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Supreme court ruling a warning for liability exclusion clauses

A recent Supreme Court decision is a valuable warning in insurance cases, where the insurer seeks to restrict its cover to the insured.

The case Burnett or Grant (Respondent) v International Insurance Company of Hanover Ltd (Appellant) (Scotland) [2021] UKSC 12, confirms that if an insurer intends to exclude liability for reckless or negligent acts or omissions, the policy wordings must state this clearly and specifically.

In 2013 Craig Grant died as the result of an assault by a pub bouncer, Jonas Marcius, during which he was put in a neck restraint that proved fatal. The bouncer was later convicted of assault rather than murder.

Mrs Grant, the Respondent, brought a claim for damages in her capacity as Mr Grant’s widow against a number of parties including Jonas Marcius, a door steward employed by the Prospect Security Ltd and the Insurer. The claim was ultimately discontinued against all defendants save for the Insurer.

Mrs Grant claimed that the Insurer would be liable to indemnify Prospect, who is in liquidation, in respect of its vicarious liability for the wrongful acts of their employee, Mr Marcius, and that the right to be indemnified was transferred to and vested in her under the Third Party (Rights and Insurers) Act 2010.

The Insurer sought to have the claim dismissed on the basis that it was not liable to indemnify Prospect under the policy as Mr Marcius’ actions fell within the exclusion of "deliberate acts" in clause 14 of the policy. It was further argued that any liability to indemnify arose under Extension 3 of the policy, which provided coverage for public liability for wrongful arrest limited to £100,000.

 Mrs Grant’s claim succeeded before the Lord Ordinary and the Insurer’s appeal was dismissed by the Court of Session. On appeal to the Supreme Court, the issues were: (1) is the Insurer entitled to rely on an exclusion under the policy of "liability arising out of deliberate acts" of an employee; and (2) was the death of Mr Grant brought about by Mr Marcius’ wrongful arrest of him under the terms of Extension 3 of the policy, with the effect that the insurer’s liability to indemnify Mrs Grant is limited to £100,000?

The Insurer argued that the exclusion clause must have some function and that a construction should be inserted that required the “deliberate act” to be also “unlawful” or at least “blameworthy.” This would have extended the operation of the exclusion clause to allow it to apply in respect of the assault in question. The court rejected this argument.

Consequently, the Supreme Court unanimously dismissed this appeal concerning the interpretation of a public liability contract. The ruling stated: “The Court accepts the Insurer’s argument that “deliberate acts” in clause 14 of the policy means acts which are intended to cause injury but rejects the contention that the clause extends to recklessness. It is not the act which gives rise to the injury that has to be deliberate, but the act of causing injury itself. This is the most natural interpretation of the clause.” 

Brokers in W Denis examine policy wordings and carry out technical reviews in order to check for the intended cover requirements and are experts at placing General Liability Insurance for businesses. To discuss further, contact Daniel Moss at daniel.moss@wdenis.co.uk or on 0044 (0)113 2439812

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