You’re only responsible for what you know

Insurer not estopped from denying coverage when it acted soon after obtaining new information and there was no prejudice to insured.

Insurance law – Automobile insurance – Statutory provisions – Impaired driver – Breach of policy – Estoppel – Practice – Appeals – Discovery

Bradfield v. Royal Sun Alliance Insurance Co. of Canada, [2019] O.J. No. 5047, 2019 ONCA 800, Ontario Court of Appeal, October 7, 2019, D.H. Doherty, A.L. Harvison Young and J.A. Thorburn JJ.A.

The action arose out of a motor vehicle accident involving three motorcycles and a car. The lead motorcyclist, Devecseri, collided with a car operated by Caton, resulting in a multi-vehicle collision. Devecseri was pronounced dead at the scene. Caton and the other two motorcyclists, Bradfield and Latanski, suffered personal injuries. Devecseri was in breach of his policy at the time of the collision as he had alcohol in his system. The information was in the coroner’s report but this was not obtained by the insurer’s adjuster during investigation in 2006.

Caton commenced an action for damages against Devecseri’s estate and Bradfield. In 2008, RSA appointed counsel to defend Devecseri’s estate without a reservation of rights or proposing a non-waiver agreement. In examinations for discovery in 2009, there was evidence that Devecseri had consumed alcohol prior to driving his motorcycle. RSA obtained the coroner’s report following discoveries. RSA then took an off-coverage position and ceased to defend Devecseri’s estate. Liability was found against Devecseri and Bradfield.

Bradfield commenced an action against RSA for a declaration that he was entitled to recover the balance of the estate’s policy limits. The lower court held that RSA’s failure to take an off-coverage position for three years during which the coroner’s report existed and was available to it, its defence of the claim, and its continued defence of the claim through discovery amounted to a waiver by conduct of Devecseri’s breach. Further, the Court held that prejudice was presumed.

On appeal, the Court held that RSA was not estopped and had not waived Devecseri’s breach because it was not actually aware of the breach until 2009. Further, there was no prejudice. The claim was issued in May 2008, the statement of defence was filed in March 2009, and the evidence of alcohol consumption came to light in June 2009. Two weeks after discovering the evidence of alcohol consumption, RSA took an “off-coverage” position. There was no evidence that any steps taken by RSA to defend the case operated to prejudice the estate.

This case was digested by Dionne H. Liu, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Dionne H. Liu at dliu@harpergrey.com.

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