Policy excluded lawsuits that insured's senior counsel 'could have reasonably foreseen'
The Ontario Superior Court of Justice has rejected an insurance policy claim because the company’s senior lawyer could have reasonably foreseen a potential lawsuit that triggered the policy’s exclusionary clause.
In Colliers International Group Inc. v. Liberty Mutual Insurance Company, 2022 ONSC 6184, real estate company Colliers International obtained a professional liability insurance policy which contained a clause that excluded claims arising out of wrongful acts committed before the term of the policy started, if the insured’s chief legal counsel “knew or could have reasonably foreseen that such wrongful act did or would result in a claim” against the company.
Prior to the policy coming into force, Colliers had received a litigation hold letter from one of its customers, warning the company of a potential lawsuit against it. An employee of Colliers was also embroiled in the complaint. Colliers’ chief legal counsel entered into a joint defence agreement with the employee to combat any potential claims made by the customer.
The insurance companies alleged that Colliers actions were sufficient to trigger the exclusion clause under the policy. Colliers, on the other hand, contended that for the exclusion clause to apply, the insured had to have known with certainty or probability that a claim within the policy period would result from the matters known before the policy came into force. The company asserted that it did not know a claim was coming with sufficient certainty to trigger the exclusion clause.
The insurers disagreed. They pointed out that the exclusion clause looked at the facts known by the chief legal counsel of the insured and excluded claims if the counsel “could have reasonably foreseen that such wrongful act…would result in a claim.” The insurers said that the test was not whether a claim would emerge, but whether a senior lawyer could have reasonably foreseen that a claim would be brought during the policy term.
The court agreed with the interpretation of the insurers, emphasizing that the clause focused on an objective assessment of the reasonableness of what the senior legal counsel could have foreseen based on the facts they knew. The court found that prior to the policy commencing, Colliers’ chief legal counsel had more than ample knowledge of alleged wrongful acts that he could have reasonably foreseen would result in a claim during the policy period. The court pointed out that the senior lawyer had engaged in a joint defence agreement to combat the potential lawsuit, indicating that he could have reasonably foreseen that a claim would be brought during the policy term. That was precisely what triggered the exclusion clause, the court said.
The court concluded that the exclusion clause applied with unambiguous terms and, consequently, dismissed Colliers’ application.