Court says insurer must pay N.B. diocese $3.3 million to cover abuse claims
THE CANADIAN PRESS
Published Friday, October 19, 2018 1:44PM ADT
Last Updated Friday, October 19, 2018 2:53PM ADT
FREDERICTON -- An insurance company has been ordered by New Brunswick's top court to pay over $3.3 million to a Catholic diocese to cover the cost of compensation for decades of sexual abuse by priests.
The province's Court of Appeal ruled that Aviva Insurance Company of Canada breached its contract when it denied coverage of claims resulting from a conciliation process set up by the Catholic Diocese of Bathurst.
"The question on appeal is whether the diocese is entitled to damages for breach of contract in amounts that involve the costs of, and payments made through a conciliation process the diocese set up as a result of its insurer's denial of coverage," Justice Marc Richard said in a written ruling released Thursday.
Richard says 83 victims participated in the conciliation process, with compensation paid to 50 people.
Twenty-six priests were identified as having committed sexual abuse, he wrote, with 19 identified in the conciliation process and another seven in separate court actions.
In a previous civil trial held in Moncton, a Court of Queen's Bench judge ruled Aviva wasn't responsible for covering the costs of the conciliation claims -- a decision appealed by the church in a hearing last February in Fredericton.
In his ruling, Richard points out that Aviva discontinued its own appeal in the case, leaving only a cross appeal to be argued. He said that left unchallenged the trial judge's determination that the claims for sexual abuse were covered under policies that were not void for failure to disclose material risks and were not excluded in the intentional acts clause.
He said in essence, Aviva accepts it had wrongfully denied the diocese when it sought coverage for the sexual abuse claims and that left a question whether the trial judge erred in concluding that the claims were not recoverable as damages because they didn't involve payments for liability imposed by a court.
"In my respectful view the judge did err in this regard by applying an incorrect test," Richard wrote. "This was a claim for damages flowing from a breach of contract and not for indemnity under the policy."
Richard said allowing an insurer to escape liability because the insured settled a claim rather than seeking a court judgment would encourage companies to deny coverage in such cases.
"Such conduct by insurers must be prevented," he said.
Richard said whether or not the settlement by the diocese was reasonable was the "threshold issue in this case."
The ruling said the diocese acted reasonably in instituting an alternative dispute resolution process that would allow for its financial survival, having been abandoned by the insurance company.
The appeal ruling says the abuse of young people occurred from the late 1950s to the early 1980s.
Retired Supreme Court of Canada Justice Michel Bastarache was retained to devise and implement a process aimed at resolving claims and to seek the forgiveness of the victims. Aviva declined to participate in the process.
"By using the conciliation process the diocese kept its costs for that process to $4,284,000, which paled in comparison to the $15,000,000 paid by the Diocese of Antigonish, N.S., through claim-by-claim settlements. It was a decision designed to minimize costs, ensure there was enough money to pay victims, and avoid protracted litigation, all in the name of financial viability."
Richard said the diocese's "broader obligations" would have been known to Aviva when it decided to insure the diocese, and he noted the company did not dispute the amounts being claimed or the reasonableness of the amounts being claimed as reimbursement.
"For these reasons I would allow the appeal and set aside the trial judge's decision on the question of Aviva's liability to pay damages for breach of contract relating to claims resolved through the conciliation process."
The diocese paid conciliation process participants a total of $4,284,000 and another group of victims who opted not to participate were paid a total of $2,879,179.
The diocese ultimately made a total claim for breach of contract totalling $3,358,264, which was the amount awarded by the Court of Appeal, with pre-judgment interest.