Crandall University v AIG Insurance Company of Canada, 2024 NBKB 151
Reading Time: 4 minutes (approx.)
By: Krista Nasartschuk
In March of 2023, Crandall University undertook an internal investigation after receiving anonymous allegations of sexual harassment by its employees. The investigation was concluded on November 15, 2023, and determined that the demeanor of a Crandall employee, Dr. Stackhouse’s constituted sexual harassment and that correspondence between Dr. Stackhouse and a student was a “classic case of grooming”. These, in addition to other findings, formed the basis of Dr. Stackhouse’s termination.
Dr. Stackhouse subsequently filed a civil action against Crandall University alleging wrongful termination, defamation, false light in public eye, intrusion upon seclusion, public disclosure, and breach of confidence. Crandall University filed an application with the Court of King’s bench seeking a declaration that it’s insurer, AIG, must indemnify it against losses resulting from Dr. Stackhouse’s action against it.
The Court first considered whether the policy’s Sexual Misconduct Exclusion clause barred coverage for losses relating to Dr. Stackhouse’s civil suit and began its analysis by reiterating the principles of insurance policy interpretation: firstly, if the policy is unambiguous, clear language is to be put into practice; secondly, ambiguity, if any, is to be resolved through examining the policy language alongside similar policies; and finally, if the ambiguity cannot be resolved, courts must interpret the policy contra proferentum – that is, against the insurer – meaning that the interpretation of coverage is broad while the interpretation of exclusions is narrow.
The court found that the language of the Sexual Misconduct Exclusion was unambiguous and therefore several of Crandall University’s arguments (including the reasonable expectations of the parties, interpretation based upon other policies, and contra proferentum) were not applicable as these only come into play where the plain language reading results in ambiguity.
The court then assessed whether the action against Crandall University arose out of sexual misconduct. It found that Dr. Stackhouse’s termination and his subsequent claim arose indirectly from the sexual harassment of a student by Dr. Stackhouse and that this foundational element could not be divorced from Dr. Stackhouse’s claim.
Finally, in considering whether “Sexual Misconduct” as contemplated by the exclusion clause includes “sexual harassment” the court relied upon the generally accepted definition of sexual harassment as per the 1989 decision of the Supreme Court of Canada in Janzen v Platy Enterprises Ltd., [1989] 1 SCR 1252. The court found that the definition of Sexual Misconduct included “immoral and sexual behaviour” and that, specifically, the term ‘sexual behaviour’ was broad enough to include sexual harassment.
The court also, briefly, addressed additional arguments made by Crandall University. Specifically, that the coverage available under the Employment Practices Liability (EPL) provisions does not preclude the operation of the exclusion clause. Crandall’s argument that giving effect to the exclusion clause would nullify coverage provided under the EPL provision failed to acknowledge the broad scope of the remaining EPL coverage.
Crandall University was unsuccessful in establishing that AIG had a duty to defend and the application was dismissed.
