Insurer applies “belts, braces and beyond” approach to excluding liability

The insurer did not have a duty to defend its insured where the policy had a broad exclusion clause that covered the claims made against the insured.

Insurance law – Commercial general liability insurance – Duty to defend – Exclusion – Interpretation – Third parties – Practice – Summary judgment

Kelloway v. Eakins (c.o.b. Jack-O’s Sports Bar), [2023] O.J. No. 4698, 2023 ONSC 5925, Ontario Superior Court of Justice, October 24, 2023, K.C. Tranquilli J.

On a motion for summary judgment alleging personal injuries acquired by a patron at a sports bar, the question arose whether the third-party insurer (the “Insurer”) had a duty to defend its two insureds, namely Doug Eakins, the owner of the bar in question, and Jack-O’s, the bar itself.

The plaintiff, Guy Kelloway, alleged that he had suffered bodily injuries at the hands of Mr. Eakins following an incident during which, after having consumed alcohol at home, he had gone to Jack-O’s and continued drinking there until he became so intoxicated that he fell off his bar stool. At that point, Mr. Eakins had removed Mr. Kelloway from the bar, taken him out to the back alley and allegedly assaulted him both verbally and physically. Mr. Kelloway sued.

For their part, the defendants commenced a third party claim within the tort action, against both the insurance broker and the insurer, seeking “contribution and indemnity”. The insurance policy in question (the “Policy”) included coverage for both commercial general liability (“CGL”) and liquor liability. The CGL provided coverage for sums that that the insured became legally obliged to pay as “compensatory damages” because of “bodily injury” or “property damage”. The Insurer did not dispute that Mr. Kelloway’s claim fell within the primary grants of coverage for such claims. Instead, the Insurer simply pointed to the broadly worded and extremely comprehensive “Assault or Battery Exclusion” in the CGL. That exclusion rendered inapplicable any action, claim or demand based on actual assault or battery tied to a duty to defend in circumstances where an action was “in consequence of” or “in any way involving” assault or battery, including whether it was caused in whole or in part by negligence or by any acts or omissions of any insured or its employees. The Court noted in particular that the exclusion clause defined the terms “Assault” and “Battery” beyond their generally accepted legal definitions.

The insureds acknowledged that intentional acts did not trigger a duty to defend, but they argued that the personal injury claims that were rooted in negligence were severable from those claims that fell within the exclusion clauses, and they were content to rest on the notion that the plaintiff’s allegation of a fall from the barstool was severable from the uncovered claims.

The Court disagreed, holding that a plain reading of the terms of the Policy as a whole defeated the defendants’ submissions. At the end of the day, in the Court’s view:

The fall from the stool is narrative or context that ostensibly caused the defendant Eakins to remove the plaintiff from the premises. His fall from the stool remains linked to the “incident” as is now alleged in the Amended Statement of Claim and at paragraph 7. It includes both the falling from the stool and the alleged aggressive and physical escorting of the plaintiff by the defendant Eakins from the premises, whereon the plaintiff sustained his injuries.

Even if some of all of the alleged injuries were sustained from falling from the barstool are part of the claim, the terms of the Policy clearly exclude such recovery as pleaded in the context of the plaintiff’s alleged over-serving and removal from the bar. Any injuries sustained from the fall from the stool cannot be severed from the claim. The exclusionary language is drafted in the broadest terms such that the defined terms of “assault” or “battery” need only be part of the chain of events leading to the claimant’s injuries. The exclusion clauses negate coverage for bodily injury “arising out of, directly or indirectly resulting from, in consequence of, or in any way involving assault or battery”. In other words, even if there is a claim in negligence arising from the plaintiff’s fall from the barstool, the alleged events are also connected to his subsequent removal from the defendant premises, and also involve allegations of assault or battery as defined in the Policy, such that there is no duty to defend.

This case was digested by Siobhan Sams, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Siobhan Sams at [email protected].

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