Case information

Insurance — Extent of risk — Intentional acts — Whether a claims process initiated by an insured inviting claimants to come forward based on total anonymity constitutes the basis upon which “reasonable” settlements can be achieved — Whether the “reasonable” settlement must be assessed on the application of objective criteria only or can the criteria be subjective — Whether an insured continues to be bound by the terms of the insurance contract where the insurer has wrongfully denied coverage and to what extent — Whether a breach by the insurer entitles the insured to recovered amounts paid voluntarily and not based upon any liability imposed by law, where the contract limits recovery to liability imposed by law.

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Following the sexual abuse of youth perpetrated by various priests in the respondent Diocese of Bathurst between the late 1950s and the early 1980s, and the criminal conviction of two of them, claims were made against the Diocese. The Diocese’s insurer, the applicant Aviva Insurance Company of Canada participated in one settlement and denied coverage for subsequent cases. The Diocese responded by setting up a concilitation system that would resolve the claims, a parallel system to the conventional procedure that was also used by other claimants. The Diocese paid out over $7 million before commencing an action against Aviva for breach of contract. The trial judge found that the conciliation claims were not covered by the Diocese’s insurance policies as they were voluntary payments, whereas the claims resolved by the traditional process were found to be covered by those same policies. The Court of Appeal found that Aviva is responsible for both the conciliation claims and those resolved by the traditional process.