More than you bargained for -
The effect of British Columbia’s Universal Automobile Insurance on American, and other out-of-Province, Insurance Policies
1. INTRODUCTION
When motorists venture into the Province of British Columbia they may have more insurance than they or their insurer ever imagined. Non resident motorists travelling in British
Columbia could be entitled to British Columbia’s $200,000 third party liability minimum regardless of the coverage provided in their automobile insurance policy.
In addition, if the motorist is injured in a motor vehicle accident while in the Province their insurer could be required to pay British Columbia’s statutory first party benefits which consist of unlimited first party wage replacement benefits, $1,000,000 underinsured benefits and
$150,000 medical and rehabilitation benefits.
Finally, insurers are unable to subrogate for any proceeds paid through a policy of automobile insurance in British Columbia.
2. NATURE OF AUTOMOBILE INSURANCE MANDATED IN BRITISH COLUMBIA
Since 1974 automobile insurance in British Columbia has been governed by the Insurance (Motor Vehicle) Act and the Regulations enacted under the Act. This legislation introduced a universal compulsory automobile insurance scheme to British Columbia (the "BC’s
Autoplan"). The Insurance Corporation of British Columbia ("ICBC") was created to operate the scheme. Insurance was made compulsory by requiring every owner of a licensed motor vehicle to purchase basic automobile insurance from ICBC. Basic automobile insurance includes minimum third party liability limits of $200,000; and first party benefits including: total disability benefits that could extend for an insured’s full working life expectancy, death benefits, underinsured, uninsured motorist protection of $1,000,000, and hit and run motorist protection, and $150,000 for medical and rehabilitation expenses ("Basic Autoplan Insurance"). Benefits paid pursuant to automobile insurance in British Columbia cannot be subrogated. Section 25 of the Insurance (Motor Vehicle) Act stipulates that benefits payable to a plaintiff injured in a motor vehicle accident are deductible from any damages awarded to the plaintiff. The effect of this provision is that insurance benefits paid to an insured cannot be recovered in the underlying tort action. Therefore benefits paid to an insured under their automobile insurance policy cannot be subrogated because the insured cannot recover from the
tortfeasor.
Although ICBC operates the BC’s Autoplan and provides Basic Autoplan Insurance, other insurance companies are able to supplement Basic Autoplan Insurance with private insurance. This consists mainly of vehicular damage and supplemental third party legal liability benefits. Before ICBC was created automobile insurance in British Columbia was governed by Part 7 of the Insurance Act.
Although the Insurance Act has essentially no application to ICBC, it applies to every other insurance company who provide automobile insurance to British Columbia drivers or is licensed to sell automobile insurance in British Columbia. Section 228(9) of Part 7 of the Insurance Act stipulates that an insurer that issues motor vehicle liability insurance outside of British Columbia shall file with the Superintendent of Insurance a Power of Attorney and Undertaking ("PAU").
3. POWER OF ATTORNEY UNDERTAKINGS
The initial wording of the PAU was determined by the Superintendent of Insurance in 1964. Insurers file the PAU with the Superintendent of Financial Institutions. The 1964 PAU reads as follows:
A. To appear in any action or proceeding against it or its insured in any province or Territory in which such action has been instituted and of which it has knowledge; B. That upon receipt from any of the officials aforesaid of such notice or process in
respect of its insured, or in respect of its insured and another or others, it will forthwith cause the notice or process to be personally served upon the insured; C. Not to set up any defence to any claim, action, or proceeding, under a motor-vehicle
liability insurance contract entered into by it, which might not be set up if the contract had been entered into in, and in accordance with the law relating to motor-vehicle liability insurance contracts of the Province or Territory of Canada in which such action or proceeding may be instituted, and to satisfy any final judgment rendered against it or its insured by a Court in such Province or Territory, in the claim, action, or proceeding, up to
(1) the limit or limits of liability provided in the contract; but
(2) In any event an amount not less than the limit or limits fixed as the minimum for which a contract of motor-vehicle liability insurance may be entered into in such Province or
Territory of Canada, exclusive of interest and costs and subject to any priorities as to bodily injury or property damage with respect to such minimum limit or limits as may be fixed by the Province or Territory.
The impact of the 1964 PAU on first party benefits contained in Basic Autoplan Insurance was
considered by the British Columbia Court of Appeal in Shea v. Shea (1995) 66 B.C.L.R. 92 (BCCA). Mr. Shea lived in the Province of Manitoba and had insured his motor vehicle in Manitoba. He drove his vehicle into British Columbia and was involved in a motor vehicle accident in which his son was seriously injured. The son was entitled to benefits under his father’s automobile insurance policy.
