Opinion
When does an exclusion for a ‘deliberate act’ apply?
I
t is fundamental to all insurance that it only covers a fortuity – that is, a loss that is accidental from the insured’s point of view. So, how are the courts to interpret a liability policy that excludes: Liability arising out of deliberate acts …? Deliberate acts cannot, by definition, be accidental. However, deliberate acts can still result in a loss that is accidental from the insured’s point of view; there is still a fortuity. For example, I deliberately burn some rubbish in an incinerator in my back yard, but the embers cause an accidental fire next door. If the courts interpreted the above exclusion literally, the exclusion would apply to this example. Only accidental acts causing accidental loss would be covered. This diminishes the benefit of the cover considerably. Recently, this issue went all the way to the United Kingdom’s Supreme Court. Although the facts of the case relate to liability for personal injury rather than property damage, the principles that apply are the same.
28
September 2021
Background A bouncer at a bar in Scotland ejected a customer from the bar who was intoxicated with both alcohol and cocaine; he had fallen asleep. Once outside, an altercation occurred. The customer was restrained by the bouncer around the neck. The police were called. In the meantime, the bouncer continued to apply his neck restraint for up to 3 minutes. The customer continued to resist for a short period, but then turned blue in the face and started to cough. Once the police arrived the customer was motionless. He was pronounced dead shortly afterwards. The cause of the death was mechanical asphyxia caused by the bouncer’s neck hold. The bouncer was charged with murder. The jury acquitted him of murder but found him guilty of assault. When sentencing the bouncer, the trial judge accepted the bouncer’s actions were ‘badly executed, not badly motivated’. The customer’s widow sued the bouncer for damages. He was insured under a liability policy
containing the exclusion quoted above. Policy interpretation The Supreme Court restated the established law about interpreting an insurance policy. The Court said the policy must be: “… interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the contract, would have understood the language of the contract to mean”. This allows the court to have regard to the commercial realities underpinning a liability policy issued to a door security company that employs bouncers. Insurer’s position The insurer accepted that the exclusion could not be interpreted literally – it could not apply simply because an action by a person was deliberate. Rather the insurer argued that the word ‘deliberate’ is referring
