An insurer could be entitled to freeze legitimate settlement funds if the insured was engaged in fraudulent activity against the insurer in an unrelated claim.
A Provincial Motor Vehicle Insurer ("ICBC") was required to pay an insured $200,000 for a legitimate insurance claim. ICBC discovered that the insured brought a fraudulent claim after the occurence of the legitimate claim. ICBC brought an application by for a Mareva injunction against the Insured to freeze the settlement of the actual claim. The application was denied on the basis that ICBC did not establish that the funds would be dissipated prior to the resolution of the fraudulent claim.
Here is the case citation: Insurance Corp. of British Columbia v. Patko  B.C.J. No. 1141. British Columbia Supreme Court. Fisher, J. February 15, 2007.
ICBC sought an order enjoining itself from paying $200,000 in settlement funds to the Insured in accordance with a settlement agreement reached on January 15, 2007. This settlement was in respect of a motor vehicle accident that had occurred in August 1986. ICBC claimed that the Insured had committed fraud with respect to a subsequent single-car accident that occurred on January 5, 2005 and brought an action against the Insured in this regard.
In the fraud action ICBC alleged that the Insured and his uncle had made false statements concerning who was driving the vehicle at the time of the 2005 accident. A little more than a year after that accident, it became clear that the Insured had lied when he stated that his uncle had been driving the vehicle. Prior to learning of the Insured’s alleged "fraud", ICBC had paid out approximately $55,800.00 and therefore sought indemnity from the Insured for this amount, and punitive damages of up to $100,000.
The issue before the Court was whether a Mareva injunction should be issued to prevent the Insured from receiving all or part of the settlement funds in respect of the earlier accident. The primary questions were whether the nature of the alleged fraud was sufficiently serious to place it within the fraud exception to the general rule prohibiting pre-judgment execution and whether the evidence supported an inference that the Insured would likely dissipate the funds. The Court considered its general jurisdiction to grant an injunction under s. 39(1) of the Law in Equity Act and noted that in order to obtain a Mareva injunction the plaintiff must demonstrate that it has a strong prima facie case [of fraud], and also that there is a real risk of assets being dissipated before judgment is obtained.
While the Court noted that the alleged fraud by the Insured was serious and could not be countenanced, it was distinguishable from the fraudulent conveyances cases on which ICBC relied as it did not involve the complex taking of property. The Court found that the Insured’s lies and misleading statements only suggested that the Insured was a dishonest person who could not be trusted. This was not sufficient to support an inference of a real risk that the asset would be dissipated such that ICBC’s attempts to realise on any judgment it might obtain would be frustrated.
The Court ultimately concluded that there was no factual basis for it to grant a Mareva injunction in the nature of pre-judgment execution and, further, that it would not be just and equitable in the circumstances to do so.