In this Newfoundland Supreme Court judgment the court upheld the insurer’s avoidance of the insured’s comprehensive general liability policy due to pre-contractual non-disclosure of clergy abuse allegations from 1980 to 1985. 

The court said that the insured failed to disclose those allegations before obtaining the policy and during its renewals, constituting material misrepresentation and fraudulent concealment:

RCEC had knowledge of allegations of sexual abuse by a member or members of its clergy at the time of the first submission for insurance and did not disclose this information to Guardian Insurance, despite being under a common law and statutory duty to report these allegations to civil authorities.

The collective weight of the expert opinion adduced by both parties was that despite the absence of questions from Marsh, a reasonably prudent insurer during the period of 1980 to 1985 would have considered RCEC’s knowledge of allegations of sexual abuse to be a material fact, or at the very least, an important and relevant consideration before issuing the Policy; and therefore, RCEC had an obligation of full disclosure under the doctrine of uberrima fides [utmost good faith].

Guardian Insurance has proven that it was more probable than not that the underwriter(s) who approved and renewed the Policy would not have issued a CGL policy to RCEC. The expert evidence as supplemented by the factual evidence supports the finding that the most likely scenario would have been that had the information been disclosed to the underwriter, it would have been viewed as potential criminal conduct that went to the core of the insured’s moral fiber. As such it would have been considered a material risk or, at the very least, a moral hazard that would prevent the issuance of the Policy or the introduction of exclusions for individual clergy members and direct liability by RCEC for any future claims for sexual abuse.

This conclusion is supported by factual evidence that the failure to disclose demonstrated a lack of truthfulness, a misrepresentation of the risk, and an acceptance of potential criminal acts so as to make a reasonable and prudent insurer decide to decline to issue a policy.

In the result, Guardian Insurance has met its burden of establishing that RCEC and its legal representatives intentionally and recklessly withheld knowledge of past and ongoing sexual abuse by its clergy and is not required to return the premiums paid by RCEC during the time of the Policy.”

The outcome would in principle be no different in South African law. 

[John Doe v. Roman Catholic Episcopal Corporation of St.John’s, 2024 NLSC 182 (CanLII)]