When a Denial is Not a Denial: Waiver and Estoppel of Defences and Confirmation of Causes of Action Under Insurance Policies

Author: Neo Tuytel

Published: May, 1995

Insurers may deny claims by their insureds or injured third parties on many grounds. A common basis for denying a claim is the expiry of a limitation period. Insurers may also refuse to defend or indemnify insureds with respect to claims by third parties, on grounds of lack of coverage. Some coverage defences are peculiar to first party indemnity policies, while others are unique to third party liability policies. However, most are common to both.

An insurer may deny coverage on the ground that the insured misrepresented the risk in the policy application. The insurer may have cancelled the policy or coverage may have lapsed due to non-payment of premiums. The insured may have breached contractual or statutory conditions of the policy. For example, he may have failed to give timely notice of the claim, he may have failed to provide a proof of loss on a timely basis or he may have failed to commence an action on the policy within the applicable limitation period. In the third party context, the acts of the insured which resulted in liability may have been deliberate or even dishonest, and not inadvertent. Upon investigation, the insurer may discover that the claimant was not in fact an insured under the policy in question or that the insured had no insurable interest in the property which was damaged or destroyed. Similarly, it may turn out that the loss fell within an exclusion from coverage. For example, in a motor vehicle accident situation, the insurer may learn that the insured had been driving while impaired. Each and every one of these circumstances may justify denying coverage, and provide a complete defence to a claim.

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