The $800,000 Question: No Waiver By Insurer
In Bradfield v. Royal Sun Alliance Insurance Company of Canada, 2019 ONCA 800, the Court of Appeal disagreed with the trial judge that an insurer waived its right to rely on a policy breach for not conducting thorough and timely investigations.
The matter arose out of a motorcycle accident in May 2006. The defendant motorcycle driver was insured by RSA with limits of $1 million. His driver’s licence prohibited him from operating a motorcycle with any alcohol in his system.
During discoveries in June 2009, RSA learned that the defendant driver was drinking beer shortly before the accident. This was a breach of the insurance policy. In July 2009, RSA took an off-coverage position.
The trial judge held that RSA waived its right to deny coverage because RSA could have discovered in 2006 that the defendant driver had alcohol in his system, if it had obtained a coroner’s report.
As a result, the trial judge found that the plaintiff was entitled to the full $1 million policy limits from RSA, instead of the statutory minimum limits of $200,000.
The Court of Appeal indicated that knowledge of a policy breach is required before an insurer can be seen as waiving its right to deny coverage.
In order for knowledge of a policy breach to be imputed, the insurer must have all the material facts from which to determine there was a policy breach.
In the case at bar, the Court of Appeal said that RSA had no actual knowledge that the defendant driver breached the policy until 2009.
Further, knowledge could not be imputed. This was not a case where RSA failed to appreciate the significance of information. Rather, until June 2009, RSA did not have information that the defendant driver had been drinking and had, therefore, breached the policy.
No legal authority was presented to support the plaintiff’s argument that RSA had to obtain the coroner’s report.
In addition, the Court of Appeal noted that there was no written waiver of the breach on the part of RSA, as required by s. 131(1) of the Insurance Act, to demonstrate a clear intention to waive the policy breach.
Therefore, the Court of Appeal held that the trial judge erred in concluding that RSA waived its right to refuse coverage.
The Court of Appeal also examined estoppel. Similar to waiver, in order to be estopped from denying coverage, an insurer must have knowledge of the facts that support a lack of coverage.
Since RSA did not have knowledge of the breach until 2009, it was not estopped from asserting a breach of the policy.
Moreover, there was no evidence of detrimental reliance. RSA took an off-coverage position soon after it learned of the policy breach. There was no evidence that any steps taken by RSA to defend the case prejudiced the defendant.
The trial judge’s decision was overturned, and RSA is only responsible to pay the plaintiff $200,000 instead of the policy limits of $1 million.