An insurer’s duty to defend in defamation cases

British Columbia Medical Association v. Aviva, 2011 BCSC 1399, decision rendered October 19, 2011 

A plaintiff cannot circumvent a defendant’s insurance coverage for defamation by simply pleading that the publications were made with an intent to injure and with knowledge of their falsity. The British Columbia Supreme Court held on October 19, 2011 that such pleadings will not enable a defendant’s insurer to deny coverage by relying on the common policy clause which excludes coverage for acts of intentional wrongdoing.

The British Columbia Medical Association and its board members were sued in defamation. Although they had insurance coverage for defamation claims, their insurer, Aviva, denied coverage by relying on the exclusion clause for acts of intentional wrongdoing. The insurer based its position on the plaintiff’s allegations in her statement of claim that the statements at issue constituted a “campaign of vilification” published by the defendants with an intent to injure the plaintiff and with knowledge of their falsity.

Madam Justice Ross, applying Non-Marine Underwriters, Lloyd’s of London v. Scalera, [2000] 1 S.C.R. 551 (S.C.C.), noted that an insurer’s duty to defend is triggered by the mere possibility that a claim within the policy may succeed. As such, it is the true nature of the substance of the claim that is to be determined, not the particular labels used by the plaintiff. Where the pleadings are found to contain “properly pleaded allegations of both intentional and non-intentional torts, the court must decide whether the harm allegedly inflicted by the negligent conduct is derivative of that caused by the intentional misconduct.” If the underlying elements of the two claims are sufficiently disparate, the non-intentional claim will not be derivative and the duty to defend will apply.

In determining if there is a possibility of coverage, the Court must consider the possibility that some but not all of the plaintiff’s allegation will succeed at trial.

The Court correctly acknowledged that the elements of a defamation claim do not require proof of conduct with intent to injure:

“If the allegations of intent to injure and knowing publication of falsehood are removed, sufficient facts remain to support a pleading of defamation…. A plaintiff alleging defamation does not have to establish that the defendant had any level of knowledge or blameworthy mental state. Here, the policy exclusions address such blameworthy mental state but do not exclude publications that were made intentionally…”

The Court not only declared that the insurer is, and at all material times had been, under an obligation to pay for the defence, but also declared that the defendant insureds were permitted to conduct the defence with legal counsel of their choosing, and that counsel for the insureds is not required to report to the insurer with respect to any matter bearing on the issue of liability. The latter ruling was found after the Court heard the insured’s argument that there was a conflict in the present case, as the coverage questions will depend upon all aspects of the insured’s conduct at issue in the litigation, in particular to the intention, knowledge and purpose of the defendants in the underlying action.

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