Burnett or Grant v International Insurance Company of Hanover Ltd

An insurance exclusion for liability arising from an employee’s “deliberate acts” applies where the employee intended to cause injury. It does not require an intention to cause the particular kind or degree of injury which resulted. Equally, an intention merely to perform the physical act which caused injury is insufficient.

In its natural and commercial context, “deliberate” does not include recklessness. Although “wilful” may bear a wider meaning when used of a breach of duty, the two expressions are not necessarily synonymous. An assault conviction establishes that the underlying act was performed deliberately. It does not, without more, establish an intention to injure for the purposes of such an exclusion.

A door steward employed by a security company applied a neck hold to an intoxicated customer while removing and restraining him outside a bar. The customer died from mechanical asphyxia. The steward was convicted of assault, but it was agreed that he had not intended to kill the customer.

The customer’s widow claimed against the employer’s public liability insurer under rights transferred by the Third Party (Rights against Insurers) Act 2010. The Lord Ordinary declared that the insurer was liable to indemnify the employer. The First Division dismissed the insurer’s reclaiming motion in [2019] CSIH 9.

The Supreme Court considered whether liability was excluded as arising from an employee’s “deliberate acts”. It also considered whether the claim instead fell within a wrongful-arrest extension carrying a lower liability limit.

1. The appeal was dismissed unanimously. Lord Hamblen delivered the judgment, with which Lord Reed, Lord Briggs, Lord Leggatt and Lord Burrows agreed.

2. A liability policy is interpreted objectively. The court asks what a reasonable person possessing the background knowledge reasonably available to the parties would understand its language to mean. The words must be considered in their documentary, factual and commercial context. These principles apply equally to exclusion clauses, and the contra proferentem doctrine is relevant only where genuine ambiguity or real doubt remains: Wood v Capita Insurance Services Ltd [2017] UKSC 24 and Impact Funding Solutions Ltd v Barrington Support Services Ltd [2016] UKSC 57 applied.

3. The “deliberate acts” exclusion meant acts intended to cause injury. It was insufficient that the employee deliberately performed the physical act which caused injury. The exclusion did not, however, require an intention to produce the particular type or degree of injury which resulted. The policy insured liability for “injury” without distinguishing between lesser, serious or fatal injury. Requiring an exact correspondence between the intended and actual injury would produce arbitrary outcomes unsupported by the wording.

4. That construction preserved meaningful cover for a business whose door stewards would predictably perform deliberate physical acts and whose employer could incur vicarious liability. As Hawley v Luminar Leisure Ltd [2006] EWCA Civ 18 demonstrated, injury deliberately inflicted by an employee may nevertheless be accidental from the insured employer’s perspective.

5. “Deliberate” did not include recklessness. Its natural meaning required the conscious performance of an act with the intention of producing its relevant consequence. Although “wilful” can include recklessness in some contexts, particularly where it qualifies a breach of duty, that did not make “deliberate acts” synonymous with “wilful default or neglect”. Extending the exclusion to recklessness would also circumscribe the commercially expected cover substantially.

6. The insurer failed to establish an intention to injure. Neither the courts below nor the criminal court had made such a finding. The assault conviction established only that the neck hold was performed deliberately. The Supreme Court could not make new findings of fact. The sentencing finding that the conduct was badly executed rather than badly motivated pointed away from an intention to injure and from recklessness. Clause 14 therefore did not apply.

7. It was unnecessary to decide whether a claim could lie under the wrongful-arrest extension. The court nevertheless agreed with the First Division that the claimed losses did not relate to wrongful arrest and that the factual basis for such a claim had not been established.

1. United Kingdom Supreme Court: The insurer’s appeal was dismissed unanimously. The deliberate-acts exclusion did not apply, and the court agreed that the wrongful-arrest extension was inapplicable.

2. First Division of the Inner House of the Court of Session: The insurer’s reclaiming motion was refused in [2019] CSIH 9. All three judges held that the deliberate-acts exclusion and the wrongful-arrest extension were inapplicable.

3. Lord Ordinary: Lord Uist declared that the insurer was obliged to indemnify the insured employer and that its right to indemnity had transferred to the claimant under sections 1 and 3 of the Third Party (Rights against Insurers) Act 2010.