Canada Insurance Lawyer & Attorney : Michael Thomas of Harper Grey Law Firm : British Columbia, Vancouver

Every so often an issue arises in personal injury cases as to whether the services provided by a physician or hospital can be claimed by a plaintiff in a personal injury claim. It is important to identify whether a plaintiff has the legal right, or obligation, to claim for the expense of services they have received, whether in the context of a doctor’s office or a hospital. Such a right or obligation could significantly increase the value of the award provided to a plaintiff and therefore provide an incentive to lawyers working under a contingency fee arrangement to always include such a claim. In addition, if the Plaintiff is legally required to claim for these benefits they may be deducted from any award of settlement regardless of whether they were recovered in the action.

In British Columbia, there are issues arising under the Medical Services Plan as well as the Hospital Insurance Act,R.S.B.C. 1996, c. 204. With respect to the Medical Services Plan, there does not appear to be a statutory right of subrogation for MSP expenses. The other way that the benefit could be claimed if it was characterized as private insurance. This issue was addressed, in a different context, in Wallace Estate v. Taylor, [1990] B.C.J. No. 2825 (S.C.) (QL), varied [1992] B.C.J. No. 2154 (C.A.) (QL). In Wallace, the plaintiff, an injured elderly citizen of the United States, had claimed special damages reflecting medical?related expenses that were paid for by, or reimbursed by, an American “MediCare” plan and a “Cigna” policy issued under her husband’s employment. The MediCare plan was an American statutory health insurance program under which the plaintiff became entitled to benefits at the age of 65 without having to pay a premium. The trial judge noted, at p. 9, that, “Medicare paid $19,352.28 to or on the Plaintiff’s behalf and it claims a right of subrogation in that amount which claim is advanced by the Plaintiff.” After referring to the then recent decision of the Supreme Court of Canada in Ratych v. Bloomer, the trial judge provided the following comments:

Neither of the Medicare or the Cigna claims involve wages or wage benefits.  Both are in the nature of insurance, that is, their purpose e [sic] harmless the Plaintiff from expenses incurred.  Falling as they do in that category, Ratych does not dictate deduction but it does recognize the principle that the measure of damages should be the Plaintiff’s actual loss.

A well?established exception to that principle is that proceeds of an insurance policy, the premiums for which were paid by a Plaintiff, are not deductible from damages.  Is that exception available to the Plaintiff here to support her claim?  Neither one of the schemes was put in place by the Plaintiff nor did she pay any premiums.  With respect to the significance of the nonpayment of premiums for a policy of insurance McLachlin J. said in Ratych at p. 16:

I also accept that if an employee can establish that he or she directly paid for a policy in the nature of insurance against unemployment, equivalent to a private insurance, he or she may be able to recover the benefits of that policy, although I would leave resolution of this question for another case.

Medicare is a statutory scheme which became available to the Plaintiff when she reached age 65.  As such it does not qualify, in my view, as an exception to the principle.  The amount of $19,352.28 paid by Medicare is deductible.

This part of the decision was not disturbed on appeal and indicates that our court will not allow a claim for expenses paid under MSP benefits to be collected in a tort action.

Finally, with respect to MSP expenses, the case of Semenoff (Committee) v. Kokan, [1991] B.C.J. No. 2674 (C.A.) (QL), is an example of a court “deducting” these expenses because they were not actually incurred to the detriment of the injured plaintiff. In this medical negligence action, the plaintiff tried to claim the amount of $29,135.15 that was paid by the Medical Services Commission for medical services rendered to the plaintiff. The Court noted that the plaintiff was not “under any obligation to the doctors to pay them for their services nor under any initial obligation to the Medical Services Plan to reimburse it for these costs” (at p. 4). The determination of the recoverability of this money was important because if recoverable by the plaintiff then there was a provision at the time in the Regulation to the Medical Service Act that gave the Medical Services Commission a subrogated right of recovery against the tortfeasor. The Court of Appeal relied on three cases dealing with hospital fees in the context of the Hospital Insurance Act, all discussed in the next paragraphs of this paper, and concluded that the plaintiff had not suffered a compensable loss because he was under no obligation to pay the amounts that were incurred for his care. Therefore, the Medical Services Commission would not have a subrogated right of recovery because they were only subrogated to people with a “right of action…”.

