Date: Fri, 6 Apr 2007 03:16

From: David Cheifetz

Subject: Insurance and punitive damages

Lionel,

Blair was right in principle, in my view. If the liability is insured, then the wrongdoer never pays, so where's the punishment? The stigma of the award?

The problem in McIntyre is that the Ontario automobile policy liability coverage does not explicitly exclude liability for punitive damages from the insurance it provides. There is no exclusion. There are no terms that restrict the insurance grant to compensatory damages. What it provides is insurance against liability imposed by law. Other provinces, BC for example - I can't now recall if any of the others do - specifically provides by statute that its automobile policy liability insurance does not apply to punitive damages liability.

The problem is usually addressed in modern liability policies either by an exclusion or a phrase in the coverage grant that says the liability insurance is for liability for compensatory damages.

Absent that sort of drafting answer, one is forced to fall back on a public policy argument that it's contrary to public policy to allow liability insurance against punitive damages because they're essentially penal. That argument isn't unanimously accepted. It might have been a strong argument once. It isn't any more. I wouldn't expect it to find favour, today, in Canada.

It's my view that Blair J is right about how the Ontario policy will likely be interpreted if the question ever arises. For what it's worth, I've been told that the insurance issue wasn't mentioned during argument or in anybody's factum. He raised it on his own in his reasons.

In passing you're right that excluding liability for punitive damages flowing from a criminal act resulting in civil liability will require proper wording, but that's the case regardless of whether the act is "criminal" - in the strict meaning of "criminal" or not. The offence for which Griggs was convicted - careless driving - isn't a criminal code offence but a highway traffic act (provincial "quasi-criminal") offence.

The insurance coverage for punitive damages issue doesn't have invoke the problem that the sections such as s. 118 of the Ontario Insurance Act were enacted to cover. These sections relate to the activity - the act and the intent to cause the injury resulting from the act - not the damages for which the actor is held liable as a result of harm caused by the activity. If the policy doesn't apply to the activity, at all, then who cares what damages the actor is held liable for. It's only where the policy applies to the activity which causes the harm that one need to limit (or not) the insurance provided for the types of damages for which the actor may be held liable.

David

-----Original Message-----
From: Lionel Smith
Sent: April 5, 2007 3:52 PM
Subject: ODG: Insurance and punitive damages

An interesting point arises out of McIntyre v Grigg [2006] OJ No. 4420, in which a majority of the Ontario CA allowed punitive damages in a running down case in which the defendant was impaired, though reducing the jury award from $100,000 to $20,000. The defendant was convicted of the relatively minor criminal offence of careless driving; he was not convicted of impaired driving etc because the police failed to read him his Charter rights which made evidence of his blood alcohol level inadmissible. Blair JA dissented and would have disallowed any punitive damages. One of his points (at [131]) was that so far as he could tell, the defendant's insurance policy would cover the punitive damages.

Is he right when he goes on to say that the general principle of ignoring insurance does not make sense in the assessment of punitive damages?

There are some older cases that said the whole liability coverage was lost in the case of impaired driving, because no one can insure against their own criminal act, but this has been modified by statute, eg Ontario Insurance Act s 118: coverage is only lost through criminality if you intended to bring about loss or damage. So presumably exclusion of coverage punitive damages in cases of criminal carelessness would require a specific exclusion.

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