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Tag: Section 76 Insurance Vehicle Act

ICBC 'Third Party' Settlement Ends Tort Litigation Despite Defendant Protests

When a motorist is in breach of their insurance ICBC has the right to intervene in a lawsuit against them and settle any tort claims arising from a collision pursuant to the powers given to them under sections 76 and 77 of the Insurance (Vehicle) Act.  ICBC is further given the power to recover the amount of the settlement from the breached motorist provided the settlement was entered into in good faith and further that appropriate notice is given to the breached motorist.  This remedy is available to ICBC even where the ‘breached’ motorist disputes fault for the collision as was demonstrated in reasons for judgement released last week by the BC Supreme Court, Nanaimo Registry.
In last week’s case (Chandler v. Gomez) the plaintiff was injured in a collision and sued the defendant for damages.  The defendant was insured with ICBC but the insurer alleged the defendant was in breach of their coverage. ICBC joined the lawsuit as a statutory Third Party and eventually settled the plaintiff’s claim for $112,000.  ICBC sought recovery of this amount from the defendant.  The defendant argued that she was not at fault for the crash and the tort matter should proceed to trial on that issue.  Mr. Justice Greyell disagreed and found that the tort claim was concluded with the settlement despite the defendant’s protests. In doing so the Court provided the following reasons:

[14] Section 21(6) of the Act (s. 77(2) of the new Act) provides that ICBC has the right to recover any amount paid under or by way of a settlement or other payment, and I refer to this section which provides that:

. . . if the corporation has paid an amount to a person under this section, by way of settlement or otherwise, that it would not otherwise be liable to pay, and has personally delivered or forwarded by registered mail to the last known address of the insured a demand for reimbursement of that amount, the insured is liable to reimburse the corporation that amount, and the corporation may enforce the right [of] action in court.

[15] Accordingly, s. 21 provides ICBC with the right to defend the action, to settle the action, and to recover any amount paid under that settlement from an insured.  In essence, ICBC stands in the place of such defendant when it makes itself a third party to the action, as it has in this case, under s. 21.

[16] The necessary result of a combined reading of ss. 21(2), (6), (7), and (8) is that, upon settlement, the tort action has been concluded.  ICBC has acted pursuant to its statutory authority as insurer to settle the action.

[17] As stated by Madam Justice Gray in Insurance Corp. of British Columbia v. Schmidt, 2004 BCSC 1786, a case which raises similar issues to those present in this case:

[22]      ICBC’s third party notice is an unusual form of pleading.  It does not purport to make a claim against Mr. Schmidt.  Instead, it denies liability for indemnity and claims the right to defend the action as well.  It does not constitute a claim by ICBC for payment from Mr. Schmidt.

[23]      In fact, no claim against Mr. Schmidt under s. 21(6) could have arisen at the time of the third party notice.  Such a claim can arise only after payment and after delivery of the demand for reimbursement as required.

[24]      The issues in this litigation, a form of lawsuit sometimes termed a “recovery lawsuit,” are whether ICBC has met the terms of the statute giving it a right to recover, and whether the settlement was reasonable and effected by the insurer in good faith.  See the discussion of the respective issues in ICBC v. Doyle, [1984] B.C.J. No. 889, a decision of Judge Boyle when he was a County Court judge.

[26]      Bearing in mind this articulation of the issues in any recovery action, the issue before me is whether ICBC’s settlement was reasonable and made in good faith.  If ICBC had paid money to Mr. Neumann following the entry of a dismissal order, it is likely that any payment by ICBC would have been unreasonable.  But I must judge the reasonableness of ICBC’s conduct at the time that settlement was achieved.  At that time, the consent dismissal order had not been made.

[33]      While s. 21(2) permits ICBC to compromise or settle the claim at any stage, Mr. Straith argued that once ICBC becomes a third party in a tort lawsuit, the issues between ICBC and the driver over liability ought to be resolved in that lawsuit.  Mr. Straith suggested that if ICBC wanted to be able to proceed against Mr. Schmidt, ICBC ought to have reserved its rights, or proceeded to trial, or obtained an assignment from Mr. Neumann of his claim against Mr. Schmidt, or compromised with a judgment against Mr. Neumann and obtained an assignment of that judgment.

[34]      There is nothing in s. 21 which restricts ICBC to proceed under only one of the subsections, or requiring it to proceed as suggested by Mr. Straith.  Section 21(6) and the case law provide adequate protection for a driver who is denied indemnity by ICBC.  Any compromise ICBC enters into can be recovered from the driver only if the settlement were reasonable and entered into in good faith.

[18] The decision of Madam Justice Gray sets out a clear distinction between the tort action or the issues in the tort action which are between plaintiff and defendants, and ICBC pays out funds pursuant to s. 21.

