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Tag: principle operator

A Judicial Warning: Saving a "Modest Amount" in Insurance Premiums Can Create "Dire Financial Consequences"

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I’ve previously discussed how saving a few hundred bucks could cost you a few hundred thousand by misrepresenting the principle vehicle operator when purchasing ICBC insurance.  Today reasons for judgement were released by the BC Supreme Court, New Westminster Registry, demonstrating breach of insurance consequences in action.
In today’s case (Lau v. ICBC) the Plaintiff was involved in a 2009 collision.  At the time he was driving a two month old Subaru Impreza which was purchased for $41,287.  The collision resulted in the vehicle being a total loss.
ICBC found the Plaintiff fully liable for the collision although the Plaintiff was disputing this finding.  ICBC further denied coverage to the Plaintiff (meaning for starters they would not pay to replace the vehicle nor indemnify the Plaintiff for any claims brought by the occupants in the other vehicle) arguing that the vehicle owner made a ‘willfully false statement’ when the vehicle was purchased by not accurately declaring who the principle operator was going to be.
Mr. Justice Verhoeven agreed that the vehicle owner “knowingly misrepresented the identity of the vehicle’s intended principle operator” and therefore that the insurance coverage was forfeited.  The Court provided the following valuable comments:

[5] For the reasons that follow, I conclude with considerable reluctance that Yu Jung Lau knowingly misrepresented the identity of the vehicle’s intended principal operator when he applied for the insurance, and therefore the insurance coverage was forfeited.

[6] The reason I reach the conclusion I do with reluctance is that in my view, the misrepresentation was made in order to save a relatively modest amount of insurance premium, and almost certainly without any real appreciation that forfeiture of the insurance could result, with dire financial consequences. The result is harsh for the plaintiffs.

[7] However, ICBC does not have to prove that the plaintiffs were aware of the consequences of a misrepresentation concerning the insurance.  A contract of insurance is one of utmost good faith, and one cannot commit frauds or make wilfully false statements about the subject-matter of the claim without risking the loss of the right to indemnity: Inland Kenworth Ltd. v. Commonwealth Insurance Company (1990), 48 B.C.L.R. (2d) 305 (C.A.) at 310.

[8] Judging by the number of similar cases that have come before the courts, it seems likely the plaintiffs’ lack of understanding of the consequences of a false declaration as to the vehicle’s intended principal operator is shared with many members of the public. The result in this case should serve as a warning.

More on ICBC Injury Claims and Breach of Insurance

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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:

[5] 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.

[6] 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.”

[7] 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:

[28] 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.

[29] 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…

[31] 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.

More on ICBC Claims and Breach of Insurance

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I’ve previously written about the significant financial consequences that can come with being in breach of your ICBC Insurance and reasons for judgement were released today by the BC Supreme Court, Penticton Registry, demonstrating the consequences of ‘breach’ in action.
In today’s case (Booth v. ICBC) the Plaintiff was the registered owner of a Camaro.   When purchasing her insurance with ICBC she declared that she was the principle operator.  In 2004 her son was driving the Camaro and was involved in an accident.  He injured a passenger in another vehicle in this collision.  ICBC payed out over $37,000 in settlement of the passenger’s injury claim.
ICBC came to the conclusion that the Plaintiff misrepresented who the principle operator was when she purchased insurance and concluded that the Plaintiff’s son was in fact the principle operator of the Camaro.  ICBC told the Plaintiff she was in breach of her insurance and demanded repayment of the $37,000.  The Plaintiff sued ICBC for a declaration that she was not in breach of her insurance.
Mr. Justice Barrow sided with ICBC and concluded that the son in fact was the principle operator.  In so concluding he summarized the law relating to principle operator misrepresentations as follows:

[5] The phrase “principal operator” is defined in s. 1 of the Insurance (Motor Vehicle) Regulation, B.C. Reg. 447/83, as follows:

“principal operator” means 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;

[6] Section 19 of the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231, deals with forfeiture of claims. It provides, in part, as follows:

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…

all claims by or in respect of the applicant or the insured are rendered invalid…

[7] It is common ground that an applicant for an owner’s certificate by which insurance is acquired under the Act is required to identify the principal operator of the insured vehicle. It is also common ground that the defendant bears the burden of proving, on a balance of probabilities, that the insured knowingly misrepresented a fact contemplated by s. 19(1)(b). (See generally Gill v. Insurance Corp. of British Columbia, 2006 BCSC 1397 at para. 20, and Rai v. ICBC, 2005 BCSC 92 at para. 3.)

[8] Because an assertion that an insured knowingly misrepresented a material fact is tantamount to a claim of fraud, until the Supreme Court of Canada’s decision in F.H. v. McDougall, 2008 SCC 53, it was thought that in order to establish such a claim, it was necessary that it be proven on something more than a mere balance of probabilities and/or that the evidence said to support it be subjected to a heightened scrutiny (see Bevacqua v. I.C.B.C., 1999 BCCA 553 at para. 44). In F.H., the court concluded at para. 40 that:

…it is time to say, once and for all in Canada, that there is only one civil standard of proof at common law and that is proof on a balance of probabilities. Of course, context is all important and a judge should not be unmindful, where appropriate, of inherent probabilities or improbabilities or the seriousness of the allegations or consequences.

[9] Finally, whether an insured has knowingly misrepresented a material fact is to be determined on the basis of the circumstances at the time the policy of insurance was issued (see s. 19(1)(b) and Rai at para. 14).

He went on to conclude that the son was the likely principle operator.  This case is worth reviewing in full for anyone interested in the types of considerations the courts make when making such a determination and in seeing the evidence that ICBC can lead in proving who the principle operator of a vehicle is.

Misrepresenting the principle operator of a vehicle may save a few bucks but this case gives over 37,000 reasons why doing so is not a good idea.