Mark A. Borgo

The court granted partial summary judgment in favour of Western Surety Company on its claim for exoneration against the defendants.

The decision reviews the legal principles underpinning exoneration clauses in surety indemnity agreements, the appropriateness of partial summary judgment, and the application of these principles to the facts.

The court found that the exoneration claim was discrete and severable from indemnification claims, that there was no genuine issue requiring a trial, and that the defendants were jointly and severally liable to exonerate Western in the amount of $3,990,000.

An insured motorcyclist died in an accident while in breach of his insurance policy due to alcohol consumption, but his insurer provided a defence for three years without knowledge of the breach.

The insurer ceased defending and denied coverage upon discovering the breach; a third-party claimant sought a declaration that the insurer was estopped from denying full coverage.

The majority held that promissory estoppel requires the promisor to have actual knowledge of the facts demonstrating the breach, as a promisor cannot intend to alter a legal relationship by promising to refrain from acting on information it does not have.

The court also rejected constructive knowledge arising from a breach of a duty to investigate as a basis for estoppel, holding that the insurer's duty to investigate fairly runs to the insured, not to third-party claimants.

The concurrence agreed the appeal should be dismissed but disagreed that actual knowledge is an absolute requirement, preferring an objective analysis of the promisor's intent.

An appeal by Royal Sun Alliance Insurance Company of Canada (RSA) from a trial judge's decision that RSA was responsible to provide insurance coverage to the estate of Steven Devecseri, who was killed in a motorcycle accident in 2006.

Devecseri had alcohol in his system at the time of the accident, which breached both his M2 driver's licence restrictions and his insurance policy terms.

RSA did not learn of the alcohol consumption until 2009 during discovery proceedings, at which point it took an off-coverage position.

The trial judge found that RSA waived its right to deny coverage by failing to obtain the coroner's report in 2006 and by defending the claim without taking a reservation of rights.

The Court of Appeal reversed, holding that RSA did not waive coverage and was not estopped from denying coverage because it lacked actual knowledge of the policy breach until 2009.