Waiving The Insurer’s Right To Deny Coverage
This summary does not constitute a legal opinion. The information it contains may not reflect the current state of the law.
The role of the claims adjuster is essentially to act as a connection between the insurer and the insured. The insured—who is often in a stressful and sometimes complicated situation—relies on the claims adjuster to offer him guidance when a loss occurs. However, as we shall see in this article, the claims adjuster’s actions can also bind the insurer. It is therefore important for him to properly analyze the situation and obtain the necessary instructions to correctly assess the insurance coverage and thus avoid waiving a right provided for under the insurance policy.
A waiver of the insurer’s right to deny coverage is a unilateral act that binds its author; it cannot be undone.1 The waiver is described as “the unilateral, intentional abandonment of a right [our translation]”2, for example, the right to deny coverage or to invoke an exclusion provided for under the insurance policy. Thus, the insurer waives its right to deny coverage when it:
- takes up the defense of the insured although an exclusion in the insurance policy could have been raised;
- leads the insured to believe that it is not crucial to fulfill certain administrative formalities in the insurance contract.3
The insured must prove three things in order to conclude that the insurer has waived its rights:
- the voluntary nature of the waiver;
- its unequivocal nature;
- the existence of a right at the time the waiver is ascribed to the insurer.4
Likewise, the time elapsed before invoking a ground to deny coverage could amount to the insurer waiving its rights. The reservation of rights5 or the denial letter is therefore important, since the insurer must “limit its dispute to the grounds raised in its denial of coverage letter. [our translation]”6.
Subsequently, the insurer will be prevented from raising any other grounds, having been deemed to have tacitly waived doing so7.
THE CLAIMS ADJUSTER’S ROLE
Often, the claims adjuster acts as the insurer’s mandatary.8 The insurer is thus bound by the acts the claims adjuster performs while fulfilling his mandate. When a claims adjuster makes representations, or confirms to the insured that he will be covered for damages suffered or that he will receive compensation, he has bound the insurer, who could thus be deprived of the right to deny coverage or to invoke an exclusion in the insurance policy.
For example, in Turcotte v. Pelletier9, the plaintiffs instituted proceedings after having bought a residence they claimed was affected by hidden defects. The defendants (the sellers of the residence) claimed defence costs from their insurer. During his investigation, the claims adjuster mandated by the insurer indicated that the insurer would side with the insureds with respect to indirect or consequential damages. However, the insurer sent a letter to the insureds denying coverage. The letter explained that the insurance policy did not cover hidden defects.
The Superior Court ruled that the insurer was bound by the representations the claims adjuster had made and that it had implicitly waived its right to deny coverage for indirect or consequential damages:
 The Court rules that La Personnelle is bound by the voluntary, unequivocal and concrete statement made by claims adjuster Gagnon that the Turcotte-Larouches’ claim for consequential damages was covered.
 Given its implicit waiver, La Personnelle cannot retract the position it took and is forbidden from raising new grounds for non-coverage, such as the absence of a loss. [our translation]
However, since the plaintiffs were only claiming damages for “remedial work” and not for indirect damages, the court ruled that the insurer had not waived its right to deny coverage on this basis.
In addition, if the claims adjuster remits a cheque in partial settlement of the claim, this can be seen as waiving the right to invoke non-coverage. For example, in Trudel v. Promutuel L’Abitibienne10, which concerned a fire that broke out behind a newly installed woodstove in the insured’s residence, the Court of Québec ruled that the insurer had waived its right to deny coverage when the claims adjuster it had mandated remitted a cheque to the insured as partial settlement of the claim. The court explained:
 The defendant [the insurer] is bound by the acts of its mandatary [the claims adjuster], regardless of whether the adjuster is its employee or its duly mandated contractual employee. [our translation]
More recently, in Touchette v. Oppenheim11, the court confirmed that, as the insurer’s mandatary—or at very least, its apparent mandatary—the claims adjuster’s acts bound the insurer.12 In this case, following a fire in his building, the insured’s claim was investigated and he received numerous requests for information from various claims adjusters mandated by the insurer, all of which led him to believe that a settlement proposal would be forthcoming. On the basis of this, the insurer had waived its right to deny coverage.
The importance of the claims adjuster’s role with the insured is clear. His actions bind the insurer that mandated him; in fact, these actions become those of the insurer. Thus, the claims adjuster’s actions or representations could result in the insurer being deprived of its right to deny coverage or to invoke an exclusion in the insurance policy.
It is therefore essential to draw up a clear, comprehensive reservation of rights letter and give it to the insured as soon as possible after the loss occurs in order to avoid an implicit waiver being held against the insurer. In conclusion, since the claims adjuster’s role is essentially to act as a connection between the insurer and its insureds, he must ensure effective communication between all parties in order to avoid any misunderstanding.
By Me Léonie Gagné and Me Jonathan Lacoste-Jobin, Lavery de Billy
1 Bergeron, Jean-Guy. Les contrats d’assurance (terrestre), lignes et entre-lignes, tome deux, Les Éditions SEM, 1992, p. 371.
2 Ibid, p. 372; Hilliker, Gordon. Liability Insurance Law in Canada, 5th edition, LexisNexis, 2011, p. 143.
3 Lluelles, Didier. Précis des assurances terrestres, 4e édition, Les Éditions Thémis, 2005, p. 314.
4 Turcotte c. Pelletier, 2012 QCCS 2462, paragr. 42; Pagé, Philippe. L’irrémissible « Waiver » et le prix des sous-entendus, in Développements récents en droit des assurances, vol. 222, Éditions Yvon Blais, 2005, p. 8-9.
5 Lombard du Canada c. Ezeflow inc., 2008 QCCA 1759, paragr. 60; Di Capua c. Barreau du Québec à Montréal, 2003 R.R.A. 750 (C.A.), paragr. 86; Joy Displays inc. c. Canadian General Insurance Company, 1976 C.A. 1, p. 10-11; Lapointe-Boucher c. La Mutuelle-vie des fonctionnaires, 1996 R.R.A. 957 (C.A.), p. 12-13.
6 Lapointe-Boucher c. La Mutuelle-vie des fonctionnaires, 1996 R.R.A. 957 (C.A.), p. 11.
7 Placements Gervasi enr. c. Citadelle (La), compagnie, 2006 QCCS 3694, paragr. 71-72.
8 Code civil du Québec, RLRQ c. C-1991, art. 2160.
9 Turcotte c. Pelletier, 2012 QCCS 2462.
10 Trudel c. Promutuel L’Abitibienne, 2008 QCCQ 1508.
11 Touchette c. Oppenheim, 2014 QCCS 6039, (inscription en appel, 2015-01-13 [C.A.] 500-09-024982-159).
12 Code civil du Québec, RLRQ c. C-1991, art. 2163.