MICHAEL WLASICHUK Applicant - v. -, 1999 ABQB 578

Wlasichuk v. Citadel General Assurance Company , 1999 ABQB 578 Date: 1999 0 603 Action No. 9903 00994 IN THE COURT OF QUEEN'S BENCH OF ALBERTA JUDICIAL DISTRICT OF EDMONTON BETWEEN: MICHAEL WLASICHUK Applicant - and - CITADEL GENERAL ASSURANCE COMPANY Respondent _______________________________________________________ REASONS FOR JUDGMENT of the HONOURABLE MR. JUSTICE M. A. BINDER _______________________________________________________ INTRODUCTION/OVERVIEW [ 1 ] This Application concerns the

interpretation of an insurance policy ("Policy") issued by the Respondent insurer ("Respondent" or "Insurer") to the Applicant insured ("Applicant" or "Insured"). [ 2 ] At issue is whether the Insurer has the duty to defend an action ("Action") which has been commenced by Statement of Claim ("Statement of Claim") against the Insured to recover damages resulting from an alleged assault by the Insured upon a Third Party ("Third Party"), where the Insured has filed a Statement of Defence ("Statement of Defence") in which he denies the assault and in the alternative relies on the common law defence of self defence.

[ 3 ] The Insurer argues that it is not required to defend the Action on behalf of the Insured, on the basis that the circumstances are indistinguishable from those in Nichols v . American Home Assurance Co. (1990), 1990 CanLII 144 (SCC) , 68 D.L.R. (4th) 321 (S.C.C.) . In order to assess this position, it is necessary to compare the relevant Policy provisions with the provisions in Nichols , supra .

CITADEL POLICY [ 4 ] The relevant provisions of the Policy are as follows: Coverage E - Comprehensive Personal Liability - Coverage is provided for Personal Liability as follows: Coverage under the liability portion of this policy will apply only to accidents or occurrences which take place during the policy period [...] (

a) We provide coverage for all sums you become legally liable to pay resulting from bodily injury or property damage including subsequent care and loss of services . [...] 3. Defence, Settlement, and Supplementary Payments With respect to the coverage offered under this section, we agree to: (

a) Defend any suit against you alleging bodily injury or property damage and seeking compensation, even if it is groundless, false or fraudulent. However, we reserve the right to investigate, negotiate or settle any claim or suit if we determine that this would be appropriate. II. Loss or damage not insured This policy does not offer insurance under Coverage E, F and G for claims arising from: [...] 12. Bodily injury or property damage caused intentionally or by a criminal act. This exclusion does not apply to (

a) the use of reasonable force to protect people or property. AMERICAN HOME POLICY [ 5 ] The relevant provisions of the policy in Nichols , supra, were as follows:

The American Home Assurance Company [...] agree [...] To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of any act or omission of the Insured [...] and arising out of the performance or intended performance or professional services for others, or failure to perform such services as ought to have been performed, in the Insured's capacity as a lawyer [...] COVERAGE D -- DEFENSE, SETTLEMENT, SUPPLEMENTARY PAYMENTS: With respect to such insurance as is afforded by this Policy, the Insurers shall in addition to the applicable Limit of Liability (

a) Defend any suit against the Insured [...] alleging such act or omission and seeking damages which are or may be payable under the terms of this Policy, even if any of the allegations of the suit are groundless, false or fraudulent [...] II. EXCLUSIONS THIS POLICY DOES NOT APPLY: (

a) to any dishonest, fraudulent, criminal or malicious act or omission of an Insured, however, this exclusion does not apply to any Insured who is neither the author of the said act or omission, nor an accomplice [...] ACCIDENT OR OCCURRENCE [ 6 ] As a preliminary issue, the Insurer relies on the judgment at trial in Bluebird Cabs Ltd. v. Guardian Insurance Co. of Canada, [1997] I.L.R.

I-3440 (B.C.S.C.) as authority for the proposition that an “assault” is not an "accident" or an “occurrence”. [ 7 ] In Bluebird , Drake J. stated (para.11): So, the question boils down to whether or not the 2 assaults in question [...] undoubtedly “occurrences” in a general sense [...] were occurrences such as to require Guardian to defend the actions against Bluebird and its two employees; that is to say, “accidents”. [ 8 ] Drake J. concluded that an assault was not an "accident", having regard to the particular facts in that case. [ 9 ] Apparently counsel were not aware that Drake, J.'s conclusion was reversed by the Court of Appeal (March 30, 1999), [1999] B.C.J.

