An insurer that funded an insured’s defence without raising coverage issues until the litigation was “well advanced” was estopped from denying coverage despite a potentially applicable exclusion.

Insurance law – Liability insurance – Homeowner’s policy – Exclusions – Personal injury – Duty to defend – Waiver – Estoppel

Commonwell Mutual Assurance Group v. Campbell, [2018] O.J. No. 5152, 2018 ONSC 5899, Ontario Superior Court of Justice, October 4, 2018, C.U.C. MacLeod J.

In April 2015, the insured was sued following a collision between his dirt bike and an ATV. The insured’s automobile insurer investigated under a reservation of rights and denied coverage in January 2016. The insured’s home insurer appointed defence counsel for the insured in June 2015 and did not raise any coverage issues until March 2016, when the litigation was at the discovery stage. There was no coverage under the automobile insurance policy because the dirt bike was owned by the insured’s employer. Coverage under the home insurance policy likely would have been excluded by the terms of the policy. However, by defending the insured until the litigation was “well advanced” without a non-waiver agreement or reservation of rights, it became too late for the home insurer to deny coverage as either waiver or estoppel would apply. The home insurer was required to defend  and indemnify the insured under its policy.

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.