‘Deliberate acts’ exclusion disapplied: Supreme Court decision on Public Liability

The Supreme Court has rejected attempts by an insurer to rely upon an exclusion clause under a public liability policy, in a case arising from the death of a customer following an assault by door staff at a bar in Aberdeen.

The security company’s insurance provided cover for accidental injury or death, but excluded “deliberate acts wilful neglect or default“.  The policy was governed by English law and there was no suggestion of any difference in approach under the law of this jurisdiction or Scotland in relation to the issues on appeal. The customer’s widow claimed against the insurer pursuant to the Third Party (Rights against Insurers) Act 2010, following liquidation of the security company employer, based on vicarious liability for wrongful acts of its employees.

The Supreme Court held that a “deliberate act” was something carried out with the intention of producing the insured outcome i.e. in this case, acts intended to cause injury.  In reaching this conclusion, their Lordships recognised the commercial context of the policy to cover the business of “Manned Guarding and Door Security Contractors”, including unintended consequences of incidents at the bar door, which commonly involve deliberate physical acts.  If every intentionally performed act was classed as deliberate for purposes of the exclusion, there would be no coverage for many accidental injuries the policy was designed to insure.

The same was true if “wilful neglect or default” was construed as extending the exclusion clause to acts embarked upon with reckless disregard for the consequences, in the sense of proceeding despite a known risk of injury, or not caring if such a risk may arise.  Interpreting the exemption in that way would seriously limit the cover provided and lead to a “commercially unlikely exclusion, given the nature of the [insured]’s business”.

There was no determination in the earlier proceedings of intention to injure, or even recklessness, and it is not the role of appellate courts to make findings of fact.  Following ejection from the bar due to intoxication, the customer hit out at security staff and was taken in a neck hold for up to three minutes, resulting in death from asphyxiation.  In sentencing remarks, Lady Wolffe found that the employee’s actions were: “badly executed, not badly motivated … you believed you were acting in defence of your fellow door stewards and to minimise the danger you felt Mr Grant posed to others.”

The insurer was therefore unable to avoid liability. Following a series of pro-policyholder decisions, this appears to be another example of the Supreme Court’s willingness to take account of public policy considerations to avoid stripping insurance contracts of much of their content, and confirms that exclusion clauses will be construed based on the words used in their “documentary, factual and commercial context”, in accordance with principles set out in Wood v Capita Insurance Services Ltd [2017].

The decision is helpful for policyholders in demonstrating that conscious performance of an act with intention to cause insured damage must be established, in order to trigger a deliberate acts exclusion, and mere recklessness will not suffice.  Whilst recklessness will be enough to prove breach of a reasonable precautions condition (Fraser v Furman [1967]), insurers face a higher evidential threshold in relation to ‘deliberate acts’.

Burnett or Grant v International Insurance Company of Hanover Ltd [2021] UKSC 12

https://www.supremecourt.uk/cases/docs/uksc-2019-0121-judgment.pdf

Amy Lacey is a partner at Fenchurch Law