Reasons for judgement were published today by the BC Supreme Court, Chilliwack Registry, finding an insurance company in breach of contract and ordering them to pay, in addition to wrongfully withheld benefits, damages for “mental distress”.
In today’s case (Gascoigne v. Desjardins Financial Security Life Assurance Company) the Plaintiff was insured with the Defendant. She became disabled in her own occupation and sought benefits. The Defendant initially approved the plaintiff’s claim and paid LTD benefits for a short period but later took “the position that the plaintiff is not disabled and it has refused to pay further benefits.“.
The Plaintiff produced medical evidence in support of her claim. The Defendant did not have any independent medical exams contradicting this evidence and instead relied on a medical consultant whose evidence the Court criticized as amounting “to little more than generic opinions unsupported by the evidence”.
In ordering that the Defendant pay damages for ‘mental distress’ for wrongfully denying insurance benefits Mr. Justice Skolrood provided the following reasons:
I have previously detailed the potentially high financial consequences for civil breach of insurance. One way a motorist can be in breach relates to intoxication. If as a result of intoxication an individual is “incapable of proper control of the vehicle” then the motorist can be in breach of their insurance pursuant to Section 55(8)(a) of BC’s Insurance (Vehicle) Regulation. This means that the individual can lose all insurance coverage and be forced to pay all damages flowing from a collision.
This is a severe consequence and in appropriate circumstances a very deserving one. However, if ICBC is too quick to breach someone from their coverage they may be forced to pay damages in bad faith. Such a result was demonstrated in reasons for judgement released today by the BC Supreme Court, Vancouver Registry.
In today’s case (McDonald v. ICBC) the Plaintiff was involved in a 2007 collision. She was at fault for the crash. She consumed two to three glasses of wine prior to operating a vehicle. As she was driving she “turned the wrong way into an oncoming van” causing a collision and injuries to the other motorist.
The Plaintiff was issued a 24 hour roadside suspension and charged criminally with dangerous driving and alcohol related offences. Eventually the criminal charges were dropped and the Plaintiff plead guilty to careless driving pursuant to section 144 of BC’s Motor Vehicle Act.
The injured van driver brought a claim against the Plaintiff. ICBC eventually settled the claim for just over $182,000. ICBC held the Plaintiff in breach of her insurance arguing the collision occurred as a result of impairment and sought to collect the money from her.
The Plaintiff disputed ICBC’s allegations. She sued ICBC for a declaration that she is entitled to coverage and further for punitive damages. Madam Justice Ballance sided with the Plaintiff. The Court found that ICBC failed to prove that the collision occurred as a result of alcohol consumption and further ordered that ICBC pay the Plaintiff $75,000 for their ‘bad faith’ denial of coverage. In reaching this result Madam Justice Ballance provided the following reasons:
An insurer does not have to have an iron-clad case in order to deny coverage. It is not expected to investigate a claim with the skill and forensic proficiency of a detective. Nor is it required to assess the collected information using the rigorous standards employed by a judge. The duty of good faith does not impose a standard of absolute liability in respect of an insurer’s wrong decision. The duty simply dictates that an insurer bring reasonable diligence, fairness, an appropriate level of skill, thoroughness and objectivity to the investigation, and the assessment of the collected information with respect to the coverage decision. My criticisms of the calibre of Ms. Baadsvik’s investigation and the shortcomings of her ultimate assessment should not be interpreted as suggesting that each individual omission or failing is, of itself, necessarily a violation of good faith and fair dealing. It is their cumulative effect that constitutes a breach of its duty of good faith.
It is not possible to perform a fair and proper evaluation in the absence of a reasonably thorough underlying investigation. The latter precludes achievement of the former. And so it was, in the case at hand. Here, that deficiency was compounded by the other failings of Ms. Baadsvik’s evaluation of whether the plaintiff had been Incapacitated…
ICBC engaged in settlement negotiations and concluded a settlement binding the plaintiff without appointing legal counsel on her behalf, all the while investigating her potential breach of contract. The plaintiff was never informed of the settlement discussions despite the fact that ICBC knew that the damages in the To Action were likely to be significant and that the plaintiff would potentially have to bear them personally. Indeed, after Ms. Baadsvik’s final discussion with Constable Wood on April 1, she was essentially on the brink of deciding that the plaintiff was in breach and that ICBC would not be indemnifying her. The nature and sequence of these events, all fully within ICBC’s control, was manifestly unfair.
Ms. Baadsvik was asked whether, in making the decision that the plaintiff was in breach, any consideration was paid to the settlement of the To Action. She gave the unsatisfactory answer that she understood she had to wait until that settlement was concluded before she could advise the plaintiff about the breach and tell her how much money was involved.
