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Insurance - Fortuity Principle

. Ontario v. St. Paul Fire and Marine Insurance Company

In Ontario v. St. Paul Fire and Marine Insurance Company (Ont CA, 2023) the Court of Appeal considers the insurance 'fortuity principle':
G. Did the application judge err in failing to apply the fortuity principle?

[48] St. Paul submits that this difference in wording between the First Policy and Second Policy that I have identified should make no difference because even without the qualifying phrase – “neither expected nor intended from the standpoint of the Insured” – the fortuity principle prevents coverage for intended or expected injuries. The fortuity principle provides that “ordinarily only fortuitous or contingent losses are covered by a liability policy”: Hollinger Inc., at para. 16. It is St. Paul’s position that if the Personal Injury coverage in the Second Policy is interpreted in light of the fortuity principle, it must be interpreted as extending only to unintentional or unexpected loss.

[49] I recognise the fortuity principle but disagree that it applies here. This same general issue was addressed by this court in Ontario Society for the Prevention of Cruelty to Animals v. Sovereign General Insurance Company, 2015 ONCA 702, 127 O.R. (3d) 581 (C.A.) (“OSPCA”). Like the Second Policy in this case, the policy at issue in OSPCA did not include a qualifying phrase expressly limiting its Personal Injury coverage to unexpected or unintentional injuries and provided explicit coverage for the actions alleged against the insured party, in that case “false arrest”, “false imprisonment” “malicious prosecution”, and “slander”. Pepall J.A. held for the court that the fortuity principle is an interpretive aid that should not be applied so as to preclude coverage that the insurer agreed to provide: OSPCA, at para. 65. The same holds true in this case. St. Paul agreed to provide coverage for wrongful detention and cannot now rely on the “fortuity principle” to avoid that coverage.[4]
. OSPCA v. The Sovereign General Insurance Company

In OSPCA v. The Sovereign General Insurance Company (Ont Sup Ct, 2014) the court set out the interpretive "fortuity principle" of insurance law:
[39] Sovereign submits that it is a well-established principle of insurance law that liability policies generally only cover losses from fortuitous events (accidental or unforeseen occurrences): Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 S.C.C. 24 at paras. 68 and 69. The allegations against the OSPCA in the three contested claims allege that agents of the OSPCA willfully violated the law, intentionally violated the rights of the plaintiffs and/or intentionally caused them harm. Sovereign’s position is that not only are these allegations expressly excluded by the Sovereign Policy, they are also uninsurable in law.

[40] Sovereign relies on the Ontario Court of Appeal decision of Liberty Mutual Insurance Co. v. Hollinger Inc., 2004 CanLII 10995 (ON CA), 2004 CanLII 10995 (ONCA), which applied the fortuity principle in the context of intentional torts and determined that there was no duty on the insurer to defend a claim for intentional discrimination. The Court recognized that for the purposes of insurance law, a distinction should be drawn between intentional conduct that results in unintended harm, and conduct where the kind of harm or loss was intended from the standpoint of the insured. The fortuity principle, as a matter of law, prevents an insured from recovering where the actual harm alleged was intended by the insurer.
. OSPCA v. Sovereign General Insurance Company (Ont CA, 2015)

In OSPCA v. Sovereign General Insurance Company (Ont CA, 2015) the Court of Appeal considered the basic principles applicable to the 'fortuity principle' (that intentionally-caused harm is not implicitly covered by liability insurance):
(ii) Fortuity Principle

[43] The fortuity principle serves as an interpretive aid. It is a “general principle of insurance law that arises from the very nature and purpose of insurance, namely, that ordinarily only fortuitous or contingent losses are covered by a liability policy”: Hollinger, at para. 16. The principle is based on the notion that insurance makes economic sense where losses are unforeseen or accidental and that it would be undesirable to encourage people to injure others intentionally by indemnifying them for the civil consequences: Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24 (CanLII), [2000] 1 S.C.R. 551, at paras. 68-69.

[44] A fortuitous loss is one that is neither intentional nor inevitable: Hollinger, at para. 16; ING Insurance Co. of Canada v. Miracle, 2011 ONCA 321 (CanLII), 105 O.R. (3d) 241, at para. 23.

[45] In Hollinger, the insurance policy allowed for coverage for claims of discrimination but coverage for a claim alleging intentional discrimination was denied based on the fortuity principle. As Sharpe J.A. noted, at para. 16, the language of the policy:
must be read and interpreted in light of a general principle of insurance law that arises from the very nature and purpose of insurance, namely, that ordinarily only fortuitous or contingent losses are covered by a liability policy. Where an insured intends to cause the very harm that gives rise to the claim, the insured cannot look to a liability policy for indemnity. [Emphasis added.]
[46] The fortuity principle should be distinguished from rules of public policy designed to prevent tortfeasors or criminals from benefitting from their own wrongful acts: Hollinger, at para. 21; Beresford v. Royal Insurance Co. Ltd., [1938] A.C. 586 (H.L.). While the fortuity principle can overlap with various rules of public policy, the two bodies of law are distinct, since the fortuity principle is an aspect of contractual interpretation, rather than a rule of public policy: Hollinger, at para. 16; Beresford, at pp. 594-95. It is an interpretative aid that is of assistance in interpreting contracts: Scalera, at paras. 67-69.

[47] In some cases, insurers may include clauses in the insurance policy that mirror the fortuity principle. Of course, the converse is also true; an insurer may expressly agree to cover intentional acts: E.M. v. Reed (2003), 49 C.C.L.I (3d) 57 (Ont. C.A.).

[48] As Sharpe J.A. observed in Hollinger, the fortuity principle does not exclude coverage for all claims that arise from intentional acts. Absent provision in an agreement to the contrary, the critical issue when determining whether the fortuity principle aids in precluding coverage for harm caused by an intentional act is whether or not the insured intended to inflict the actual harm about which the plaintiff complains. An intended act may have unintended consequences. The fortuity principle does not preclude coverage for an intentional act with unintended consequences. Rather, it precludes coverage for an intentional act with intended consequences: see Hollinger, at paras. 18-19.

[49] Section 118 of the Insurance Act, R.S.O. 1990, c. I.8 incorporates the distinction: “Unless the contract otherwise provides, a contravention of any criminal or other law…does not, by that fact alone, render unenforceable a claim for indemnity under a contract of insurance except where the contravention is committed by the insured…with intent to bring about loss or damage…”


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Last modified: 16-03-23
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