[19] The lis between the parties in the tort action has been resolved by way of the settlement.  Whether the settlement was reasonable and whether it was effected in good faith is not a subject matter for determination in this case.  That issue must be determined when ICBC seeks to recover the amount it has paid by way of settlement.  The issue as stated is then between ICBC and Ms. Gomez as to whether that settlement was effected reasonably in all the circumstances of the case…

[22] I accept counsel for ICBC’s interpretation of the issue remaining to be determined between the third party ICBC and the defendant Ms. Gomez.  The forum for determination of that issue is in what is commonly referred to as a recovery action by ICBC.  It is not in these proceedings.

Limited Application Provided to ICBC's "Attached Equipment" Exclusion

While ICBC does provide coverage for most tort claims following BC motor vehicle accidents there are certain exclusions to their coverage.  Last week the BC Court of Appeal released useful reasons for judgement addressing the scope of ICBC’s “Attached Equipment” exclusion.
In last week’s case (Wormell v. ICBC) the Plaintiff was injured in a 2003 incident when he was helping a friend transport some goods.  Their vehicle stopped at a weigh scale.  The Plaintiff stood on top of the cargo.  At the same time, the Defendant was operating a crane attached to the vehicle intending to lift the cargo.  The cargo shifted while the Plaintiff was still standing on it and in the “agony of the moment” the Plaintiff jumped off the truck to the ground which was some 12 feet below.  In jumping on the ground the Plaintiff suffered various injuries including a “crush fracture to the left ankle and a tear to the anterior cruciate ligament of his right knee“.
The Plaintiff sued for damages and following trial the Defendant was ordered to pay just over $570,000 in damages.  The Defendant was insured by ICBC.  The Plaintiff applied, pursuant to section 76(2) of the Insurance (Vehicle) Act for ICBC to pay the judgement.  ICBC refused to pay arguing that this claim fell outside of the scope of coverage because of section 72(2) of the Insurance (Vehicle) Regulation which states that:
The corporation shall not indemnify an insured for liability imposed by law for injury, death, loss or damage arising, directly or indirectly, out of the operation of attached equipment at a site where the attached equipment is being operated…
The Plaintiff sued ICBC and succeeded.  ICBC appealed arguing that the claim fell within this exclusion.  The BC Court of Appeal disagreed and dismissed ICBC’s appeal.  In doing so the Court provided the following reasons limiting the scope of ICBC’s ‘attached equipment’ exclusion:

[21] To repeat, the language of this exclusion is as follows:

(2)        The corporation shall not indemnify an insured for liability imposed by law for injury, death, loss or damage arising directly or indirectly, out of the operation of attached equipment at a site where the attached equipment is being operated, unless the attached equipment …

[22] ICBC’s position is that anywhere the crane is being used to load or unload cargo from the truck, or to move other loads, is “a site where the attached equipment is being operated”.

[23] This proposition is at odds with the presumption against tautology.  All words in a provision are to be taken to have meaning.  To interpret this clause as ICBC would, that whenever the crane is being operated it is at a site, effectively strikes out or renders superfluous the words “at a site where the attached equipment is being operated”.

[24] A plain reading of s. 72(2) leads to the conclusion that some losses from the operation of the attached equipment would be covered by ICBC.  Otherwise, the clause “at a site where the attached equipment is being operated” is meaningless.  The appellant argues in effect “everywhere” and “every time” the crane is operated it is at a site.

[25] If that were the case, then s. 72(2) would simply have read as follows:

(2)        The corporation shall not indemnify an insured for liability imposed by law for injury, death, loss or damage arising, directly or indirectly, out of the operation of attached equipment …

[26] To give meaning to the words “at a site where the attached equipment is being operated” requires that “site” refer to something more, such as work sites or the site of the owner’s business operations.  The appellant has not raised an alternative meaning or function that would not render the words “at a site” meaningless or superfluous.

[27] In accordance with the principles of interpretation for statutes and insurance policies, the clause means that the automobile insurance policy covers accidents caused by the attached equipment unless it was being used for business operations at a work site.  That was no doubt the intent of the drafters, namely to exclude losses arising from business operations.

[28] On the appellant’s interpretation the only time the vehicle would not be at a site, and the exclusion would not apply, would be when the truck and crane were in transit from place to place.

[29] Such an interpretation is not consistent with the reasonable expectations of the parties and if it had been intended, could have been achieved by much simpler and concise language directed to that end.

[30] I agree with the learned trial judge that the plain meaning of the words used in s. 72 is that the words “at a site where the attached equipment is being operated” mean, a site such as a construction site, a building site, or some other “work site”.