In addition, the son commenced a tort action against his father for compensation for injuries suffered in the accident. He received a substantial judgment. The benefits that the son
received from his father’s automobile insurance were deducted from the tort award pursuant to section 25 of the Insurance (Motor Vehicle) Act. The court then had to determine whether the son was entitled to the benefits stipulated in the policy of automobile insurance purchased in Manitoba, or the benefits required under British Columbia’s Basic Autoplan Insurance.
Although Mr. Shea’s automobile was insured by an out-of-province insurer who did not normally operate in British Columbia, the insurance company had filed the 1964 PAU with the Superintendent of Insurance in British Columbia. The British Columbia Court of Appeal ruled that the 1964 PAU did not impose a requirement on the out-of-province insurer to provide no-fault benefits required by BC’s Autoplan, and that Basic Autoplan Insurance would not be read into an automobile policy issued in another jurisdiction. Therefore the son was only entitled to benefits as stipulated by the Manitoba insurance policy. Since these benefits were deducted from the tort award, no right for subrogation existed for the Manitoba insurance company.
This issue was considered in other provinces in Canada,and reconsidered by the British Columbia Supreme Court and the British Columbia Court of Appeal. These subsequent decisions led to uncertainty with respect to the scope of the 1964 PAU. It was generally felt that Shea had been effectively overturned and that the 1964 PAU would be interpreted by British Columbia’s courts as requiring out-of-province insurers to provide Basic Autoplan Insurance to people insured by their policies in British Columbia.
Although there was uncertainty as to whether the 1964 PAU applied to first party benefits, the law is clear that the 1964 PAU applied to third party liability limits. Therefore, out-of- province automobile insurers who are signatories to the 1964 PAU will have the Basic Autoplan Insurance third party liability limit of $200,000 read into their insurance policies for accidents that occur in British Columbia regardless of what the limits are in the contract of insurance.
Uncertainty over the scope of the 1964 PAUs was recently resolved by the British Columbia Court of Appeal in Batchelder v. Filewich [2004] B.C.J. No. 149 (BCCA). Batchelder directly addressed the decisions which had raised uncertainty over Shea and concluded that an out-of- province insurer, who was a signatory to the 1964 PAU, was not responsible for providing Basic Autoplan Insurance as required by BC’s Autoplan.
4. THE NEW POWER OF ATTORNEY UNDERTAKINGS
The Government of British Columbia redrafted the 1964 PAU in 1988, largely in an attempt to circumvent the court’s interpretation of Shea and impose British Columbia’s Basic Autoplan Insurance onto out-of-province automobile insurance policies. The 1988 PAU reads as follows: C. Not to set up any defence to any claim, action, or proceeding, under a motor-vehicle
liability insurance contract entered into by it, which might not be set up if the contract had been entered into in, and in accordance with the laws relating to motor vehicle liability insurance contracts or plan of automobile insurance of the Province or Territory of Canada in which such action or proceeding may be instituted, and to satisfy any final judgement rendered against it or its insured by a Court in such province or Territory, in the claim, action, or proceeding, in respect of any kind of class of coverage provided under the contract or plan and in respect of any kind or class of coverage required by law to be provided under a plan or contracts of automobile insurance entered into in such Province or Territory of Canada up to the greater of
a. the amounts and limits for that kind or class of coverage or coverages provided in the contract or plan, or
b. the minimum for that kind or class of coverage or coverages required by law to be provided under the plan or contracts of automobile insurance entered into in such province or Territory of Canada, exclusive of interest and costs and subject to any priorities as to bodily injury or property damage with respect to such minimum amounts and limits as may be required by the laws of the Province or Territory.
[emphasis added]
The 1988 PAU was interpreted by the British Columbia Supreme Court in Diotte (Gaurdain ad litem of) v. ICBC [2000] B.C.J. No. 2476 (BCSC). The court noted that once the out-of-province insurer files the 1988 PAU, any automobile insurance issued by the insurer will be considered to be a contract of insurance issued in British Columbia when the vehicle is in British Columbia. All automobile insurance policies issued in British Columbia are required to provide Basic Autoplan Insurance as stipulated by BC’s Autoplan regardless of the wording of the policy.