In my opinion, ICBC’s multiple failings in the investigation, assessment and breach decision that I have outlined, and its misconduct in relation to the To Action, respectively, contravened the duty of fair dealing and good faith owed to the plaintiff…
This is an exceptional case. The nature of ICBC’s bad faith behaviour took different shapes throughout the time line. The overall handling and evaluation of the claim was overwhelmingly inadequate. ICBC also allowed its objectivity to be tainted by the fact that the claim indirectly involved the “very difficult” Mr. McDonald. While I recognize that the tainting of impartiality was only slight, it was nonetheless real and improper.
In my opinion, ICBC’s conduct was harsh, high-handed and oppressive as those concepts have been developed in the jurisprudence, and marked a significant departure from the Court’s sense of decency and fair play. Some of the acts of bad faith were inadvertent and others were not and they persisted over a considerable period. The plaintiff was in a vulnerable position and suffered harm in consequence of ICBC’s misconduct, not all of which is tidily rectified by this Court confirming her right to be indemnified. ICBC would not be accountable for its bad faith in the absence of an award of punitive damages, which it can well afford. Such an award is justified to deter other insurers from engaging in similar types of misconduct, and to punish ICBC and condemn its breaches of duty…
I declare that the plaintiff is entitled to indemnity from ICBC for all claims arising from the accident, including the To Action.
I also award her the sum of $75,000 in punitive damages.
If you purchase Theft of Fire Damage coverage from ICBC and need to take advantage of this insurance can ICBC force you to provide a statement under oath before processing your claim? The answer is yes and reasons for judgement were released this week by the BC Supreme Court, Nelson Registry, dealing with this area of the law.
In this week’s case (Cort v. ICBC) the Plaintiff had fire insurance coverage with ICBC. On September 18, 2010 his vehicle was destroyed by fire. He asked ICBC to pay his loss but ICBC refused to respond until he provided them with an “Examination Under Oath“. He refused to do so and sued ICBC. ICBC brought an application for various pre-trial relief including an order to ‘stay‘ the lawsuit until the Examination Under Oath was provided. Master Keighley granted this order finding that the lawsuit could not move ahead until this ‘investigative’ step took place. In doing so the Court provided the following reasons:
6(1) If required by the insurer, the insured must, on the occurrence of loss or damage for which coverage is provided by this contract, deliver to the insurer within 90 days after the occurrence of the loss or damage a statutory declaration stating, to the best of the insured’s knowledge and belief, the place, time, cause and amount of the loss or damage, the interest of the insured and of all others in the vehicle, the encumbrances on the vehicle, all other insurance, whether valid or not, covering the vehicle and that the loss or damage did not occur through any wilful act or neglect, procurement, means or connivance of the insured.
(2) An insured who has filed a statutory declaration must
(a) on request of the insurer, submit to examination under oath,
(b) produce for examination, at a reasonable time and place designated by the insurer, all documents in the insured’s possession or control relating to the loss or damage, and
(c) permit copies of the documents to be made by the insurer.
8(1) The insurer must pay the insurance money for which it is liable under this contract within 60 days after the proof of loss or statutory declaration has been received by it or, if an arbitration is conducted under section 177 of the Insurance (Vehicle) Regulation, within 15 days after the award is rendered.
(2) The insured must not bring an action to recover the amount of a claim under this contract unless the requirements of conditions 4, 5 and 6 are complied with and until the amount of the loss has been ascertained by an arbitrator under section 177, by a judgment after trial of the issue or by written agreement between the insurer and the insured.
(3) Every action or proceeding against the insurer in respect of loss or damage for which coverage is provided under this contract must be commenced within 2 years from the occurrence of the loss or damage.
Accordingly, says ICBC, since the insured may not commence an action to recover the amount of his claim until he has, inter alia, submitted to an examination under oath, at the very least he should be enjoined from proceeding with the claim…
 ….The purpose of an EUO, on the other hand is investigative. The insured is contractually bound to co-operate with his insurer by submitting to an examination which may assist the insurer in determining its response to the claim. The insured may not, as a matter of contract, seek to attach conditions to his attendance.
In the circumstances the contract claim will be stayed until the plaintiff has complied with the requirements of the Prescribed Conditions. In the event that the parties cannot resolve the issue of compliance by agreement, they will have liberty to apply.
This case is also worth reviewing for the Court’s discussion of transfer of claims to Small Claims Court under section 15 of the Supreme Court Act and further the severance of bad faith claims from breach of contract claims pursuant to Rule 22-5(6) and 12-5(67) of the Supreme Court Rules.
If you would like further information or require assistance, please get in touch.
When not writing the BC Injury Law Blog, Erik is the managing partner at MacIsaac & Company, based in Victoria, B.C. He is also involved with combative sports regulatory issues and authors the Combat Sports Law Blog.
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