In finding that an insurer has a duty to defend a sexual abuse claim, a Superior Court judge took the unusual extra step of allocating defence costs: 20% payable by the insurer and the 80% by the insured.
The case is Sommerfield et al. v. Lombard Insurance Group. Sommerfield and the other plaintiffs in this action were teachers at Upper Canada College between 1986 and 1990. They and the school are being sued by a former student for sexual abuse.
The statement of claim in the underlying action by the student alleged not only sexual battery but that each of the individual defendants (i.e., the plaintiffs in this coverage action) had been negligent for having failed to report the sexual abuse of his co-defendants.
Lombard ’s policy excluded bodily injury caused intentionally and it was apparently not disputed that there was no coverage for the allegations of sexual battery. But the insurer went on to argue that the allegations of negligent failure to report were derivative of the sexual battery claims and so, were also excluded.
Mr. Justice John McMahon noted that at trial, any one of the defendants in the underlying action could be found not to have committed sexual battery himself, and yet still be liable to the plaintiff for negligent failure to report abuse by the other defendant teachers. Hence, the court concluded that the negligence claim was not derivative and that a duty to defend was owed by Lombard in relation to that part of the underlying action.
It was ordered that each of the four teachers was entitled to separate representation (because of a perceived potential for conflict in their defences). The court then ordered that the defence costs be allocated between insured and insurer. This was something of a victory for Lombard because although the Court of Appeal has said, in Daher v. Economical Mutual Insurance Company, that defence costs can be apportioned in an appropriate case, this rarely happens in practice. The reason is that in most cases, the part of the case that is within coverage cannot readily be separated from the part that is not covered. Thus, when a duty to defend is found, the result usually is that the insurer pays the entire cost of defence, for both covered and non-covered claims.Here, the court concluded that the facts that would support the claim of negligent failure to report were different from those pertaining to sexual battery. The judge also found that the defence of the negligence claim would be much less onerous than would the defence of the sexual battery part of the case. On this basis, Lombard was ordered to pay only 20% of the defence costs of each of the teachers.