{"id":2043,"date":"2012-11-02T12:22:34","date_gmt":"2012-11-02T10:22:34","guid":{"rendered":"http:\/\/ourblog.greenwoods.org\/?p=2043"},"modified":"2012-11-02T12:22:34","modified_gmt":"2012-11-02T10:22:34","slug":"estopped-on-excluded-claims","status":"publish","type":"post","link":"https:\/\/greenwoods.org\/estopped-on-excluded-claims\/","title":{"rendered":"estopped on excluded claims"},"content":{"rendered":"

\"\"<\/a>When will insurers be estopped from denying coverage on excluded claims?<\/strong><\/p>\n

Abstract<\/strong><\/p>\n

This article considers when an insurer will be estopped from denying coverage in circumstances where the insured has not entered into a non-waiver agreement and the insurer has not sent the insured a reservation of rights letter.<\/p>\n

Introduction<\/strong><\/p>\n

When a claim is filed by an insured, the insurer must decide whether the claim is covered by the policy, or is excluded by one of the policy exclusions. If it is clear that the claim is excluded, the insurer will notify the insured of that fact and deny coverage.<\/p>\n

If the insurer is uncertain as to whether the claim is covered by the policy, it will generally do one of two things. First, it may attempt to have the insured sign a non-waiver agreement. Such agreements state that the insurer will investigate the claim, but that it reserves the right to deny coverage later on if it decides that in fact the claim is not covered by the policy.\u00a0If the insured refuses to enter into a non-waiver agreement, the insurer will normally resort to its second option, which is to send the insured a reservation of rights letter. That letter is designed to have the same effect as the non-waiver agreement; but rather than having the insured agree that the insurer\u2019s rights to deny coverage are reserved, the letter simply tells the insured that the insurer reserves the right to deny coverage if it decides that the claim is not covered by the policy.<\/p>\n

But what if the insured does not enter into a non-waiver agreement, and the insurer does not send the insured a reservation of rights letter? Does that mean that the insurer is obligated to provide coverage even if there is an exclusion that appears to exclude coverage? Will failure to assert its rights at the outset estop the insurer from asserting those rights and denying coverage based on an exclusion later on? This article considers those questions.<\/p>\n

The distinction between waiver and estoppel<\/strong><\/p>\n

Insurers may lose the right to rely on coverage exclusion in two ways:<\/p>\n

1.\u00a0\u00a0\u00a0\u00a0\u00a0 By waiving the right to rely on the exclusion<\/p>\n

2.\u00a0\u00a0\u00a0\u00a0\u00a0 By conducting themselves in a way that estops them from invoking the exclusion.<\/p>\n

Although this article focuses on estoppel<\/strong>, it is useful to understand waiver in order to appreciate the difference between waiver and estoppel<\/strong>.<\/p>\n

Waiver arises where one party to a contract, with full knowledge that his obligation under the contract has not become operative by reason of the failure of the other party to comply with the condition of the contract, intentionally relinquishes his right to treat the contract or obligation as at an end but rather treats the contract or obligation as subsisting.\u00a0It involves knowledge and consent and the acts or conduct of the person alleged to so have elected, and thereby waived that right, must be viewed objectively and must be unequivocal.<\/p>\n

In other words, waiver requires the following:<\/p>\n

1.\u00a0\u00a0\u00a0\u00a0\u00a0 Full knowledge of the contractual right being waived<\/p>\n

2.\u00a0\u00a0\u00a0\u00a0\u00a0 An act which evinces a clear intention to abandon the right being waived<\/p>\n

Note that prejudice to the insured is not<\/span> an element of waiver.<\/p>\n

Provincial insurance<\/strong> legislation generally requires waiver of rights under insurance<\/strong> contracts to be in writing. For example, the British Columbia statute provides as follows:<\/p>\n

Waiver of term or condition <\/em><\/p>\n

A term or condition of a contract is not deemed to be waived by the insurer in whole or in part unless the waiver is stated in writing and signed by a person authorized for that purpose by the insurer.<\/p>\n

