On September 8, 2025, the Federal Court released its decision in Elite Insurance Company (Aviva) v Borgatti Estate, 2025 FC 1471, where the Court rejected Aviva’s application for summary judgement seeking to deny coverage for claims against the Estate relating to a fatal boating accident from 2019 (the “Collision”). The Court held that Aviva was estopped from denying coverage to the Estate after Aviva delayed and took steps that prejudiced the Estate’s access to evidence, including disposing of the boat before advising the Estate the boat’s lights could be the basis for denying coverage. 

Aviva sought declarations that losses and claims asserted in various litigation claims against the Estate relating to the Collision were not covered by the Policy and that Aviva owed no contractual indemnity to the Defendants under the Policy’s terms and conditions. Aviva argued that insurance coverage under the Policy had ceased at the time of the Collision, because Mr. Borgatti was in breach of the Safety Equipment Warranty (the “Warranty”).

The Defendants argued that Aviva should be prohibited from denying coverage under the Policy due to the operation of the doctrines of waiver, estoppel, and laches. The Defendants also argued that the Warranty did not apply to navigation lights. In the alternative, the Defendants argued that subsections 39(3) and 39(4) of the Marine Insurance Act, SC 1993, c 22, would apply to preclude Aviva from denying coverage under the Warranty. The Defendants further argued because Aviva had paid physical damage and accidental death benefit claims under the Policy, they believed Aviva was treating the Collision as a covered loss, and would continue to cover all claims under the Policy.

Background 

Neil Borgatti was the owner of a pleasure vessel (the “Borgatti Vessel”), insured by Aviva in February 2019 under a Watercraft Insurance Policy (the “Policy”). On the evening of August 24, 2019, the Borgatti Vessel collided with another vessel owned by David Koch (the “Koch Vessel”). As a result of this Collision, passengers on board both the Borgatti Vessel and the Koch Vessel were injured, and Mr. Borgatti and another passenger on the Borgatti Vessel were killed. The Collision was reported to Aviva on August 30, 2019. 

Between November 2020 and June 2021, five actions were commenced against the Estate relating to the Collision. In December 2020, the Aviva adjuster informed the Defendants that Aviva would be appointing defence counsel in early 2021 to defend the actions against the Estate. In February 2021, Aviva appointed defence counsel to defend the actions. 

Shortly before appointing this defence counsel, Aviva sent a letter to the Estate raising the possibility of a breach by Neil Borgatti of the Warranty, which required the Borgatti Vessel to be equipped with safety equipment required by law, kept in good and efficient working order at all times, and informing the Estate that Aviva reserved its rights under the Policy. However, evidence from the Aviva Claim notes indicated that Aviva was made aware of issues with the Borgatti Vessel’s lights as early as September 2019, but Aviva made no effort to raise these concerns with the Defendants.

Reasons of Justice Richard Southcott

While the Defendants advanced arguments that Aviva should be prohibited from denying coverage under the Policy due to the operation of the doctrines of waiver, estoppel, and laches, the Court accepted the argument for estoppel. 

Estoppel

Promissory estoppel is an equitable defence which requires: (a) the parties are in a legal relationship at the time of a promise or assurance giving rise to the estoppel; (b) the promise or assurance be intended to affect that relationship and acted on; and (c) the other party relied on the promise or assurance to their detriment (Trial Lawyers Association of British Columbia v Royal & Sun Alliance Insurance Company, 2021 SCC 47 [Trial Lawyers Association] at para 15). The majority in Trial Lawyers Association described promissory estoppel in the context of insurance litigation at paragraph 16 as follows:

[I]n the insurance context, estoppel arises most commonly where an insurer, having initially taken steps consistent with coverage, then denies coverage because of the insured’s breach of a policy term or its ineligibility for insurance in the first place. To prevent the insurer from denying coverage, the insured will attempt to show that the insurer is estopped from changing its coverage position based on its prior words or conduct.

Aviva conceded that they were in a legal relationship at the time. The Court found the second element of the test for establishing promissory estoppel was satisfied when Aviva made the payments for physical damage and accidental death under the Policy, both before sending the reservation of rights letter, but after being made aware the lights were not adequate during the Collision. The Court found the most compelling argument for part (c) of the estoppel requirement to be that Aviva’s disposal of the Borgatti Vessel in August 2020 deprived the Defendants of access to physical evidence that may have assisted them in responding to Aviva’s denial of coverage. 

The Defendants stated, if they had known in August 2020 that there was a potential issue regarding coverage, they could have taken steps to preserve the Borgatti Vessel to determine whether the physical evidence might have assisted in responding to Aviva’s allegation of breach of the Warranty. The Court accepted these circumstances represented detrimental reliance sufficient to invoke the doctrine of promissory estoppel.

Takeaways

Insurers must act and communicate with urgency if there are any concerns relating to coverage. Specifically, insurers should send a reservation of rights letter clearly outlining the insurer’s position that there may be a coverage issue and they are investigating. If at any point an insurer could send notice to the insured relating to a coverage concern, the insurer should.