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Supreme Court endorses Clyde & Co submissions on ‘deliberate act’ policy exclusions
- Jul 21, 2021
- Latest News
The Supreme Court recently handed down a decision providing much needed clarity for insurers in respect of policy exclusions relating to injuries caused by the ‘deliberate acts’ of employees.
Burnett or Grant v International Insurance Company of Hanover Ltd [2021] UKSC 12
Clyde & Co’s Edinburgh office acted for International Insurance Company of Hanover Limited. Whilst the conclusion of the Supreme Court was unfortunately not favourable for our client in respect of the instant case, the Supreme Court agreed with our submissions that a deliberate act to cause injury does not require the intent to cause the specific injury sustained.
For the avoidance of doubt, where Scottish legal terminology is used within this article, their English equivalent is stated in brackets if required.
Background
In August 2013, Mr Grant was assaulted by a door steward at a bar in Aberdeen. Mr Grant had demonstrated violent behaviour towards the door stewards, was subsequently wrestled to the ground and placed in a neck hold for three minutes. This caused his asphyxiation and subsequent death.
At his criminal trial, whilst it was accepted that the door steward had ignored his training in applying the neck hold, he was found guilty of assault, as opposed to murder. He was found as having no intention to kill Mr Grant, and his actions were “badly executed, not badly motivated.”
His widow, the pursuer (claimant), brought separate claims against four defenders (defendants) as qualifying relatives under the Damages (Scotland) Act. Two claims, those against the tenant of the bar and the door steward, were subsequently withdrawn. The remaining claims were against the second defender, the steward’s employer, and our insurer client, the fourth defender. With the second defender in liquidation, the pursuer asserted her rights under the Third Party (Rights against Insurers) Act 2010. The pursuer sought indemnity from our client as insurer of the second defender through a public liability policy at the relevant time.
The policy provided coverage for “all sums which the INSURED [the employer] shall become legally liable to pay as compensatory damages and claimant’s costs and expenses arising out of accidental… (a) INJURY to any person.” However, our client argued that the policy did not provide indemnity with reference to reliance on an exclusion clause (“Clause 14”) dealing with ‘Liability arising out of deliberate acts wilful default or neglect’.
In the alternative, we submitted that if our client was obliged to indemnify, then any such liability was limited to £100,000 as the actions fell within the definition of “Wrongful Arrest” under the policy.
Our application for absolvitor (dismissal), which lead to a Proof before Answer (trial with questions of law reserved for determination), resulted in a judgment in the pursuer’s favour. The Court concluded that our insurer client was obliged to indemnify the second defender in respect of their liability to the pursuer, and that the 2010 Act applied.
The Lord Ordinary determined that the Clause 14 “applies only when the outcome giving rise to liability, namely death, was the intended objective”. Our subsequent reclaiming (appeal) motion was refused (dismissed) by the First Division of the Inner House, as the three judges agreed on the requirement of intent for a deliberate act. At both stages, the wrongful arrest extension was held to be inapplicable.
A further appeal was submitted to the Supreme Court.
Issues before the Supreme Court
The issues at appeal were as follows:
1, Was the death of Mr Grant brought about by a deliberate act of the door steward within the terms of Clause 14 of the policy, with the effect that the insurer’s liability to indemnify Mrs Grant is excluded?
2, Was the death of Mr Grant brought about by the door steward a wrongful arrest under the terms of the policy, with the effect that the insurer’s liability to indemnify Mrs Grant is limited to £100,000?
The parties agreed the policy was to be interpreted in accordance with the principles laid out in Wood v Capita Insurance Services Ltd. In line with this claim, “the policy is to be interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the contract, would have understood the language of the contract to mean”.
The disagreement between the parties arose as to what must be intended to be considered deliberate. As summarised by Lord Hamblen, handing down sole judgment, our client submitted “it means acts which are intended to cause injury, or acts which are carried out recklessly as to whether they will cause injury. Mrs Grant’s [the pursuer’s] case is that it means acts which are intended to cause the specific injury which results, in this case death, or at least serious injury, but that on any view it does not include reckless acts”.
Outcome
Our appeal was dismissed at the Supreme Court in respect of the ability of our client to exclude the pursuer’s claim. However, the Supreme Court accepted our argument that the "deliberate acts" referred to within clause 14 of the policy means acts which are intended to cause injury generally, not a specific injury.
Lord Hamblen studied the policy and provided his decision on its context and contents as well as the case facts. He concluded that:
- If the policy wording does not distinguish between types of injury, then the interpretation of a deliberate act should not require intent to cause a specific injury. An attempt to do so would lead to “unsatisfactory and arbitrary” results. Furthermore, there was “no commercial or other logic in excluding precision injuries in this way”.
- Deliberate acts do not allow for a reckless state of mind; therefore, incorporating reckless acts of causing injury into an exclusion policy would be commercially unlikely.
- Applying this interpretation of the term ‘deliberate acts’ to this claim, the Court was not satisfied that our client was able to establish that Clause 14 applied. Lord Hamblen noted that “not only is there no express or implied finding of intention to injure”, the conclusion of Lady Wolff in the criminal trial was that the actions were “badly executed, not badly motivated”.
Therefore, Clause 14 did not apply and the pursuer’s claim could not be excluded by our client.
In considering the wrongful arrest extension, Lord Hamblen held that “the insurer has no defence to the claim made under the main insuring clause and the appeal must therefore be dismissed”. Nonetheless, the reasoning of the First Division was sound in the view of the Supreme Court, as “the losses claimed do not relate to wrongful arrest and the factual basis for such a claim is not made out”.
What can we learn?
- Insurers can take reassurance in the clarity offered by this decision, specifically that an exclusion for injury arising out of ‘deliberate acts’ is considered to means an act carried out with an intention to injure. There is a clear distinction made between those types of deliberate acts with “negligent acts… deliberately carried out in the sense that a person intended them, albeit they may not have intended the consequences of those acts”.
- As part of our submissions, we accepted that “vicarious liability for negligent acts of door stewards which cause injury would be covered [by the policy ordinarily], since otherwise the policy would be stripped of much of its content”. For those insurers facing similar third party injury claims that they are seeking to exclude, the overall context is important.
- To that end, the decision in Mohamud provides an interesting counterpoint in terms of those circumstances where a similar exclusion to Clause 14 might bite. In Mohamud, a petrol station employee violently assaulted a customer without provocation, continuing the assault despite the protestations of his own supervisor. In this instance Clause 14, applying the finding of the Supreme Court, may have applied. This stands in contrast to this decision, where not only had there been a finding of an intention to injure, the door steward had stated he was acting in defence of his other staff members.
Authors:
Vikki Melville - Partner
Richard Templeton
www.clydeco.com