Therefore, when an insurance company files the 1988 PAU with the Superintendent of Financial
Institutions, the insurer has made an election to opt into BC’s Autoplan and, as such, creates enforceable rights and obligations. The out-of-province insurer is then required to pay Basic Autoplan Insurance benefits required by BC’s Autoplan to their insureds, despite the fact that the benefits were not included in the issued contract of insurance. This interpretation is consistent with how the 1988 PAU has been interpreted in Ontario, another Canadian Province, and by the Supreme Court of Canada in Unifund Assurance Co. v. ICBC
2003 SCC 40.
Although the 1988 PAU has been in force for over 16 years, the Financial Institutions Commission of British Columbia has not required signatories of the 1964 PAU to execute and file the 1988 PAU. The process of updating the 1964 PAU to the 1988 PAU has been instituted by requiring all new signatories to file and execute the 1988 PAU. Therefore, it is imperative that counsel determine which version of the PAU, if any, has been filed in British Columbia in order to assess whether Basic Autoplan Insurance applies to the out-of-province policy of insurance. The short answer is that both the 1964 and the 1988 PAU create third party liability insurance limits of $200,000; but only the 1988 PAU create an obligation to provide Basic Autoplan Insurance benefits.
One additional consideration that must be made is to determine whether the insurance company has obtained an authorization to carry on insurance business in British Columbia. Although most American insurance companies do not sell automobile insurance in British Columbia; the companies that are
authorized to sell automobile insurance in British Columbia are subject to the Financial Institutions Act; and, more specifically, the Motor Vehicle Liability Insurance Regulation. The Motor Vehicle Liability Insurance
Regulation has arguably the same effect that the 1988 PAU, and Basic Autoplan Insurance would likely be read into the out-of-province automobile policy. It is important to note that this would occur even if the insurer has not filed a PAU with the Superintendent of Financial Institutions.
1. CHOICE OF JURISDICTION
Noteworthy is the fact that both the 1964 PAU and the 1988 PAU only apply if the lawsuit is brought in British Columbia. The effect of this provision was noted by the British Columbia Court of Appeal in Marchand v. A.M.A. (1994) 89 B.C.L.R. (2d) 253 (BCCA). Marchand involved a person who was insured by an out-of-province automobile insurance policy who was injured in British Columbia, and commenced a claim to recover benefits under his policy of insurance in British Columbia. The insurer brought a motion to have the action stayed and tried in its jurisdiction on the basis that the plaintiff was simply forum shopping and
commenced his action in British Columbia because so that he could obtain British
Columbia’s Basic Autoplan Insurance, which contained benefits that were substantially more than the benefits in the insurance policy that he purchased from A.M.A.
The British Columbia Court of Appeal noted that if the insured had commenced his action for benefits under his policy of insurance in his own jurisdiction he would have been entitled to $5,000 in first party benefits contained in the policy. However, by commencing the action in British Columbia he was entitled to Basic Autoplan Insurance, worth approximately $150,000. With respect to the forum shopping argument, the Court of Appeal noted that a strong degree of deference should be provided to the exercise of judicial discretion in this type of application. Since there was some factual basis supporting the chambers judge’s decision that British Columbia had the "natural" or "real and substantial" connection with the action, it would be inappropriate to overturn the decision. The action was allowed to continue in
British Columbia, and the insured was granted the Basic Autoplan Insurance benefits.
The basic rule is that an insured whose automobile insurance policy provides less than British Columbia’s Basic Autoplan Insurance benefits will be able to obtain additional coverage by commencing an action for payment of their first party benefits in British Columbia. The determination of whether British Columbia is an appropriate forum for a lawsuit involving a non-resident injured in British Columbia but insured by an out-of-province insurer falls largely within the discretion of the chambers judge.
The lesson for out of province automobile insurers is that it is to their benefit to obtain a judicial determination of their insured’s entitlement to benefits in their own jurisdiction. Where an insured is injured in British Columbia an out-of-province automobile insurer may want to consider a pre-emptive application in their jurisdiction to determine their insured’s entitlement to benefits.
2. CONCLUSION
The determination of whether an out-of-province automobile insurer will be subject to British Columbia’s compulsory automobile insurance scheme depends largely on whether the insurer is a signatory to the 1964 PAU or the 1988 PAU. If the insurer is a signatory to the 1988 PAU it is likely that the automobile
insurance policy would be interpreted as including Basic Autoplan Insurance required by BC’s Autoplan in British Columbia.
If an insurer is a signatory to a PAU filed in British Columbia one should carefully consider the jurisdiction in which the determination of entitlement to benefits under their policy of insurance is decided, and if this determination should be made before an insured receives judgment for damages suffered in a motor vehicle accident. For example, if an insured is injured in an automobile accident in British Columbia, it might be prudent to seek a declaration from a court outside of British Columbia to determine the insured’s
entitlement to benefits before a tort award is made in British Columbia. This might help insulate an insurer from becoming liable for payment of first party benefits contained in Basic Autoplan Insurance required by BC’s Autoplan in the tort action.