In British Columbia, the issue of hospital expenses is more complicated because of legislative intervention.  A right of action for the injured plaintiff, and a right of subrogation for the government, was created in 1950 with s. 34B, which eventually became s. 25 of the Hospital Insurance Act, R.S.B.C. 1996, c. 204. The present section, which has changed minimally since 1950, but which has not been enacted, provides:

25 (1)  If, as a result of the wrongful act or omission of another, a beneficiary suffers personal injuries for which the beneficiary receives hospital services paid for by the government, the beneficiary has the same right to recover the sum paid for the services against the person guilty of the wrongful act or omission as the beneficiary would have had, had the beneficiary been required to pay for the services personally.

(2)  On the beneficiary recovering the sum or part of it under subsection (1), the beneficiary must pay it at once to the minister.

(3)  The minister may order that a commission be paid for money recovered under subsection (1) and the amount of the commission and the conditions under which it may be paid must be in accordance with the rules prescribed by the Lieutenant Governor in Council.

(4)  The government is subrogated to the rights of the beneficiary to recover sums paid for hospital services by the government, and an action may be maintained by the government, either its name or the name of the beneficiary, for the recovery of the sum paid for hospital services as provided in subsection (1).

(5)  It is not a defence to an action brought by the government under subsection (4) that a claim for damages has been adjudicated on unless the claim included a claim for the sum paid for hospital services, and it is not a defence to an action brought by a beneficiary for damages for personal injuries that an action taken by the government under subsection (4) has been adjudicated on.

(6)  No release or settlement of a claim or judgment based on a cause of action for damages for personal injuries in a case where the injured person has received hospital services paid for by the government is binding on the government unless the minister or a person designated by the minister has approved the settlement in writing.

(7)  The Lieutenant Governor in Council may, by regulation, limit or define the circumstances that give rise to a cause of action under this section.

(8)  This section applies to claims for hospital services arising after a day to be set by the Lieutenant Governor in Council.

I will repeat again that this legislation is not in force. Over the last 57 years a date has still not yet been set by the Lieutenant Governor in Council. The legislation is not in force. Other Canadian provinces have provisions in place providing rights of subrogation for the government to recover hospital expenses from tortfeasors. For instance, the cases of Matt (Litigation Guardian of) v. Barber, [2002] O.J. No. 3171 (S.C.J.) (QL) and Scanes v. Dantillo, [2003] O.J. No. 2863 (S.C.J.) (QL) considered the Ontario provisions respecting subrogated actions for hospital expenses and in Foley?Cornish v. Nabors Drilling Ltd., 2007 ABQB 250, [2007] A.J. No. 433 (Q.B.) (QL), the Court considered the subrogation provision in the Hospitals Act, R.S.A. 2000, c. H?12.  The healthcare providers in these jurisdiction will expect to be compensated for the funds that they have paid on behalf of a plaintiff. This can raise issues of conflict, and issues of responsibility for payment of contingency fees.

One of the first cases to consider this unique position in British Columbia is Flaherty v. Hughes, [1952] 4 D.L.R. 43 (B.C.C.A.) where the injured plaintiff, in a medical negligence action, attempted to claim for $429 paid by the Vancouver General Hospital for services provided to him. At the time, everyone in British Columbia was required to pay a premium for hospital coverage. The Court of Appeal referred to the case of Schaeffer v. Mish, [1950] 4 D.L.R. 648 (Sask. C.A.) wherein their Court of Appeal refused to allow the plaintiff to claim for hospital expenses because he had not paid them. A majority of our Court of Appeal relied on the rationale in that case and concluded that the plaintiff was not entitled to claim for the amount incurred in hospital fees. Sloan, C.J.B.C. provided the following comments:

It seems somewhat unjust that the negligence of the defendant should result in an added burden being placed upon the Hospital Insurance Fund and that he should thus escape the full consequences of his fault. But that is a matter of legislative intervention as contemplated by s. 34B [enacted 1950, c. 29, s. 27] of the said Act, not yet in force.

