



COURT OF APPEAL FOR ONTARIO

CITATION: Southside Muay Thai Academy Corp.
    v. Aviva Insurance Company of Canada, 2020 ONCA 385

DATE: 20200616

DOCKET: C67690

Benotto, Zarnett, and Thorburn
    JJ.A.

BETWEEN

Southside Muay Thai Academy
    Corp.

Applicant (Respondent)

and

Aviva Insurance Company of
    Canada

Respondent (Appellant)

Elizabeth Bowker and Avi Sharabi, for
    the appellant, Aviva Insurance Company of Canada

Daniel S. Freudman, for the respondent,
    Southside Muay Thai Academy Corp.

Heard: May 28, 2020 by teleconference

On appeal from the order of Justice Lorne
    Sossin of the Superior Court of Justice, dated October 21, 2019, with reasons
    reported at 2019 ONSC 6086.

REASONS FOR DECISION

OVERVIEW

[1]

The appellant, Aviva Insurance Company of Canada
    (Aviva) claims it has no duty to defend the action commenced by P.F. against
    the respondent Southside Muay Thai Academy Corp. (Southside).

[2]

P.F. was a minor athlete and student of the
    Southside kickboxing team. Southside was responsible for supervising her while
    she was in their care. Raul Fontalvo was the co-owner and employee of
    Southside.

[3]

P.F. claims she was sexually assaulted by
    Fontalvo on May 1, 2017 while she and Fontalvo were on a return flight from
    Thailand after a kickboxing competition. She started an action against
    Southside and Fontalvo for damages.

[4]

On September 7, 2018, Fontalvo was found guilty
    of sexual assault and sexual interference with a minor with whom he was in a
    position of trust and authority. The convictions arose from the incident on May
    1, 2017.

THE CLAIM

[5]

The Statement of Claim provides that:

On or about May 1, 2017, while on a flight
    back to Canada from Thailand, the Plaintiff was sexually assaulted by the
    Defendant Fontalvo,
which is the subject matter of this action
.
    [Emphasis added]

[6]

The plaintiff further alleges that:

15. The Defendant,
Southside
    Muay Thai Academy
, owed a duty of care to the Plaintiff. The Defendant,
    Southside Muay Thai Academy breached that duty of care by failing to supervise
    and protect the Plaintiff from harm, when they knew or ought to have known that
    there was a risk of danger or harm to the Plaintiff at the hands of Fontalvo.

16. The Plaintiff states Southside Muay Thai
    Academy was negligent in its
failure to supervise the Plaintiff, ensure she
    was safe while on their premises and under their care and control, in
    particular on the flight from Thailand on or about May 1, 2017
.

17. The Plaintiff further states that
    Southside Muay Thai Academy failed to supervise Fontalvo during the course of
    his work and failed to recognize Fontalvos inappropriate behaviour towards the
    Plaintiff. Further, the Southside Muay Thai Academy was negligent in its
    failure to intervene and prevent that behaviour from recurring and worsening in
    severity.

18. The Plaintiff states Southside Muay Thai
    Academy failed to adequately, or at all, ensure its employees were suitable for
    employment around children and failed to perform the necessary background
    checks for their employees.

19. The Plaintiff states the actions of the
    Defendants constitute reckless and/or intentional infliction of emotional
    distress for which she is seeking damages. [Emphasis added]

THE INSURANCE POLICY

[7]

The appellant, Aviva is Southsides insurer. The
    Aviva Commercial General Liability policy covers claims for compensatory
    damages for bodily injury or property damage except for claims that arise
    directly or indirectly from abuse.

[8]

The relevant terms of the policy read as
    follows:

We will pay those sums that the insured
    becomes legally obligated to pay as compensatory damages because of bodily
    injury or property damage to which this insurance applies.  We will have the
    right and duty to defend the insured against any action seeing those
    compensatory damages.  However, we will have no duty to defend the insured
    against any action seeking compensatory damages for bodily injury or
    property damage to which this insurance does not apply

[9]

The

Form 5211110 Abuse Exclusion, which
    forms part of the policy provides that:

This insurance does not apply to:

Abuse

a.

Claims or actions arising
    directly or indirectly from abuse committed or alleged to have been committed
    by an insured, including the transmission of disease arising out of any act of
    abuse.

b.       Claims or actions based on your
    practices of employee hiring, acceptance of volunteer workers or
    supervision or retention of any person alleged to have committed abuse.

c.       Claims or actions alleging
    knowledge by an insured of, or failure to report, the alleged abuse to the
    appropriate authority(ies).

[10]

The limit of liability under the policy is $2
    million.

[11]

The policy also has a separation of coverage
    clause:

12. Separation of Insured' s Cross-Liability

Except with respect to the Limits of
    Insurance, and any rights or duties specifically assigned in this Coverage Form
    to the first Named Insured, this insurance applies;

a. As if each Named Insured were the only
    Named Insured; and b. Separately to each insured against whom claim is made or
    "action" is brought.

[12]

Southside brought an application seeking defence
    of the claim and coverage from Aviva. Aviva denied coverage and advised
    Southside that:

Raul Fontalvo was an employee at the time of
    the alleged offence and is an insured under the policy. As per the exclusion
    cited above, coverage is removed for any claims arising directly or indirectly
    out of abuse committed or alleged to have been committed by an insured. This
    includes vicarious liability and claims of negligence against Southside Muay
    Thai Academy as they arise out of abuse.

[13]

Southside contests the denial of coverage.

