurance Company, 2020 NBCA 37, and Michaud v. Sécuritié Nationale Compagnie d’assurance, 2021 NBCA 39. Both cases involved litigation arising out of the same brawl involving two insureds and the subsequent denial of coverage under their relevant homeowners’ insurance policies on the basis that the actions of the insureds were intentional. However, despite the same facts underlying the action against the two insureds (which notably included no criminal charges being laid), the wording of the policies rendered different results.

The court in Chaisson held the insured was owed a defence because the French version of the policy excluded only intended injury, not intentional acts. The ambiguity in the French version of the policy was interpreted in favour of the insured, who argued that his actions may have been intentional, but there was at least a “mere possibility” the injuries were not intended. In contrast, the policy in Michaud did not contain this ambiguous language and excluded all “intentional or criminal act[s]”, and the insurer did not owe a duty to defend.

In conclusion, an intentional act exclusion may serve to prevent an insurer from being obligated to defend a claim based on an underlying intentional tort, even if pleaded in negligence, and even if the insured has not been criminally convicted, so long as the underlying acts of the insured were intentional and the policy is carefully drafted to exclude intentional acts, not only intended injuries.

For more information, or if you have a question about this article, please contact Tenley Pearce.