Can a seller block a claim by proving the buyer already knew about the issue before closing?

Possibly, and it comes down to the same sandbagging language discussed elsewhere in the agreement. Where a purchase agreement is silent, or expressly takes an "anti-sandbagging" position, a seller may be able to argue that a buyer who knew about an issue before closing and proceeded anyway cannot later claim indemnity for that same issue — the reasoning being that the buyer effectively accepted the risk once informed, rather than relying on the representation.

Where the agreement instead contains a pro-sandbagging clause, that defence is generally unavailable to the seller, because the clause is specifically designed to preserve the buyer's right to claim regardless of what the buyer knew or suspected going in. Ontario does not have a single settled default rule on this question in the absence of clear contract language, so the outcome depends heavily on the specific wording used and on what can actually be proven about the buyer's knowledge at the relevant time. A seller hoping to rely on this kind of defence should confirm exactly what the agreement says, and how strong the evidence of the buyer's prior knowledge really is, before treating it as a given.