Meaning of “deliberate act” in a liability policy
Unsurprisingly, most liability insurance policies exclude cover for deliberate acts. The reason is obvious – insurance is there to protect against fortuities – not the insured’s own deliberate conduct.
Issues can arise in determining precisely what constitutes a “deliberate act”, especially where the exclusion is drafted in a generic boilerplate fashion. In Burnett v International Insurance Company of Hanover Ltd, the Supreme Court of England and Wales was recently seized with the issue of whether a “deliberate act” exclusion applied where an employee of an insured had inflicted a fatal injury on a third party.
The insured was a private security contractor which provided door stewards to bars in Aberdeen, Scotland. One of its employees, while attempting to restrain a patron, used excessive force that resulted in the patron’s death. With the insured in liquidation, the patron’s widow sought to recover damages for her husband’s wrongful death directly from the insurer. The insurer refused cover on the basis that any vicarious liability on the part of the insured was excluded as it arose as a result of “deliberate acts, wilful default or neglect”.
The relevant clause contained no detail as to what would constitute a deliberate act. Its application was therefore unclear. Did it require the employee to intend to kill the patron? If so, it was common ground that he did not and so the exclusion would not apply. If, however, the employee merely needed to intend to apply the restraint to the patron, it was inarguable that he did and so the exclusion would take effect to deny cover.
At first instance, the court found that the exclusion would apply only where the employee intended to kill, since that was the outcome that gave rise to the insured’s potential liability. This conclusion was upheld on appeal, albeit in softer terms. The requisite intention was to create liabilities for losses that would be covered by the policy. This would capture an intent to kill but also an intent to create serious injury. A deliberate act accidently causing injury would not qualify.
The insurer’s argument in the Supreme Court was that “deliberate acts”, for the purposes of the policy, meant acts which are intended to cause injury (of any kind) or acts which are carried out recklessly as to whether they cause injury. The Court accepted only the first part: “deliberate acts” included acts intended to cause injury. It noted the potential for absurdity on this point—that the perpetrator must have intended the specific injury that occurred — arising from the fact that chance will often determine whether the specific consequence matched the perpetrator’s intent and that a perpetrator’s intent will often not be fixed to a particular injury.
The problem for the insurer was that there was no evidence to suggest that the insured’s employee had intended to inflict injury. In fact, there was evidence to the contrary. The insurer therefore needed the Court to accept the second strand of its proposed interpretation of the exclusion clause: that it extended to acts carried out recklessly as to whether they cause injury. The Court found against the insurer on this point. The natural meaning of “deliberate” did not include reckless acts. The insurer could point to no authority in which “deliberate” had been interpreted in this manner and there was nothing in this policy or its surrounding context suggesting such an intent.
The criminal courts are well-versed in determining questions of intent in uncertain circumstances. However, this case demonstrates that the same issue can arise in insurance law. And it causes similar uncertainty. Its key finding reduces this uncertainty somewhat — all other things being equal (and always subject to particular policy terms) exclusions for deliberate acts in public liability policies covering injury will be engaged only where the act giving rise to liability was intended to cause injury.
This case is likely to have wider ramifications. Many liability policies contain “deliberate acts” exclusions. In our view, this case will be persuasive authority for the proposition that “deliberate” does not include “reckless” conduct and that “deliberate acts” exclusions are likely to be interpreted as requiring a clear connection between the act in question and the consequence.
More generally, this case is a reminder of the importance of carefully drafting exclusion clauses. It is important to focus upon exclusion clauses to mitigate uncertainty and address the particular circumstances intended to be captured by the clause. Otherwise, excessively generic language is likely to deprive insurers of the benefit of an exclusion clause on which they intended to rely to limit the scope of liability.
Co-authored by Thomas Leggat.