Crandall University v. AIG Insurance Company of Canada, 2025 NBCA 57
Reading Time: 4 minutes (approx.)
By: Sarah Richard
Crandall University (“Crandall”) terminated a professor’s employment after he was found to have sexually harassed a student. The professor, along with his wife, sued the university for wrongful dismissal, defamation and privacy-related torts. These allegations led Crandall University to seek coverage under the “Not-For-Profit Risk Protector” insurance policy issued by AIG Insurance Company of Canada (“AIG”). Coverage was denied because of the exclusion of claims in any way involving, directly or indirectly sexual misconducted under the “Sexual Misconduct and Child Abuse Exclusion” endorsement.
The New Brunswick Court of King’s Bench dismissed the application filed by Crandall University for a declaration of coverage. It found the exclusion to be unambiguous and applicable to the claims.
The appeal addressed the following issues:
- Did the application judge err in interpreting the “Sexual Misconduct and Child Abuse Exclusion” as excluding coverage for claims indirectly involving sexual misconduct?
- Is the exclusion ambiguous, and should it be interpreted narrowly to preserve coverage for wrongful dismissal and defamation claims?
- Did the application judge fail to read the insurance policy as a whole?
The Court found no error in the application judge’s interpretation of the exclusion clause. The language, which excluded claims “in any way involving, directly or indirectly,” sexual misconduct, was clear and intended to bar even those claims with an indirect link to such conduct. The Court rejected Crandall’s argument that the exclusion should apply only to direct allegations of sexual misconduct against the insured, emphasizing that the broad wording encompassed the claims in question.
The Court also held that the application judge correctly interpreted the policy as a whole and found no ambiguity in the exclusion. The broad language of the exclusion aligned with the policy’s overall structure and purpose. The judge rightly concluded that the claims stemmed indirectly from the professor’s sexual misconduct, as the termination and resulting lawsuit were based on the findings of the investigative report.
The Court rejected Crandall’s argument that the interpretation led to an absurd result, emphasizing that the exclusion’s language was clear and broadly worded, and that its application to the claims was reasonable under the circumstances.
The appeal was dismissed, and costs of $2,500 were awarded to AIG.