No. 694 (B.C.C.A.) , online: QL (BCJ) on the basis that the employer/insured who was vicariously liable for its employee's assault, could not have intended or anticipated the assault, and so fell within the definition of "accident". [ 10 ] In any event, the policy before me does not contain a definition of “Occurrence”.

[ 11 ] I am of the view that an assault, at least in a general sense, is an occurrence, and is therefore covered by the term “Occurrences” in the Policy. SUIT/STATEMENT OF CLAIM/PLEADINGS [ 12 ] In Nichols , supra, The Bank of Montreal sued Nichols (a lawyer), his partner and others.

The statement of claim alleged that Nichols and his partner had committed fraud on the Bank by assisting other defendants to transfer various real properties and charges. [ 13 ] Nichols’ insurer refused to defend the suit on the basis that the policy did not cover fraud. [ 14 ] The Bank eventually discontinued its action against Nichols and his partner.

Nichols recovered party-and-party costs against the Bank, but in the result was not fully indemnified for the cost of defending the lawsuit and looked to his insurer for the balance. [ 15 ] The insurer refused to pay, maintaining that the policy did not cover fraud, which was the basis of the alleged cause of action contained in the statement of claim against Nichols. [ 16 ] At trial and on appeal, Nichols was successful.

On further appeal to the Supreme Court of Canada he was not. [ 17 ] In Nichols , supra , the insurer agreed to indemnify and defend Nichols for any sum he became legally obligated to pay as damages arising from the performance by him of legal services. There was an exclusion for fraud, but an exception if Nichols was neither the author nor accomplice to the fraud. [ 18 ] McLachlin, J., speaking for the Court in denying Nichols’ claim, appeared to restrict the inquiry to the statement of claim.

That is, unless the statement of claim alleged a cause of action covered by the policy, the insurer had no obligation to defend. For example, in referring to the insurer’s obligation to defend under the policy, McLachlin, J. said (p.325): That obligation is clear. It arises only where a suit is brought against the insured alleging

an act or omission under the policy. [...] The question which must be asked is whether, in the case at bar, the Bank of Montreal’s suit claimed damages which might be payable under the policy[...] It follows that the bank’s claim was not for damages payable under the policy and that the defence clause does not apply. The respondent seeks to meet this conclusion by arguing that damages might have been payable under the terms of the policy “if the acts alleged ... are proven, but found to be negligent, rather than fraudulent, by a Trial Judge”. This would be so if the statement of claim alleged negligence.

However, it does not. Without an amendment to the pleadings , the bank’s claim could not give rise to damages payable under the policy. [Emphasis added.] [ 19 ] From a review of the Reasons of McLachlin, J., it seems reasonable to conclude that as against Nichols, the only allegation contained in the statement of claim was fraud. Presumably, Nichols' defence was a denial. [ 20 ] In reference to the exception to the exclusion, McLachlin, J. noted (at pp. 326, 327) that it was on that basis that it was suggested Nichols’ partner, Servos, was viewed as entitled to a separate defence.

However, as there did not appear to be any evidence relating thereto, the matter was not dealt with. It seems that as against Nichols’ partner Servos, therefore, the statement of claim may have also alleged that Servos was liable for Nichols’ fraud, because of their partnership, notwithstanding that Servos was neither the actual perpetrator nor an accomplice in the commission of the fraud. Presumably if the statement of claim did so allege, then Servos’ insurer may have been obligated to defend on his behalf.

[ 21 ] According to the reasoning in Nichols , supra, it appears that only the statement of claim is to be considered in determining the duty to defend.

If so, and as I am of the view (as argued by the Appellant) that there is no material difference between the wording of the Policy in the case before me and the policy in Nichols , supra, I find that the Respondent has no duty to defend the Applicant against the allegation of intentional assault alleged in the Statement of Claim, it being excluded under the Policy. [ 22 ] However, McLachlin, J. goes on to consider general principles relating to the construction of insurance contracts and in that analysis refers to “ pleadings ” (p. 327): However, general principles relating to the construction of insurance contracts support the conclusion that the duty to defend arises only where the pleadings raise claims which would be payable under the agreement to indemnify in the insurance contract.

