Clark Wilson LLP Insurance Bulletin
Case Law Review Archive
B.C. Court of Appeal Addresses
Criminal Act Exclusions Again
On September 20, 2002 the B.C. Court of
Appeal once again had occasion to consider and enforce the "criminal act"
exclusion applicable to the liability coverage in a homeowner's policy.
In B.C.I.C. v. Kraiger the insured's teenage
son started a fire near Penticton, B.C. which spread through the forest
to nearby residential areas. The fire was intentionally set for "entertainment"
value i.e. to see the same being fought and extinguished by firefighters.
But it started to get out of control very quickly and although the insured
claimed that he tried to extinguish the fire (and thought that he had in
fact put it out) it nevertheless flared up and caused considerable damage
to both the forest and nearby residences.
As a result of these events the insured
was charged with and pled guilty to the offence of arson under the Criminal
Code. He was also sued by the surrounding homeowners for their property
damage claims.
The insured pled guilty to the arson offence
in return for a conditional sentence. He testified that he did so
because he couldn't afford a criminal lawyer, he
did not think he would survive in jail, and he acted on the advice of counsel.
However, his homeowner insurer invoked the "criminal act" exclusion in
the policy to deny coverage for the civil lawsuits resulting from the fire
damage.
The B.C. Court of Appeal addressed the
issue of coverage under the insured's homeowner policy and, in particular,
whether the "criminal act" exclusion applied in the
circumstances. The Court decided:
-
even though the insured attempted to undo
what he had started, he nevertheless had triggered the string of events
causing the property damage in question and his conduct was a "significant
contributing cause" of the damage;
-
it was a "foreseeable, substantially certain
consequence" that an uncontrolled forest fire would reach unintended areas
(at least until the fire fighters arrived to fight it), and this was sufficient
to support the intentional element of the offence of arson; and
-
hence the "criminal act" exclusion applied
to prevent coverage for all of the resulting damage even though the precise
extent of the damage may not have been foreseen or intended.
The Court noted, "if the ["criminal act" exclusion]
only served to exclude damage specifically intended by the insured, it
would meant that where an insured deliberately sent fire to A's house intending to burn it down, but the fire
spread and also damaged B's house next door which the insured
had not intended to damage, the insured, notwithstanding a conviction for
burning the first house, would nevertheless be
entitled to indemnity under the policy for damage to the second house.
Such a result is not consistent with the plain wording of the
exclusion, nor does it make logical sense, nor meet the reasonable expectation
of the parties to the insurance policy."
There is a perception in the insurance
industry that the courts will bend over backwards to find coverage for
an insured, often accepting what appear to be ludicrous arguments. The
decision in the Kraiger case is a pleasing confirmation that cynicism is
not always warranted and that common sense
will sometimes prevail.
You can access the Court's decision in
B.C.I.C. v. Kraiger at:
http://www.courts.gov.bc.ca/jdb-txt/ca/02/05/2002BCCA0521.htm