(2) Neither the insurer nor the insured are deemed to have waived any term or condition of a contract by any act relating to the appraisal of the amount of loss or to the delivery and completion of proofs or to the investigation or adjustment of any claim under the contract.<\/p>\n

Waiver of term or condition<\/em><\/p>\n

No term or condition of a contract shall be deemed to be waived by the<\/p>\n

insurer in whole or in part unless the waiver is stated in writing and signed by a<\/p>\n

person authorized for that purpose by the insurer.<\/p>\n

Appraisal acts not waiver<\/em><\/p>\n

Neither the insurer nor the insured shall be deemed to have waived any term<\/p>\n

or condition of a contract by any act relating to the appraisal of the amount of loss or to the delivery and completion of proofs or to the investigation or adjustment of any claim under the contract.<\/p>\n

The insurer denied liability on the grounds that the loss was caused by dishonesty, which was excluded from coverage, and on the grounds that the insured solicitor was in breach of the policy by failing to give timely notice of possible claims. The estate argued that the insurer, by taking on the defense, was estopped from denying liability.<\/p>\n

The court held that the defense and settlement negotiations could have been conducted differently if the estate had known that the insurer was going to deny coverage. Although it was not established that the defense of the action would actually have been conducted differently, and so actual prejudice was not established, the court was prepared to infer prejudice:<\/p>\n

It is not possible to point to actual prejudice but in the circumstances of this case where the insurer persisted in the defence through production and discovery into settlement negotiations prejudice must be presumed.<\/p>\n

When a claim is presented to an insurer the facts giving rise to the claim should be investigated.\u00a0If there is no coverage then the insured should be told at once and the insurer should have nothing further to do with the claim if it wishes to maintain its off-coverage position.\u00a0If coverage is questionable the insurer should advise the insured at once and in the absence of a non-waiver agreement or of an adequate reservation of rights letter defends the claim at its risk. \u2026<\/p>\n

Thus the insurer in Rosenblood<\/em> was estopped from denying coverage.<\/p>\n

Insurer conduct which may establish an estoppel.<\/strong><\/p>\n

The following are examples of the type of conduct that may result in an insurer being estopped from denying coverage.<\/p>\n

(a)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 continued investigation of the claim after it becomes known that coverage is questionable<\/p>\n

(b)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 silence or inaction on the part of the insurer in response to a request by the insured to confirm that coverage in fact is in place<\/p>\n

(c)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 defending the action against the insured<\/p>\n

(d)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 making payments to third parties on behalf of the insured<\/p>\n

(e)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 conducting settlement negotiations with the claimant or his solicitor<\/p>\n

(f)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 an express or implied representation by an insurer, its adjuster, agent or counsel that coverage will afforded<\/p>\n

(g)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 attending at mediations, discovery, arbitration and trial<\/p>\n

(h)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 invoking policy provisions \u2013 for example, appraisal, exercising the right to repair.<\/p>\n

Conclusion<\/strong><\/p>\n

Insurers who suspect that a claim is excluded should promptly notify the insured of that view. To reserve their rights to deny coverage while investigating the claim, insurers should have the insured enter into a non-waiver agreement, or, failing that, send the insured a reservation of rights letter. If this is not done, and the insured embarks on a course of conduct which suggests that it intends to provide coverage, it will be estopped from denying coverage if doing so would prejudice the insured. However, estoppel<\/strong> is an equitable doctrine and each case will turn on its own facts.<\/p>\n","protected":false},"excerpt":{"rendered":"

When will insurers be estopped from denying coverage on excluded claims? Abstract This article considers when an insurer will be estopped from denying coverage in circumstances where the insured has not entered into a non-waiver agreement and the insurer has not sent the insured a reservation of rights letter. Introduction When a claim is filed […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39,46],"tags":[],"_links":{"self":[{"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/posts\/2043"}],"collection":[{"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/comments?post=2043"}],"version-history":[{"count":0,"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/posts\/2043\/revisions"}],"wp:attachment":[{"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/media?parent=2043"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/categories?post=2043"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/greenwoods.org\/wp-json\/wp\/v2\/tags?post=2043"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}