Exclusion clause held not to cover certain claims arising out of negligence, as a consequence of the specific wording in the clause

Insurance law – Commercial general liability insurance – Exclusions – Interpretation of policy – Duty to defend – Practice – Pleadings – Class actions

Aviva Insurance Co. of Canada v. 8262900 Canada Inc. (c.o.b. Carepartners/Community Nursing Services Foundation), [2023] O.J. No. 2041, 2023 ONSC 2641, Ontario Superior Court of Justice, May 1, 2023, M. Koehnen J.

The insured, a large provider of healthcare services, was hacked in 2018 and personal data of employees was obtained by the hackers. The data was published online when the insured refused to pay a ransom demand. A class action was commenced against the insured seeking damages for personal injury.  The insurer responded to the class action and agreed to defend and indemnify the insured under a commercial liability policy, without prejudicing its right to take a position in a later proceeding that it was not obliged to respond. The class-action was settled. The insurer then brought an application for a declaration that it did not owe any duty to respond to the class action and an order that the insured reimburse it for defending and settling the class-action. The application was dismissed.

The insurer relied on a data exclusion endorsement to the policy, which excluded coverage for personal injury claims arising out of the display of data on the Internet or similar system, and also that the insurance did not apply to liability for misappropriation of data. The insurer argued that the entire class action flowed from the misappropriation of data and was excluded by the endorsement.

The court reviewed the pleading in the class action and concluded that the claim did not seek to hold the insured liable for misappropriation of data but rather for negligence arising out of the misappropriation. The language of the endorsement was specifically worded to exclude liability for misappropriation of data and did not refer to claims arising out of the misappropriation.

This case was digested by Mark A. McPhee, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Mark A. McPhee at [email protected].

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