THE DECISION OF THE APPLICATION JUDGE

[14]

The application judge held that the separation
    of coverage clause in the policy did not assist Southsides position, and that
    Aviva has no duty to defend Southside against the claim that Southside was
    negligent for failing to supervise the plaintiff and ensure she was safe while
    on the flight from Thailand on May 1, 2017.

[15]

He correctly held that this claim falls within
    the policy exclusion because it arises directly or indirectly from an act of
    alleged abuse. The parties take no issue with this finding.

[16]

However, the application judge held that Aviva
    has a duty to defend the Claim due to the allegation in paragraph 16 of the
    Statement of Claim that Southside was negligent in its failure to supervise
    the Plaintiff, ensure she was safe while on their premises and under their care
    and control. because:

[
30
]               This
    allegation includes the broader question of Southsides supervision of the
    plaintiff while the plaintiff was on Southsides premises in Ontario, and under
    their care in contexts beyond the flight on May 1, 2017. At a minimum, this
    allegation in the claim creates the possibility of Southsides liability for
    breaching a duty of care in situations not arising directly or indirectly from
    the alleged abuse.

[
31
]              Given the
    application of
contra proferentem
in the context of interpreting
    insurance policies, where coverage is to be interpreted broadly, and exclusion
    clauses are to be interpreted narrowly (see, for example,
Progressive Homes
at para. 24), I find that the specific allegation against Southside for its
    negligent supervision of the plaintiff in settings that may extend beyond the
    May 1, 2017 flight, is not caught by the Abuse exclusion, and therefore would
    be covered by Avivas policy.

ANALYSIS AND CONCLUSION

[17]

The standard of review applicable to the
    interpretation of a standard form insurance contract is correctness:
Ledcor
    Construction Ltd. v. Northbridge Indemnity Insurance Co.
, 2016 SCC 37 at
    para 46.

[18]

The wording of the policy exclusion is clear and
    unambiguous. All claims or actions arising directly or indirectly from abuse
    and or claims or actions based on supervision or retention of any person
    alleged to have committed abuse are excluded from coverage.

[19]

A claim or action is the assertion of a right
    that is, as yet, unproven.

[20]

Southside agrees that the policy exclusion
    applies to the claim for failure to supervise arising from the incident on May
    1, 2017 since the alleged abuse took place on the said flight and therefore
    any claims arising from such abuse would be excluded from coverage.:
    Respondents factum para. 9.

[21]

The question is whether the Statement of Claim
    makes any (a) claim other than the claim arising from the sexual abuse and if
    so, (b) whether that claim(s) is covered by the policy.

[22]

Southside claims it is possible that paragraph
    16 of the Statement of Claim includes not only the failure to supervise the
    plaintiff while she was on the flight on May 1 but other claims for failure to
    ensure the plaintiffs safety while in Southsides care and control. Southside
    claims at paragraph 11 of its factum on this appeal that:

Perhaps the Plaintiffs safety was compromised
    through Southside improperly training her or permitting her access to defective
    gym equipment; it is neither appropriate nor necessary to speculate on
    particulars at this early stage since the mere possibility of a claim falling
    within coverage will trigger the duty to defend.

[23]

Rule 25.06 of the
Rules of Civil Procedure
R.R.O. 1990, Reg. 194, provides that, Every pleading shall contain a concise
    statement of the material facts on which the party relies for the claim or
    defence, but not the evidence by which those facts are to be proved: See also
Balanyk
    v. University of Toronto
, [1999] O.J. No. 2162 (S.C.J.) at para. 29
    and
Norman v. Thunder Bay Regional Health Sciences Centre
, 2015 ONSC
    3252.

[24]

The
only
claim or action set out in the
    Statement of Claim arises from the May 1 incident. The material facts in
    support of the action are as follows:

10.     On or about May 1, 2017, while on a
    flight back to Canada from Thailand, the Plaintiff was sexually assaulted by
    the Defendant Fontalvo, which is the subject matter of this action.

11.     The defendant Fontalvo did sexually
    assault the plaintiff the particulars of which are described herein.

[25]

The subject matter of this action is the
    sexual abuse.

[26]

Moreover, the damages claimed as set out in
    paragraphs 23 through 26 of the Statement of Claim, are all damages arising
    from the sexual assault.

[27]

Any claim arising from the sexual abuse is
    clearly excluded from coverage under the policy.

[28]

Therefore, while we agree with the Application
    judge that coverage is to be interpreted broadly and exclusion clauses
    narrowly, there is no claim for damages resulting from Southsides negligence
    other than the claim arising from the subject matter of this action, that is,
    the May 1, 2017 incident.

[29]

Since there is no claim or action in the
    Statement of Claim other than the claim arising from the sexual abuse that took
    place on May 1, 2017, which is excluded from coverage under the policy, there
    is no need to assess whether those claims would be covered by the policy.

[30]

We reject Southsides alternative argument that
    the separation of coverage clause leads to a different result. We agree with
    the application judge that it has no bearing in this case.

[31]

As such, Aviva has no duty to defend this claim.
    There is no ambiguity in the exclusion clause and thus no reason to invoke the
    concept of
contra proferentum
to the exclusion clause.

[32]

For these reasons the appeal is allowed.

[33]

On the agreement of both parties, costs to the
    successful party, Aviva in the amount of $22,000, which sum includes costs
    below and costs of this appeal.

M.L.
    Benotto J.A.

B.
    Zarnett J.A.

Thorburn
    J.A.