A similar conclusion was reached in Wipfli v. Britten (1985), 56 B.C.L.R. 273 (C.A.) in the context of a future care award, and in Heltman v. Western Canadian Greyhound Lines Ltd. (1996), 57 W.W.R. 449 (B.C.C.A.).

It is the understanding of these writers that the delay in respect of s. 25 of our Hospital Insurance Act is due, in large part, to an understanding between certain insurers and the Ministry of Health. This written statement, often referred to as the “Gentlemen’s Agreement”, outlines the understanding between certain insurers and the government that in exchange for avoiding the situation envisioned in the other provinces and in s. 25 of the Hospital Insurance Act, the insurers will compensate the government for certain expenses. For instance, in situations where an award does not exhaust the policy limits, the insurer will compensate the government for hospital expenses up to the amount of their policy limits.

It is clear that s. 25(1) of our Hospital Insurance Act, if it comes into force as contemplated in s. 25(8), would make the hospital expenses recoverable as part of the injured person’s tort claim for the benefit of the government. Further, aside from the issue of whether the private insurance exception would apply, the fact that a right of subrogation is given to the government would seem to preclude a deduction of the amount of publicly?funded hospital expenses.

In British Columbia in an action involving a motor vehicle accident the benefits are not claimable. Section 88(6) of the Insurance (Vehicle) Act specifically states that these benefits are not claimable from the Insurance Corporation of British Columbia.

Cameron Lougheed was a passenger in a vehicle in which the driver lost control, resulting in an accident that killed Mr. Lougheed. The vehicle was insured by Co-operators General Insurance Co. under a policy issued in Alberta, where the driver resided. Under its terms, coverage for third party liability was limited to $500,000.00. Mr. Lougheed's sons obtained Judgement and proceeded to an underinsured motorist's protection arbitration to determine their entitlement to benefits. Although $1,000,000.00 of underinsured motorist protection coverage is mandatory in British Columbia, Mr. Lougheed's sons claimed that they were each entitled to $1,000,000.00 of underinsured motorist protection coverage under the British Columbia legislation, as opposed to $1,000,000 in total. The trial Judge determined that if Mr. Lougheed had survived, he could have recovered no more than $1,000,000.00 underinsured motorist protection for his injuries, and that his sons were therefore limited to the $1,000,000.00 underinsured motorist protection that Mr. Lougheed was entitled to, not $1,000,000.00 each. The matter was appealed to the British Columbia Court of Appeal.

The underinsured motorist protection is found in Part 10, Division 2 of the Revised Regulation (1984) under the Insurance (Motor Vehicle) Act, B.C., Reg, 447/83 promulgated under the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231 [now the Insurance (Vehicle) Act]. At the date of the accident, the limit of coverage for underinsured motorist protection was $1,000,000.00 per insured person. The issue to be determined by the trial Judge was that the insured person was Mr. Lougheed as opposed to Mr. Lougheed's sons (as well as his spouse). The Court of Appeal noted that the action brought by Mr. Lougheed's sons, and his spouse, was a Family Compensation Act action, and as such the action had to be commenced by the personal representative of Mr. Lougheed on behalf of all the beneficiaries. The key to the Family Compensation action was that the action must be treated as a single cause of action brought on behalf of all Mr. Lougheed's beneficiaries. The Court determined that the "insured" referred to in the Regulations must be the personal representative who is the individual entitled, either directly or indirectly, to maintain a Family Compensation action as a result of the death of Mr. Lougheed, and not each of the beneficiaries. The British Columbia Court of Appeal dismissed the Appeal, and upheld the trial Judge's finding that the beneficiaries were entitled to a total of $1,000,000.00 in underinsured motorist protection coverage.  

The Plaintiff was seriously injured in a motor vehicle accident. The Plaintiff entered into a “BC Ferries” settlement with one Defendant. The Plaintiff subsequently amended his statement of claim in accordance with B.C. Ferries Corporation v. T&N plc, [1995] B.C.J. No. 2116. The Insurance Corporation of British Columbia (“ICBC”) argued that it should have access to the settlement amount to assist with negotiations and to prevent double recovery. The Plaintiff argued the amount should only be disclosed after judgment and the apportionment of liability.

