Trial Lawyers Association of British Columbia v. Royal & Sun Alliance Insurance Company of Canada
(Ontario) (Civil) (By Leave)
Insurance - Automobile insurance, Contracts, Estoppel - Insurance - Automobile insurance - Exclusions - Contracts - Waiver - Estoppel - Reasonable investigation of policy breach - Insured caused vehicular accident insured by defendant insurer - Plaintiff injured in accident - Policy prohibited operating vehicle with blood alcohol level above zero - Insurer retained counsel to defend insured’s estate - Insurer later obtained coroner’s report indicating insured’s blood alcohol level was above zero at time of accident - Insurer took off-coverage position - Whether the Court should decide case despite mootness - Whether insurer could use insured’s policy breach as a defence to injured party’s action - How the Insurance Act scheme interacts with waiver and estoppel with respect to rights under insurance contract - When insurer’s assumption and continuation of defence of action is assurance of coverage for purposes of estoppel - If so, what amounts to “detrimental reliance”.
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Steven Devecseri was insured by the respondent Royal & Sun Alliance Insurance Company of Canada (“RSA”) under a standard motor vehicle policy. Under this policy, Mr. Devecseri was prohibited from operating a motorcycle with any alcohol in his bloodstream. To do so would constitute a policy violation. In 2006, Jeffrey Bradfield, Mr. Devecseri and another were riding their motorcycles. Mr. Devecseri drove onto the wrong side of the road and collided with an automobile. Mr. Devecseri was killed. Mr. Bradfield the automobile driver were injured. RSA engaged an adjuster to investigate the accident. The adjuster obtained the police report, which made no mention of alcohol. The adjuster noted that the coroner’s report would confirm whether alcohol had been a factor in the accident, but neither he nor RSA took steps to obtain the report. Mr. Bradfield commenced and later settled an action against Mr. Devecseri’s estate and his own insurer for uninsured and underinsured coverage. The other motorcyclist brought a personal injury action against Mr. Devecseri and Mr. Bradfield. RSA retained counsel to defend Mr. Devecseri’s estate in both actions.
Three years after the accident, RSA became aware that Mr. Devecseri had consumed beer before the accident. It then took steps to obtain the coroner’s report, which confirmed that Mr. Devecseri’s blood alcohol level was above zero at the time of death. RSA then took the position that the matter was off-coverage and it stopped defending Mr. Devecseri’s estate. Mr. Bradfield commenced an action against RSA alleging that it was too late for RSA to take an off-coverage position. He argued that, having defended Mr. Devecseri’s estate to the point of examinations for discovery even though it was or should have been aware of the policy breach, RSA had waived Mr. Devecseri’s policy breach, or was estopped for denying the coverage.
The chambers judge granted the application, finding that RSA’s failure to take an off-coverage position after June 2006, and its defence of the claim amounted to a waiver by conduct of Mr. Devecseri’s breach of the insurance policy. The Court of Appeal allowed RSA’s appeal and dismissed Mr. Bradfield’s action.
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