Insurers Can Deny Coverage After A Claim Is Accepted, SCC Rules

The Supreme Court of Canada recently clarified that an insurer with no prior knowledge of a policy breach may later deny coverage once the breach has been discovered.

Trial Lawyers Association of British Columbia v. Royal & Sun Alliance Insurance Company of Canada  involved an insurer ("RSA") that discovered an insured had consumed alcohol before a fatal multi-vehicle accident that killed the insured. However, RSA only made that discovery one year into defending the insured's estate in the ensuing litigation – and more than three years after the accident had taken place.

RSA discovered that the insured's alcohol consumption breached both their motorcycle licence and insurance policy. Upon discovering the breach, RSA denied coverage and stopped defending the insured's estate in the litigation.