Crandall University’s attempt to secure insurance coverage for a lawsuit involving a terminated professor has been dismissed by the Court of King’s Bench of New Brunswick.
Justice Maya Hamou ruled that AIG Insurance Company of Canada is not obligated to cover the university’s losses, including legal defence costs, associated with the wrongful termination suit brought by the professor, J.S., and his partner.
The case centred on the interpretation of an exclusion clause in the insurance policy Crandall purchased from AIG. The clause in question, Endorsement #18 – Sexual Misconduct and Child Abuse Exclusion, was determined to exclude coverage for claims related to sexual misconduct, which the court found included sexual harassment.
The lawsuit against Crandall arose following an internal investigation into anonymous allegations of harassment made on social media. The investigation, documented in the Michaud Report, led to the termination of J.S. for sexual harassment of a student. J.S. and his partner then filed a civil claim against the university, alleging wrongful termination, defamation, false light in the public eye, intrusion upon seclusion, public disclosure, and breach of confidence.
Crandall sought a declaration from the court that AIG must indemnify the university for its losses related to this lawsuit. Crandall also sought the right to choose its own counsel and the payment of all costs incurred to date. However, AIG argued that the Sexual Misconduct Exclusion in the policy barred any such coverage.
Justice Hamou found that the exclusion clause was unambiguous and that the lawsuit filed by J.S. and his partner was indirectly related to sexual misconduct. “The court finds that the… Action and Crandall’s losses (including its legal costs) associated with the… Action ‘arose indirectly out of Sexual Misconduct’ and finds that ‘Sexual Misconduct’ includes ‘sexual harassment’,” Hamou wrote in her decision.
The court noted several key points in determining that the claim fell under the exclusion:
- The internal investigation by Crandall University identified J.S.’s behaviour as sexual harassment.
- The termination of J.S. was directly linked to the findings of this investigation.
- The exclusion clause explicitly barred coverage for losses related to claims involving sexual misconduct, directly or indirectly.
Crandall had argued that the policy’s Employment Practices Liability (EPL) Coverage, which included protection against claims of sexual harassment, should apply. However, Justice Hamou pointed out that specific exclusions, like the Sexual Misconduct Exclusion, take precedence over general coverage provisions.
Crandall also contended that the exclusion clause was ambiguous and that it should be interpreted contra proferentem — against the insurer. The court rejected this argument, stating that the plain language of the exclusion was clear and unambiguous.
Additionally, Crandall’s request for indemnification of legal costs incurred to date and the choice of its own legal counsel was dismissed. Justice Hamou referenced provisions in the insurance policy that give AIG the right to select counsel.
The court awarded costs to AIG, ordering Crandall to pay $3,000 plus disbursements.
For more information, see Crandall University v AIG Insurance Company of Canada, 2024 NBKB 151 (CanLII).