The Court found that settlements are generally confidential, but there are exceptions to this general rule. The Court found that ICBC had failed to meet the requirements of relevance and necessity to bring itself within this rule, and dismissed the application on the understanding that there was no objection to the disclosure of the amount after judgment and the apportionment of liability

At trial, a judge held that a deduction for income replacement benefits was to be made from the global award, prior to the application of the deduction for contributory negligence. 

The Ontario Court of Appeal disagreed, and held that on a plain reading, section 267(1) of the Insurance Act, which provided for the reduction of the “damages awarded to a person” must mean the amount actually awarded, not the quantum of the total damages assessed before the application of contributory negligence.

The Plaintiff brought an application to amend its Statement of Claim seeking damages for business interruption; mental distress on behalf of the corporate directors; and punitive damages for loss of reputation and loss of business incurred by the Plaintiff corporation. In the underlying action, the Plaintiff, 539091 Ontario Ltd. (c.o.b. Len’s R.V. Sales) ("Len’s R.V. Sales") sued its insurer, Allianz Insurance Co. of Canada ("Allianz") alleging bad faith after a fire broke out at the corporate premises. Mr. and Mrs. Ager were the shareholders and directors of the Plaintiff Len’s R.V. Sales.

The Defendant, Allianz opposed the amendments on the following grounds: counsel for the Plaintiff had already confirmed there would be no claim for business interruption loss which constituted an admission that should not now be withdrawn by the amendment; the corporation’s directors were not named insureds and therefore did not have any claim under the insurance policy; and a claim for punitive damages had already been pleaded in the Statement of Claim.

The first issue was whether the statement by Plaintiff’s counsel that there would be no claim for business interruption loss constituted an admission. Plaintiff’s counsel submitted the statement, contained in a letter following a request made at an examination for discovery, was not an admission as it was not made by Mr. and Mrs. Ager, the company’s shareholders. The Court found that the solicitor’s statement constituted an informal admission that was not binding on the Plaintiff who gave it. The Defendant would not suffer prejudice if the admission was withdrawn and the amendment was permitted.

The second amendment sought was to add a claim for damages for the mental distress of Mr. and Mrs. Ager caused by the nature of the claim and the handling of it by the Defendant insurer. The Defendant argued that this claim was not tenable at law because the shareholders were not named as insureds under the Policy. The Court found that Mr. and Mrs. Agers were not named insureds under the Policy. However, it could not be said that there was no contractual nexus between the Agers and the insurer given the limited scope of coverage extended to officers and shareholders. Whether it is sufficient to ground the duty of care is an issue that should be left for trial to be decided on a full evidentiary record.

 Accordingly, the Plaintiff was granted leave to amend its Statement of Claim to seek damages for mental distress on behalf of the Agers as officers of the Plaintiff corporation.

The Testator willed his land and cottage to one of his children and her husband and the rest of his estate to another group of heirs.   He died in the fire that damaged the cottage.

The Fire Investigator had provided a report in which he concluded that the Testator died from smoke inhalation before the cottage was substantially damaged.   The Executrices of the will of the Testator applied for directions as to whether the heirs of the estate or the heir of the interest in the cottage  were entitled to the insurance proceeds for the damaged cottage.

The Court held that, based on the evidence of the Fire Investigator, it appeared the Testator died before there was any substantial damage to the cottage. Consequently, the cottage passed to the personal representative of the deceased, with the beneficial interest to the heirs of the estate at the time of his death.  As the "substantial damage" occurred after the "legal" and "beneficial title" had passed, the insurance proceeds were likewise payable to the heirs that had an interest in the cottage as opposed to the estate.

The Claimant Strata Corporation brought an action against the owners of an individual strata unit (the "Owners") for damage caused by a burst water pipe. The failure was due to high acid levels in the local water and not to any negligent act or omission by the Owners.