Courts have frequently stated that “[t]he pleadings govern the duty to defend”: Bacon v. McBride (1984), 1984 CanLII 692 (BC SC) , 6 D.L.R. (4 th ) 96 at p. 99 [...] Where it is clear from the pleadings that the suit falls outside of the coverage of the policy by reason of an exclusion clause, the duty to defend has been held not to arise: Opron Maritimes Construction Ltd. v. Canadian Indemnity Co. (1986), 1986 CanLII 89 (NB CA) , 73 N.B.R. (2d) 389 [...] leave to appeal refused [...] [1987] 1 S.C.R. xi, 76 N.B.R. (2d). [Emphasis added.] [ 23 ] The Court in Bacon v.

McBride , supra , appears to have considered only the Statement of Claim, referring to "allegations", and "claim". However, in Opron Maritimes Construction Ltd. v. Canada Indemnity Co., supra, not only was the Statement of Claim considered, but the cross-claims, statement of particulars, and defence insofar as it was incorporated into a cross-claim, were also considered.

The majority held that it could only consider those pleadings reviewed by the trial judge, thus excluding amendments prior to the appeal being heard, which indicates that the Court did address the issue of which pleadings it would be appropriate to consider. [ 24 ] More recently, the Alberta Court of Appeal, in International Radiography and Inspection Services

(1976) Ltd. v. General Accident Assurance Co. of Canada (1996), 1996 ABCA 363 (CanLII) , 47 Alta. L.R. (3d) 137 , considered the foregoing case law, commenting that a strict application of the "pleadings rule" may lead to unjust results. [ 25 ] If the inquiry is not limited to the statement of claim, but rather extends to “the pleadings” (which would include in this case the Statement of Defence), or if another Court is inclined to distinguish the Policy from the policy in Nichols , supra, then the other arguments raised by the Insurer must be addressed.

PLEADINGS/INDEMNITY [ 26 ] The Insurer argues, relying on Nichols , supra, that the Insurer has no duty to defend unless there is a possibility that it may be required to indemnify the Insured under the Policy.

In other words, if it is clear having regard to the Statement of Claim and the Statement of Defence ("Pleadings") that there is no possibility of indemnity, then no obligation to defend arises under the Policy. [ 27 ] The Insurer argues that based solely on the Pleadings, it is clear that the Insured would either be found liable (having used unreasonable force to defend himself, in which case there would be no coverage), or would not be found liable (having used reasonable force to defend himself, in which case there would likewise be no coverage as there would be no loss).

This reasoning is sound, unless it is possible that the Insured could be found to have used reasonable force in self-defence in relation to the assault alleged in the Statement of Claim, and still be held liable for damages resulting therefrom. This calls for a consideration of the nature of the defence itself. SELF DEFENCE

[ 28 ] It is clear that where a person uses more than reasonable force in self-defence, he or she may be liable for battery: Bridgman v. Skinner (1734), 94 E.R. 591 ; Harris v. Wong (1971), 1971 CanLII 843 (SK KB) , 19 D.L.R. (3d) 589 (Sask. Q.B.) , Veinot v. Veinot (1976), 1976 CanLII 2473 (NS SC) , 22 N.S.R. (2d) 77 , aff'd 1977 CanLII 1795 (NS CA) , 81 D.L.R. (3d) 549 (C.A.) ; Peck v. Chomyc Hotels Ltd. (1989), 1989 CanLII 3306 (AB KB) , 101 A.R. 65 (Q.B.) . But what of the use of reasonable force? [ 29 ] R.F.V. Heuston and R.A.

Buckley, in Salmond and Heuston on the Law of Torts , 19th ed. (London: Sweet & Maxwell, 1987) state (p.142): It is lawful for any person to use a reasonable degree of force for the protection of himself or any other person against any unlawful use of force. [Emphasis added.] The law is stated in Halsbury's Laws of England , 4th ed. (London: Butterworths, 1985) Volume 45 at para. 1257 as follows: 1257. Self-defence . Every person is justified in using reasonable force to defend himself and those under his care [...] [Emphasis added.] and at para. 1317: 1317. Acting in defence of person .

A person who is sued for an assault or battery may justify the act on the ground that it was committed in the defence of his own person and that he used no more force than was reasonably necessary. [Emphasis added.] G.H.L. Fridman, in The Law of Torts in Canada (Toronto: Carswell, 1989) Vol. 1 states (p.60): Even if the circumstances entitle the defendant to claim that he was acting in self-defence, he cannot escape liability unless he discharges the burden of proving that the amount of force used was reasonable in all the circumstances. [Emphasis added.] In Miksa v.

