When professionals are insured for liability, whether the coverage is obtained individually, through a professional regulatory body such as the Law Society of Ontario, or through their place of work, what is the insurer’s obligation to defend them? Does the obligation change depending on the basis of the claim against the insured?
This was a question recently put before the Ontario Court of Appeal when a registered nurse was sued for the tort of “intrusion upon seclusion” by a number of former patients. The nurse was insured as an employee of the hospital where she worked, and the claims were brought against her workplace and against her individually. However, due to the intentional nature of the claims, the insurer refused to defend the claims against the nurse in her personal capacity and instead was only willing to defend the hospital.
Nurse Found to Have Fraudulently Used Patient Information to Take “Thousands” of Percocet Tablets
In Demme v. Healthcare Insurance Reciprocal of Canada, the plaintiff, Catherina Demme, worked as a registered nurse at Brampton Civic Hospital (the Hospital), for over ten years. Through her employment, she was covered by her employer’s insurance provider, the Healthcare Insurance Reciprocal of Canada (HIROC). HIROC provides liability insurance coverage to hospitals and hospital workers under Composite Healthcare Insurance Master Policy 2016/1.
In 2016, the employer, the Hospital, discovered that Demme had taken approximately 24,000 Percocet tablets between 2006 and 2016 using the Hospital’s automatic medication dispensing unit. She had used her access to confidential patient information to access the automated dispenser and dispense the tablets. As a result, the Hospital terminated Demme’s employment and then had to notify over 11,000 patients that their medical records had been accessed unlawfully as a result of Demme’s actions.
Following this notification, eight separate civil actions were launched against both the Hospital and Demme between 2017 and 2019. HIROC appointed counsel to represent the Hospital in each action but denied similar legal defence to Demme. Demme brought an action against HIROC, seeking to enforce its “duty to defend” her under the policy. She sought a declaration that she was an additional insured under the policy, and as such HIROC was obligated to extend liability coverage to her as well as cover her legal expenses in the various civil actions against her. The motion judge dismissed her claim for summary judgment and awarded $20,000 in legal costs to HIROC. Demme appealed the decision to the Court of Appeal.
The Principles Behind an Insurer’s Duty to Defend
When analyzing the duty to defend, one of the primary issues to consider is the type of claim the insured is facing. The information to be examined in this analysis will generally be limited to the language contained in the relevant Statement of Claim(s) and the insurance policy. The insurer’s duty to defend will often be triggered in the following circumstances:
- The pleadings against the insured contain facts which, if true, would require the insurer to indemnify the insured;
- There is a mere possibility that the claim falls within the insurer’s scope of liability coverage;
- If the pleadings are not specific enough to determine if the claim falls within the insurer’s coverage, the insurer will be required to defend if a reasonable person would infer that the claim is covered.
If a claim is found to be derivative in nature, the duty to defend will not be triggered.
A court considering an insurer’s duty to defend will conduct a three-step analysis as follows:
- Consider the nature of the claims against the insured.
- Consider whether any of the claims are wholly derivative in nature.
- Consider whether any properly pleaded, non-derivative claims could trigger the insurer’s duty to defend.
Motions Judge: Claims Based on Intentional Tort of Intrusion Upon Seclusion Do Not Trigger Duty to Defend
In this case, the claims were based in the tort of intrusion upon seclusion. Intrusion upon seclusion is an intentional tort in which a defendant acts recklessly or intentionally to unlawfully access the plaintiff’s private information for a purpose or in a way that would humiliate, distress, or cause anguish to the plaintiff. The tort was originally recognized in a 2012 Court of Appeal decision called Jones v. Tiege, in order to create a remedy in tort relating to the invasion of one’s privacy.
After considering the claims against the defendant Demme, the motions judge determined that they were all overtly based in, or derivative of, intrusion upon seclusion. The liability policy offered by HIROC provided for legal defence for claims resulting from bodily harm caused by “occurrences” which caused “unintended or unexpected harm” to the plaintiff. Since the harm to the plaintiffs in the matter at hand was an expected and intended consequence of Demme’s use of the plaintiffs’ information, her actions would not qualify as an occurrence under the policy. Further, the policy contained a clause excluding “intentional or criminal” acts on the part of the insured, which further upheld the position that Demme could not rely on the policy for legal defence.
Court of Appeal: “Intentional Act” Does not Require “Intention to Cause Harm”
Demme appealed the decision, arguing the motions judge had erred with respect to the definition of an intentional act. Demme argued that the judge had found she had intended to harm the patients by accessing their records, when in fact accessing the records was an unintentional consequence of her intention to acquire the Percocet tablets. As a result, the unintended harm caused by accessing the information should be considered an “occurrence” under the policy.
The motions judge had rejected this argument, noting that the relevant intention at play was Demme’s intention to access the records. Once this was demonstrated, the intention to cause harm flowed naturally. The harm suffered by the plaintiffs was each patient’s “loss of control over their private information”, and so the unlawful accessing of the information was tantamount to an intention to cause harm. The Court of Appeal found no legal error requiring intervention.
Contact Milosevic & Associates For Exceptional Legal Representation in Insurance-Related Matters
The highly experienced Toronto insurance litigation lawyers at Milosevic & Associates represent clients with insurance-related legal issues such as the denial of insurance coverage. We understand the importance of swift, resourceful action where insurance matters are involved. We can act quickly to protect our clients and help ensure that they receive maximum compensation for their injuries or harm suffered. We also regularly represent employers facing civil fraud perpetrated by employees. To learn more about how we can help you call us at 416-916-1387 or contact us online.