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What if insured is criminally insane when fire-setting?

|Written By Julius Melnitzer

Since the Supreme Court of Canada’s controversial 1989 decision in Wawanesa v. Scott, innocent third parties have been unable to collect on fire insurance when an insured under the policy has committed arson.

‘What this case boils down to is whether a criminal act has occurred when the perpetrator is crazy,’ says Alfred Kwinter.

Scott involved a minor (named in the policy) who burned down his parent’s house. The minor’s lack of legal capacity proved to be no defence to the parents who sought indemnity.

But the minor was not insane. There was no evidence that he appreciated the nature and quality of his act. What if he, or another insured, had been criminally insane when setting the fire?

That’s the interesting question posed by the May 2008 decision of Ontario Superior Court Justice Laurence Pattillo in Cipkar v. RBC General Insurance Company. Faced with a motion for summary judgment, Pattillo allowed a case to proceed to trial in which the plaintiffs alleged the insured arsonist was insane.

In August, Justice Wailan Low denied RBC’s application for leave to appeal.

“What this case boils down to is

whether a criminal act has occurred when the perpetrator is crazy,” says Alfred Kwinter of Toronto’s Singer Kwinter, counsel for plaintiff Anna Cipkar.

The case arose when Anna’s husband, Mihal Cipkar, set fire to the couple’s home. Mihal, who died in the fire, had less than one month previously been released on bail after allegedly assaulting Anna. One of the conditions of his bail was that he not have contact with his wife or go within 150 meters of their home.

Anna made a claim against RBC for the damages caused by the fire. RBC, represented by Mark Edwards of Toronto’s Beard Winter LLP, denied coverage on the basis that the policy excluded the loss because Mihal was a named insured.

The specific terms of the exclusion included “intentional acts” and “criminal acts” by any insured. Although Mihal died before criminal charges were

commenced, there was no dispute that the fire was intentionally set.

But Kwinter filed affidavits from a psychologist and psychiatrist. The affidavits stated that if Mihal had been charged criminally, he would likely have been found not guilty by reason of insanity caused by paranoid delusions that rendered him unable to form the intent requisite to commit the crime of arson.

RBC filed a responding affidavit from a forensic psychiatrist. His opinion was that Mihal acted rationally and intended the consequences of his actions. There was no evidence, the expert said, that Mihal did not appreciate the nature and quality of his act.

Edwards conceded that the evidence put forward precluded summary judgment for “intentional acts.” But, on the authority of the Ontario Court of Appeal’s 2007 decision in Eichmanis v. Wawanesa Mutual Insurance Company, he argued that “criminal acts” did not require proof of intent.

In Eichmanis, the plaintiff had been accidentally shot by an insured covered under a homeowner’s policy. The insured subsequently pleaded guilty to criminal negligence causing bodily harm - a charge that does not require proof of intent for conviction.

As the Court of Appeal saw it, however, the words “criminal act” covered criminality that did not have intent as a necessary element, and the exclusion clause applied.

“[Eichmanis] clearly established that where an insurance policy contains an exclusion in respect of injury caused by intentional or criminal acts, intention is not a required element of the criminal act,” Pattillo wrote in Cipkar.

“The exclusion clause at issue in this action [Cipkar], although not identical in wording to the clause in Eichmanis, is sufficiently similar in wording that, in my view, the ratio in Eichmanis applies to this case.”

But that conclusion was not determinative: while a “criminal act” could include a crime that did not require intent, it was not necessarily true that a person who lacked the intent (or mens rea) required by a particular crime had committed a “criminal act” within the meaning of the policy.

“[In the instant case], intention is not the issue in my view,” Pattillo concluded. “Rather, it is whether, if Mrs. Cipkar can establish on the evidence at trial that at the time her husband set the fire, he did not appreciate the nature and quality of his act, would the exclusion apply?

In other words, if Mr. Cipkar was suffering from a mental disorder at the time of the fire to the extent that he would not have been held criminally responsible [under the Criminal Code], would such a finding mean that he did not commit a ‘criminal act’ within the meaning of the exclusion in the Policy?”

Absent authority on these questions, the case raised a “novel and significant” point that required both a consideration of factual issues and an interpretive analysis of the policy.

“It is for that reason that the Court of Appeal has stated that the determination of such an issue should only be done at trial on a full evidentiary record,” Pattillo wrote. “Accordingly, RBC’s motion for summary judgment is dismissed.”

Low had little difficulty concluding that leave to appeal should not be granted.

Noting the existence of competing expert opinions on Mihal’s mental condition, and the absence of direct authority on the question in issue, it was apparent that the case presented a “novel point and an important one.”

Low rejected Edwards’ submission that Eichmanis was a conflicting decision that provided a basis upon which leave should be granted.

“The issue there was whether it was necessary that the criminal act carries with it the intent to cause the loss,” Low wrote. “That authority did not address the issue [articulated by Pattillo] whether the act would be criminal if the mind of the deceased was sufficiently disordered that a finding would be made of not criminally responsible.”

Kwinter is optimistic about the ultimate result, particularly in view of the rule that ambiguities in policies must be read against the insurer.

“Insurers could put in wording that excluded criminal acts whether the insured was sane or insane,” he says. “That’s what they sometimes do in life policies when they’re dealing with suicide exclusions.”

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