Insurance

• Author: International Law Group

Liberty Mutual Insurance Company (Liberty) is a Canadian company with its headquarters in Toronto. In that Province, it issued a comprehensive general liability insurance policy to Hollinger Inc. of Ontario applicable to the insured's business activities worldwide.

Carl Rowan, a respected African-American journalist highly supportive of civil rights, was writing three columns per week for The Chicago Sun Times, a recently-acquired Hollinger subsidiary.

Mr. Rowan later sued the Times and Hollinger (presumably in District of Columbia federal court), in major part alleging age and racial discrimination in violation of the District of Columbia and U.S. civil rights statutes. According to his complaint, after Hollinger had taken control of the Sun Times, the paper decided to increase its appeal to a "white" readership. The upshot was that it willfully sought to terminate Mr. Rowan's employment contract. Hollinger notified Liberty about Mr. Rowan's claim, retained counsel and eventually settled the discrimination case. Hollinger then tendered the claim to Liberty, requesting a contribution to the cost of defense and indemnity with respect to the discrimination claims. Liberty declined and sought a declaratory judgment from an Ontario court that it owed no duty to defend Hollinger.

The relevant personal injury items the policy covered included: "False arrest, detention or imprisonment, malicious prosecution, libel, slander, defamation of character, invasion of privacy, wrongful eviction or wrongful entry sustained by any person or organization during the policy period." The policy, however, expressly ruled out coverage for: "The wilful violation of a penal statute or ordinance committed by or with the knowledge or consent of any Insured."

The trial judge held that the policy did require Liberty to furnish Hollinger with a defense and dismissed the application. Noting that Mr. Rowan had cast his discrimination claims as wilful, the trial judge found that there was still coverage because the claims did not rest upon "a penal statute." She conceded that both the D.C. Human Rights Act and the U.S. Civil Rights Act did contain enforcement provisions providing for fines and imprisonment. Nevertheless, Mr. Rowan had formulated his claims for compensatory and punitive damages under sections creating private rights of action against a wrongdoer.

The judge also cited both Canadian and American authority classifying human rights legislation as "remedial"...