An insurer was required to defend a defamation action commenced against her insured, despite the fact that the action pled intentional conduct by the insureds.
Insured successfully obtained a declaration that the insurer was obligated to pay for its defence costs with respect to a defamation claim, and that it should have control of its own defence.
British Columbia Medical Association v. Aviva Insurance Co. of Canada,  B.C.J. No. 1948, October 19, 2011, British Columbia Supreme Court, C.J. Ross J.
This case concerns a coverage dispute between an insurer and the insured, British Columbia Medical Association. and the members of its board of directors and executive officers. The coverage dispute related to an action brought by a former member of the BCMA board against the insured. In the underlying action, the former member alleged that the insured had defamed her on numerous occasions and that the defamatory publications were published with the intention to harm and with knowledge that they were false. The relevant insurance policy provided coverage for defamation claims but excluded coverage for acts of intentional wrongdoing. On this basis, the insurer denied any duty to defend the BCMA and the individual defendants but acknowledged it had a duty to defend the BCMA with respect to any vicarious liability for the individuals' actions. A secondary issue arose with respect to the control of the defence. The insured asserted that the insurer was in a position of conflict and therefore should not be entitled to control the defence.
On this application, the insured sought a declaration that the insurer was under an obligation to pay for the defence of the insured, that it was not entitled to exercise any right to control or participate in the defence of the insured, and that it was not entitled to exercise any right that it might otherwise have enjoyed in connection with the conduct of the defence of the insured including the approval of any defence costs or settlement opportunity. The insurer sought a declaration that it was not responsible for any defence costs incurred by the BCMA, that it had no duty to defend the BCMA other than with respect to the claim that it was vicariously liable for certain of the individuals' actions, that it had the right to direct and control the defence of BCMA and to select and retain the counsel of its choice, and a declaration that the costs of defending BCMA be apportioned between the insurer, BCMA and/or BCMA's other insurers.
The Court concluded that the insurer was required under the terms of its insurance policy with the insured to provide a defence to both the BCMA and the individual defendants on the basis that the plaintiff could establish a successful defamation plea without necessarily requiring intentional conduct. Further, because of the possible conflict with respect to the issue of liability, the Court found that the insured should have conduct of the defence notwithstanding the insurer's obligation to pay for that defence.