An appeal of a decision from the Ontario Court of Appeal, Bradfield v Royal Sun Alliance Insurance Company of Canada, 2019 ONCA 800, has recently been granted leave to appeal to the Supreme Court of Canada. The basis of the appeal is whether actual knowledge or imputed knowledge is required for waiver or promissory estoppel to apply.
The action arises out of a motor vehicle accident involving three motorcycles and one automobile. The lead driver in a group of three motorcyclists, Mr. Devesceri, entered oncoming traffic and caused an accident involving the automobile driven by Mr. Caton. Mr. Devesceri was killed in the accident, Mr. Caton and one other motorcycle driver, Mr. Bradfield, were injured.
Approximately one year after the relevant claim was initiated, and three years after the accident, Royal Sun Alliance (“RSA”) was made aware during an examination for discovery that the insured, Mr. Devesceri, had consumed alcohol prior to the accident, contrary to his M2 drivers licence and insurance policy. RSA sought to refuse coverage and take an “off-coverage” position as a statutory third party in the action.
The trial judge determined that RSA had waived its right to rely on Mr. Devesceri’s policy breach because they took their off-coverage position too late. This was based on the following reasons:
- RSA did not obtain the coroner’s report after Mr. Devesceri’s fatal accident in 2006, which stated that he had alcohol in his system at the time of death;
- Having alcohol in his system was contrary to the terms of his M2 license and his insurance policy;
- Securing a copy of the coroner’s report was on a list of suggested items for the insurance adjuster to investigate;
- Knowledge of the policy breach was imputed as of the time the coroner’s report was available to RSA in 2006; and
- RSA’s failure to take an off coverage position after June 2006, its defence of the claim in 2008, and continuing until discovery in 2009, amounted to a waiver by conduct of Mr. Devesceri’s breach. Having found waiver, the issue of estoppel was rendered moot.
RSA appealed the judgment, claiming that waiver requires actual knowledge, which did not exist in this case.
The Court of Appeal found that RSA did not waive its right to rely on the policy breach nor was it estopped from relying on the breach. The appeal was therefore granted and the trial decision was set aside.
The Court of Appeal cited numerous cases for the proposition that both waiver and promissory estoppel require knowledge of the policy breach to be applied. For waiver, knowledge can be inferred from conduct, but the conduct must give evidence of an unequivocal intention to abandon rights known to the party waiving the right.
With respect to waiver by conduct, the court found that RSA did not have knowledge of the breach and knowledge could not be imputed. There was no evidence to support the assertion that RSA knew of the breach but chose not to take possession of the information. Finally, there was no written waiver of the breach as required by s.13(1) of the Insurance Act, RSO 1990.
In determining whether RSA was barred by the doctrine of promissory estoppel the court looked at two elements required: (1) the insurer must have knowledge of the facts that support a lack of finding coverage; and (2) there must be a course of conduct by the insurer which the insured relied to its detriment.
Having already found there was no knowledge on part of RSA of the breach until 2009, the court also determined there was no detrimental reliance suffered based on reliance on the insurers conduct. Two weeks after discovering the evidence of the breach, RSA took an “off-coverage” position. The litigation administrator for the estate agreed that the defence of the action would not have proceeded any differently if RSA was the defendant or a statutory third party.
Leave to Appeal
On April 23, 2020 the matter was granted leave to appeal to the Supreme Court of Canada where the issue of actual knowledge versus imputed knowledge will be litigated again.
This decision highlights the importance of early investigation on part of the insurer to determine coverage and to avoid the injured party from advancing any arguments with respect to waiver or promissory estoppel, if a breach is later discovered. Further, conducting early investigation prevents insurers from expending additional monies defending a claim.