The cost of the repairs was approximately $3,700, which was less than the $10,000 deductible in the insurance policy held by the Strata Corporation. The Strata Corporation accordingly looked to the Owners for the cost of repairs. The owners had a household insurance policy with the Insurer, which provided a limit of $2,500 in respect of liability of a strata owner for an assessment in respect of any insurance deductible of the Strata Corporation. This amount was paid by the Insurer to the Strata Corporation in partial settlement of the claim. The Strata Corporation then sought to recover the balance of the claim ($1,287.80 plus costs) from the Owners.

The same household policy held by the Owners provided that, upon payment of a $500 deductible by the Insureds (i.e. the Owners), the Insurer would pay for the remaining property damage for which the Insureds were found to be "responsible". The trial judge considered whether it could be said that the Owners were "responsible for the loss or damage" and answered this question positively. In particular, her honour held that because the Owners had a duty to repair and maintain the premises, they were "responsible" for the loss.

She therefore ordered the Insurer to pay the Strata Corporation $787.80 on behalf of the Owners, after taking into account the $500 deductible. The Supreme Court judge upheld this decision, finding that "being responsible for the loss or damage" was not the same as being negligent.

The Insured’s vehicle collided with a tractor-trailer unit, which was illegally parked, so that it was obstructing the Insured’s path. Just prior to the collision, the Insured had attempted to pass the tractor-trailer on the driver’s side, but was unable to do so because of a vehicle approaching in the oncoming lane of traffic. The Insured’s son was seriously injured as a result of the accident and received statutory accident benefits from the insurer of the vehicle (the "First Party Insurer").

The First Party Insurer then sought indemnity for payment of these benefits from the insurer of the tractor-trailer unit (the "Second Party Insurer"). The dispute was submitted to a private Arbitrator who concluded that the Second Party Insurer was 100% responsible for the Insured’s loss pursuant to the provisions in the "Fault Determination Rules", enacted by Regulation under the Ontario Insurance Act. The arbitrator accordingly ordered the Second Party Insurer to indemnify the First Party Insurer to the extent that the latter had paid statutory accident benefits to the Insured’s son.

 It was from this decision that the Second Party Insurer appealed to the Ontario Supreme Court. In reviewing the Arbitrator’s decision, the Court held that the appropriate standard of review was that of correctness. The issue before the Court was then whether the Arbitrator had correctly interpreted and applied the Fault Determination Rules to the facts of the case. In particular, the Arbitrator had concluded that the fact situation before him was not fundamentally different from what was contemplated by Rule 17(2). This Rule essentially provides that where an automobile is illegally parked, stopped or standing when it is struck by another automobile, and if the accident occurs outside a city, town or village, the driver of the illegally parked automobile is 100 per cent at fault and the driver of the other vehicle is not at fault for the incident. The Arbitrator reasoned that while the oncoming car did play some role in the Insured’s accident, it did not change the situation so fundamentally that the Rule ought not to apply.

The Ontario Superior Court found that the Arbitrator was correct in applying Rule 17(2) to determine the respective fault of the two Insurers and dismissed the Second Party Insurer’s appeal. However, the Court disagreed with the Arbitrator’s approach and his qualification that the Fault Determination Rules ought to be applied unless the fact situation is "fundamentally different" than that contemplated by the Rules. The Court noted that, having found as a fact that the tractor-trailer was illegally parked when it was struck by the Insured’s vehicle and that the accident occurred outside a city, town, or village, the criteria of Rule 17(2) were satisfied and there was no need for further analysis.

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.

Here is an article that Kim Jakeman and I wrote on this issue in the spring of 2006:

insuranceblog.harpergrey.com/Interjurisdictional article.pdf

I have included the text of the article below.  Please note that this version of the article is unformatted.  If you would like a formatted version of the article please use the link.

More than you bargained for -

The effect of British Columbia’s Universal Automobile Insurance on American, and other out-of-Province, Insurance Policies

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.

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").

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:

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;
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;
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.

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:

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
the amounts and limits for that kind or class of coverage or coverages provided in the contract or plan, or
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.

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.

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.