No Duty to Defend Parents of Alleged Bully

The Court of Appeal has held that an insurer does not have a duty to defend its insureds with respect to claims that they failed to prevent bullying.

In Unifund v. D.E., 2015 ONCA 423 (C.A.), the insurer refused to defend parents of an alleged bully.  In the underlying action, the plaintiff alleged that the parents' daughter had bullied her at school.  The allegations against the parents were that they knew or ought to have known about the bullying, and failed to investigate it, take steps to prevent it or take disciplinary action. The Unifund policy contained an exclusion which provided as follows:

We do not insure claims arising from:

6. bodily injury or property damage caused by an intentional or criminal act or failure to act by:

(a) any person insured by this policy; or

(b) any other person at the direction of any person insured by this policy;

7.(a) sexual, physical, psychological or emotional abuse, molestation or harassment, including corporal punishment by, at the direction of, or with the knowledge of any person insured by this policy; or

(b) failure of any person insured by this policy to take steps to prevent sexual, physical, psychological or emotional abuse, molestation or harassment or corporal punishment.

The application judge held that the exclusion was limited to an intentional failure to prevent physical abuse rather than negligence.  The Court of Appeal allowed the appeal.  Justice MacPherson held that by using the word "failure" in the exclusion clause, it extended to negligence.  Unifund had no duty to defend or indemnify its insureds in the underlying action.