Insurance Corp. of British Columbia v. Schmidt,  B.C.J. No. 2892, British Columbia Supreme Court
On April 13, 1998, Mr. Schmidt was driving his car allegedly while intoxicated. Mr. Schmidt struck Mr. Neumann and injured him. Mr. Neumann sued Mr. Schmidt alleging negligence (the “Neumann Action”). Mr. Schmidt had automobile insurance through the Insurance Corporation of British Columbia (“ICBC”). ICBC breached Mr. Schmidt for driving while he was intoxicated but defended the Neumann Action pursuant to section 20 of the Insurance (Motor Vehicle) Act. Section 20 provided ICBC with a right to contest liability as if it were a defendant in the Neumann Action. On December 22, 1998, ICBC settled the Neumann Action for $67,500. A Consent Dismissal Order endorsed by counsel for Mr. Neumann, Mr. Schmidt and ICBC, was entered on January 18, 1999.
Mr. Schmidt was convicted under section 253(a) of the Criminal Code of Canada for operating a motor vehicle while impaired. ICBC commenced an action against Schmidt for the proceeds it had paid under its policy of insurance to Mr. Neumann for damages arising from the Neumann Action pursuant to section 21(6) of the Insurance (Motor Vehicle) Act. Section 21(6) states:
… 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 by action in court.
Mr. Schmidt refused to pay ICBC on the basis that the Neumann Action had been resolved with a Consent Dismissal Order that stated that Mr. Schmidt was not responsible for the accident. The Court noted that this issue had been considered by the British Columbia Court of Appeal in ICBC v. Joseph (1989), 36 B.C.L.R. (2d) 248 (C.A.). In Joseph, ICBC denied liability to indemnify its insured, who had been operating a motor vehicle, but paid funds to a person who had been injured by the driver. The action commenced against the driver was terminated through a Consent Dismissal order. ICBC sought to recover the payment from the driver. The driver sought to rely on issue estoppel arising from the dismissal order. Madam Justice Southin noted that the doctrine of estoppel had no application in this situation. ICBC settled the action as it was entitled to do under section 21. The dismissal order merely brought an end to the claim by the other driver. The issues in the action that ICBC commenced against Mr. Schmidt were whether the conditions in section 21(6) of the Insurance Motor Vehicle Act had been satisfied.
The trial judge determined that there was no principal basis for distinguishing the facts surrounding Mr. Schmidt’s situation from ICBC v. Joseph. The issue to be decided was whether ICBC had met the terms of section 21(6) which would give it the right to recover against Mr. Schmidt for funds paid pursuant to the Neumann Action, where the settlement was reasonable and effected by ICBC in good faith. The trial judge noted that ICBC had considered responsibility for the accident and conducted an investigation. The investigation included obtaining photographs of the scene, a collision analyst’s investigation report and statements. ICBC considered the evidence and quantum of Mr. Neumann’s claim, including his broken femur, fractures of both ankles and a head injury. Upon considering the evidence, the court determined that the settlement obtained by ICBC was reasonable and that Mr. Schmidt was liable to compensate ICBC for funds paid pursuant to section 21(6) of the Insurance (Motor Vehicle) Act.
To stay current with the new case law and emerging legal issues in this area, subscribe here.