An insurer may waive its right to a defence if it accepts carriage of an action

Insurer estopped from relying on s. 35 of the Insurance Act because it was aware of facts which made s. 35 relevant when it appointed counsel to defend its insured.

Personal Insurance Co. v. Alexander Estate, [2012] N.W.T.J. No. 20, March 2, 2012, Northwest Territories Supreme Court, V.A. Schuler J.

The insurer sought a declaration that it had no obligation to defend or indemnify the estate of its insured in respect of a personal injury action commenced by the driver of another vehicle that was involved in a collision with the vehicle of the insured. At the time of the accident, the insured’s two daughters were in the vehicle. It was later determined that the insured had intentionally veered across the road into the other vehicle with the intention of killing himself and his daughters.

The insurer claimed that, pursuant to s. 35 of the Insurance Act, it did not have to indemnify or defend its insured’s estate because of the insured’s criminal act. The respondents accepted that s. 35 would apply but argued that the insurer had waived its right to rely on s. 35 by retaining counsel and defending the claims against its insured. The insurer did not obtain or attempt to obtain a non-waiver agreement nor did it provide a reservation of rights letter.

The court found that the insurer had sufficient knowledge of the facts that made s. 35 relevant and applicable to the case before it undertook the defence of the insured. Accordingly, the court held that the insurer had waived its rights under s. 35 and was also estopped from relying on those rights. The application was dismissed.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

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