December 15th, 2009
I’ve written many times about the potentially steep financial consequences of being in breach of an ICBC Policy when an injury claim is made.
A frequent type of breach relates to misrepresenting who the principal operator of a vehicle is. Reasons for judgement were released today demonstrating some of the consequences that occur when this type of a misrepresentation is knowingly made.
In today’s case (Deters v. Totovic) the Plaintiff was involved in a 2003 BC Car Crash. She sued the owner and driver of the other vehicle involved (a mother and daughter respectively). ICBC refused to provide coverage to the defendants claiming that they misrepresented who the principle operator of the vehicle was when they purchased their policy of insurance. A Motion was brought before the BC Supreme Court asking the judge to decide if there was a misrepresentation at the time and therefore a breach of insurance.
Mr. Justice Smith decided that the Defendants did knowingly misrepresent who the principal operator of the vehicle was when purchasing insurance from ICBC. A a result he held that the Defendants lost their right to indemnity from ICBC.
Mr. Justice Smith succinctly summarized the law relating to breach of insurance for principal operation misrepresentation as follows:
 Section 19(1)(b) and (e) of the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231 [Act], as it was in force in 2003, said:
19 (1) If…
(b) an applicant for an owner’s certificate or driver’s certificate knowingly misrepresents or fails to disclose in the application a fact required to be stated in it,…
(e) an insured makes a willfully false statement with respect to a claim under a plan,
all claims by or in respect of the applicant or the insured are rendered invalid, and his or her right and the right of a person claiming through or on behalf of or as a dependant of the applicant or the insured to benefits and insurance money is forfeited.
 The regulations to the Act (now called the Insurance (Vehicle) Act) define the principal operator as “the person who will operate the vehicle described in an application for a certificate for the majority of the time the vehicle is operated during the term of the certificate.”
 The burden of proving that the insured knowingly misrepresented a material fact is on the insurer. The standard of proof is the civil standard of balance of probabilities. The question of whether or not there has been a knowing misrepresentation is to be determined on the basis of the circumstances that existed at the time the policy of insurance was issued: Booth v. ICBC, 2009 BCSC 1346 at paras. 7-9.
Mr. Justice Smith pointed out that if the vehicle was insured with the daughter as the principal operator “the insurance would have cost approximately four times what was actually paid”.
The Court went on to make the following finding:
 In short, all of the evidence supports the inference, on the balance of probabilities, that (the Daughter) was, in fact, the principal operator of the vehicle during the period covered by the insurance certificate and was using it extensively for work purposes. That finding in itself does not necessarily mean that there was a breach of the insurance coverage because the question is whether or not there was a knowing misrepresentation at the time the policy of insurance was issued.
 At the time the policy of insurance was issued on June 25, 2003, (The Daughter) had been working in the T&F Sales job for approximately two months. The circumstances around the time the insurance policy was issued indicate that (the Mother) had to have known that (the Daughter) would be the principal operator of the Mazda—she needed it on a daily basis for her job. Therefore, I find that on the balance of probabilities, Smilja made a misrepresentation when she declared herself to be the principal operator in June 2003…
 I therefore find that there was a misrepresentation within the meaning of the Act and therefore the defendants’ right to indemnity for the plaintiff’s claim is forfeited pursuant to s. 19 of the Act. ICBC is also entitled to costs of this action.
What this ruling means, in practical terms, is that if the Plaintiff is successful in her lawsuit, ICBC would pay the judgement to the Plaintiff and then come after the Defendants personally for the damages they had to pay. Depending on the severity of the claim the consequences could be anywhere from thousands to millions of dollars. This case shows yet again that the short term financial advantages that can come with principal operator misrepresentation are far outweighed by the financial consequences of being in breach of a policy of insurance.