In Trial Lawyers Association of British Columbia v
Royal Sun Alliance Insurance Company of Canada, the Supreme
Court of Canada recently decided an issue of coverage under an
automobile policy. The decision covers fundamental obligations
between insurers and insureds and limits on how third parties are
involved. The case ultimately turned on a mundane point, but the
reasons re-affirmed some fundamental obligations owed between
parties to an insurance contract in favour of the insurer.
Insurer's investigation must be reasonable —
not diligent — and third parties can't
complain
Although insurers must fairly and reasonably investigate claims
in a balanced manner, they don't have to do so diligently,
such that the courts will impute knowledge, in the face of
knowledge gaps. Even when those gaps lead to defending an insured
for years before denying coverage, the insurer will not have waived
breaches by the insured.
