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On June 1, 2006 the Supreme Court of Canada held in Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, that coverage is not available under a claims-made insurance policy for injuries that are merely discovered during the policy period, even where the circumstances are promptly reported to the insurer. In its unanimous ruling the Court held that coverage for a liability exposure is conditional on an actual "claim" being made against the insured before the expiry of the insurance contract. The furnishing of particulars of sexual abuse to the insured in this case was held not to constitute a true claim as the disclosure had not been authorized by the victims and as it also lacked any indication of intent on their part to hold the insured responsible.

Ogilvy Renault has successfully represented one of the other liability insurers of the Jesuit Fathers of Upper Canada in all the abuse litigation in which that insurer has been joined.

FACTS

The Jesuit Fathers of Upper Canada maintained various pastoral missions within native communities in Ontario and operated and administered an Indian residential school from 1913 until its closure in 1958. The Jesuits held comprehensive general liability coverage under sequential insurance policies, which coverage as of 1988 was written on a claims-made basis by Guardian Insurance Company. The Guardian policy was renewed annually until 1994.

By January 1994 the Jesuits had become aware that both general and specific allegations of sexual abuse were being made against former members of the order. One such claim was made in writing by counsel retained by C, an alleged victim. The Jesuits opened discussions with leaders of the native communities involved and made investigations regarding the allegations.

In March 1994 the Jesuits wrote to Guardian to alert it to the claim of C and the possibility that other claims might be imminent. The letter identified the names of the alleged perpetrators, the dates and locations of the alleged acts, and the names of nine additional victims that had been disclosed to a social worker conducting investigations on behalf of the Jesuits. However, while many lawsuits based on the alleged abuse were later commenced, no formal claims other than that of C were actually made before the Guardian policy expired in September 1994. Guardian refused to defend the Jesuits in all the actions other than that of C, on the basis that the claims involved had only been "first made" after the expiry of its policy period.

RULING OF THE SUPREME COURT OF CANADA

The Supreme Court of Canada ruled that while the Guardian policy contained obligations regarding the reporting of "occurrences", the coverage it provided was in fact claims-made. At the time that the policy was obtained, it was possible to purchase claims-made coverage that permitted an insured to report "circumstances" during the policy period so as to engage coverage for a claim only made later, but the policy did not contain that coverage enhancement.

The Court also ruled that only the claim of C constituted a true claim sufficient to engage coverage under the Guardian policy. The phrase in the insuring agreement "claims first made against the Insured during the policy period" connoted a requirement for a demand to be actively presented during the term of the insurance contract, as opposed to the mere discovery of a loss or injury exposing the insured to claims which might only be made after the policy had lapsed.

Insofar as the nine additionally identified victims were concerned, the circumstances of their losses did not meet the legal requirements for a "claim". The information in question had only come to the insured as a result of its investigation activities within the community, not because a true claim had been presented on the victims' behalf. While it is possible for a claim to be made through a third party such as legal counsel, it will only constitute a claim for insurance purposes if it is made with the authority of the claimant and also conveys an intention to hold the insured responsible for the fault alleged. Here, both elements were lacking in the information that was uncovered during the course of the Jesuits' investigations.

The ruling of the Supreme Court in Jesuit Fathers v. Guardian Insurance builds on previous judgments of the Court regarding claims-made insurance coverage, notably Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252. However unlike the outcome there, the Court on this occasion ruled that coverage was not available to the insured. The fact that the insured had not purchased enhanced coverage which enabled the reporting of "circumstances" seems to have played a prominent role in the Court's approach to the dispute and illustrates that both insurer and insured can be held to the contractual bargain they negotiate.

The purpose of this document is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Ogilvy Renault LLP or any member of the firm on the points of law discussed.

© Ogilvy Renault LLP 2006 - All Rights Reserved

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