Deliberating the meaning of deliberate
18 May 2021
It is common knowledge that exclusion clauses in an insurance contract, being the sword and shield of insurers, frequently form the heart of disputes in the adjudication of insurance claims. Insurance policies generally do not cover losses or damage arising from intentional acts of harm by the insured, owing to the underlying nature of insurance being a contingency and due to public policy reasons - an insured cannot be allowed to consciously manipulate and manifest the risk to benefit from the same nor should it be allowed to benefit from its own wrongdoing. Thus, the mental element often becomes an important point for consideration.
The recent UK Supreme Court case of Burnett or Grant v International Insurance Company of Hanover Ltd  UKSC 12 provides guidance and dissects the meaning of “deliberate acts” which was present in the exclusion clause of an insurance contract.
Facts of the Case
The Respondent is the widow of the late Mr Craig Grant, who died at a bar in Aberdeen during an altercation with Mr Jonas Marcius, a bouncer who ejected him from the premises and applied a neck hold in restraining him, ultimately causing Mr Grant’s death.
The Appellant is the insurer of Mr Marcius’ employer, Prospect Security Ltd, under a public liability policy which covers, inter alia, vicarious liability for the wrongful acts of their employees.
The Respondent initially commenced proceedings claiming damages against four defendants, namely, Mr Marcius, Prospect Security Ltd, the Appellant and Blue Inns Ltd (who operated the bar) with the claim finally progressing against the Appellant only. The Respondent succeeded in the lower courts.
The Appellant appealed to the Supreme Court and the core issue was whether the Appellant is, under the policy, entitled to rely on an exclusion of “liability arising out of deliberate acts” of an employee.
The Policy and the Exclusion Clause
The policy provides that the insurer will indemnify the insured in respect of sums the insured is liable to pay arising out of “accidental injury to any person”; with “injury” being defined as “bodily injury death illness disease or shock causing bodily injury”.
The relevant exclusion clause was Clause 14 which specifically excludes the insurer from liability arising out of “deliberate acts wilful default or neglect” by the insured or its employees.
Principles of Interpretation
It was common ground that the policy is to be interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered the contract, would have understood the language of the contract to mean. This would involve a consideration of the words used in their documentary, factual and commercial context. The same approach applies to the interpretation of exclusion clauses, and the contra proferentum rule would only come into play in a case of genuine ambiguity or real doubt as to the meaning of the words used.
The Supreme Court provided preliminary context by first referring to the Court of Appeal’s decision in Hawley v Luminar Leisure Ltd  EWCA Civ 18, a case with similar facts where a nightclub doorman punched the claimant causing the latter to fall, fracture his skull and suffer permanent serious brain damage. The main issue in that case was whether the liability arose from “accidental bodily injury”. The Court of Appeal held that it did because whether the injury was “accidental” was to be determined from the perspective of the insured (i.e. the employer), instead of the doorman (i.e. the employee). Pursuant thereto, it follows that leaving aside the Clause 14 exclusion for the time being, the policy in this case will cover deliberate acts by an employee (Mr Marcius) which were “accidental” from the perspective of the employer (Prospect Security Ltd).
Secondly, Prospect Security Ltd is in the business of “Manned Guarding and Door Security Contractors”, as provided in the policy. The Supreme Court observed that there is a “clear risk that door stewards will use a degree of force in carrying out their duties and that vicarious liability for their tortious acts may result”. This was a public liability which was inherent in such a business. As such, it cannot be expected that insurers will be able to invoke the employer’s vicarious liability as a ground for avoiding, as opposed to accepting liability under the policy. This was accepted by the Appellant as a relevant part of the context and that vicarious liability for negligent acts of the employees which cause injury will be covered since otherwise, the policy would be rendered rather redundant.
That being said, the Appellant submitted that it does not follow, however, that there should be coverage for all injuries deliberately inflicted by the door staff employee.
The Appellant’s Submissions
The Appellant submitted that “deliberate acts” means acts which are intended to cause injury, or acts which are carried out recklessly as to whether they will cause injury.