Sivec , 1959 CanLII 150 (ON CA) , [1959] O.R. 144 (C.A.) , Morden, J.A. held (p. 148): Self-defence is an answer to a claim for assault but only when the force used was not unreasonable in the circumstances. [Emphasis added.] This excerpt was quoted with approval by the majority of the Supreme Court of Canada in Mann v. Balaban , 1969 CanLII 5 (SCC) , [1970] S.C.R. 74 . [ 30 ] The foregoing passages describe the use of reasonable force in self-defence as lawful, justifiable, or an answer to a claim for assault, enabling one to escape liability.

This language goes beyond merely stating that such self-defence mitigates the gravity, or otherwise qualifies the act of self-defence as a lesser assault. Rather, it delineates lawful acts from unlawful acts. If, therefore, a finding is made that reasonable force was used in self-defence, it would seem that the plaintiff would be precluded from arguing that such act results in liability in a suit based on assault. [ 31 ] However, A. M. Linden, in Canadian Tort Law , 6th ed. (Toronto: Butterworths, 1997) writes (p. 94): Traditionally, apportionment of damages was not available in intentional tort cases.

Either the defendant was liable or not; the conduct of the plaintiff was relevant only if it amounted to a complete defence, but not otherwise, the theory being that the defendant's wrongful intention so outweighed the plaintiff's contributory fault or negligence as to efface it altogether.

This is no longer the case. It is now possible to apportion damages in cases of intentional torts and trespass actions. The author goes on to discuss legislation such as the Negligence Act , R.S.O. 1990, c.N.1, s.3 which permits apportionment, as it refers to any action for damages founded upon fault or negligence, but in L.N. Klar, et. al., Remedies in Tort , looseleaf (Toronto: Carswell, 1987), the authors (which include A.M.

Linden) caution (p.2-40): The application of such legislation to the torts of assault and battery is not entirely clear. [...W]here it is alleged that the defendant committed an intentional assault or battery, there remains some doubt as to the relevance of the plaintiff's conduct on the question of liability. The authors note, however, that the Plaintiff's conduct is clearly relevant to the question of damages. [ 32 ] The possibility of apportionment under this type of legislation, assuming it were available, would nonetheless be of no assistance in resolving the present question.

Based on the above conclusion with respect to the nature of the defence, even if the Third Party were to share liability, that would not change the fact that there could be a finding of liability on the part of the Insured only to the extent that he was found to have used unreasonable force. [ 33 ] Had the Third Party alleged negligence in the alternative, the outcome may have been different, but this Court must assess the Pleadings before it.

Again, the following words of the Supreme Court in Nichols , supra are apt (p. 325) : The respondent seeks to meet this conclusion by arguing that damages might have been payable under the terms of the policy "if the acts alleged ... are proven, but found to be negligent, rather than fraudulent, by a Trial Judge". This would be so if the statement of claim alleged negligence. However, it does not.

Without an amendment to the pleadings, the bank's claim could not give rise to damages payable under the policy. [ 34 ] To conclude, there is no possibility that the duty to indemnify will arise on the part of the Insured according to the Pleadings as they presently exist, and therefore the Insured has no duty to defend. COUNSEL [ 35 ] If I had found that the Insurer is bound to defend the Insured, I would have granted the Insured's request that, having regard to the position taken by the Insurer, the Insured is entitled to be represented by counsel of his choice.

Although counsel would have a duty to provide a proper defence on behalf of the Insured, having regard to the interests of the Insured, there would be a perception that counsel might be influenced by the Insurer's stated position of denial of coverage under the policy. [ 36 ] Accordingly, I would have directed that the Insured be entitled to appoint his own legal counsel to defend him in the subject action, subject to the approval of that counsel by the Insurer, failing which leave would have been granted to further apply.

I would have also ordered that counsel so appointed would be instructed by the Insured, but would not have the authority to settle the Action without the approval of the Insurer, and if refused, leave would have been granted to further apply. [ 37 ] In addition, I would have directed that the Insurer be responsible for the reasonable fees and disbursements of counsel retained by the Insured.

DISPOSITION [ 38 ] The Application is dismissed with costs. DATED at Edmonton, Alberta this 3rd day of June , 1999. J.C.Q.B.A. APPEARANCES: S. J. Weatherill For the Applicant D. L. Picco For the Respondent