The Respondent’s Submissions
The Respondent submitted that “deliberate acts” means acts which are intended to cause the specific injury which results in serious injury or death, but that it does not include reckless acts.
The Decision of the Supreme Court
The Supreme Court clarified at the outset that the concern was with liability for “injury” arising out of “deliberate acts”. Hence, in interpreting the clause, it is not the “act which gives rise to the injury” that has to be deliberate, but the “act of causing injury” which must be deliberate.
The express definition of “injury” as provided under the policy does not support an interpretation which draws distinctions between different kinds or degrees of injury. In addition, it was the Court’s view that an interpretation which focuses on the specific injury intended will lead to unsatisfactory and arbitrary results, such that it is most unlikely to reflect the parties’ intentions. The Court gave an example where if a doorman punches a man in the face intending to break his nose and succeeds, the exclusion applies; if the doorman punches the man in the face and the man falls over and suffers a more serious injury such as brain damage, the exclusion would be inapplicable; if the doorman only succeeds in inflicting a lesser injury such as bruising, the exclusion will be inapplicable. There is “no commercial or other logic” in excluding precision injuries as such, and parties will not choose to make coverage dependent on whether a targeted injury is inflicted. Further, in most cases there will not be an intention to cause a specific injury. In line with that, the Supreme Court agreed with the Appellant that in the context of the present case, “deliberate acts” in Clause 14 means “acts which are intended to cause injury”.
The Appellant had also argued that “deliberate” which qualified “acts” (here, language denoting positive act) must be interpreted synonymously with “wilful” which qualified “neglect or default” (here, language denoting omissions). The Appellant relied on several cases in support that “wilful” may include “recklessness”, and thus, “deliberate” should also be read as including “recklessness”. However, the Supreme Court disagreed on the grounds summarised below:
- “Deliberate” connotes “consciously performing an act intending its consequences”. Recklessness involves a different state of mind.
- While the natural meaning of “wilful” includes “deliberate”, “wilful” is also capable of a wider meaning depending on the word which it qualifies and the context.
- A context in which “wilful” may have a wider meaning is where it relates to a breach of duty. The words “default or neglect” in Clause 14 is apt to refer to a breach of duty rather than merely omissions. An “act” is not the counterpart to a breach of duty.
- The Appellant was not able to show any case in which “deliberate” has been held to include “recklessness”.
- If, exceptionally if not uniquely, “deliberate” was intended in the context to include “recklessness”, the meaning should have been made clear in the policy, which it was not.
- If Clause 14 excludes reckless acts causing injury (rather than the specific injury resulting), it would seriously circumscribe the cover provided considering the nature of the business and liability coverage, resulting in a very wide and commercially unlikely exclusion of liability.
As there were no express or implied findings of fact in the lower courts (including the criminal court, where Mr Marcius was convicted of assault) of an intention to injure on the part of Mr Marcius, it follows that the Appellant is unable to establish that the Clause 14 exclusion applies on the facts as found.
Additionally, the Supreme Court also dismissed the Appellant’s alternative argument that Mr Grant’s death was a result of a wrongful arrest, which would have limited the Appellant’s liability to £100,000 (as opposed to the liability of £5,000,000 under public liability), on the ground that the losses claimed do not relate to wrongful arrest and the factual basis for such a claim is not made out.
The Appellant’s appeal was dismissed.
The Supreme Court’s restrictive interpretation of “deliberate” in the context of the policy in question demonstrates the courts’ approach in interpreting exclusion clauses and has been lauded as another pro-policyholder decision. It also shows that the courts are significantly influenced by public policy and commercial considerations. Insurers will face difficulties relying on an exclusion clause excluding liability for loss or injury arising from “deliberate acts” and will have to overcome hurdles particularly in showing the intention to cause loss or injury. If an insurer intends to exclude liability for reckless or negligent acts or omissions, the policy wordings must state so clearly and specifically.
Case commentary by Loo Peh Fern (Partner) and Siew Ka Yan (Associate) of the Insurance and Reinsurance Practice of Skrine.