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

This case involved a motion by the Defendant Insurer for a declaration of a non-suit.  The Plaintiff Insureds were a mother and her children whose home was insured by the Insurer.  After a break-in, the Insured and her children began to have health problems including skin irritations, breathing problems, and other symptoms.  The Insurer arranged for a cleaning of the home and advised the family to return home because it was safe.  The Insureds continued to have health problems and the Insurer arranged additional cleaning.  Ultimately, the Insureds moved from their home.

The Insureds brought a claim against the Insurer for breach of contract for the Insurer's failure to compensate them for items contaminated following the break-in.  The Insureds also advanced claims of equitable fraud, negligent misrepresentation, and negligence by the Insurer and its adjuster.

The Court dismissed the Insureds' claims for breach of contract and negligence on the basis that the Insureds had failed to present any evidence of the standard of care required of an insurer or its adjuster with respect to assessing a claim for chemical contamination of a home.  The Court did not dismiss the claim with respect to negligent misrepresentation and equitable fraud as there was evidence that the Insurer's adjuster advised the Insureds that their home was safe to inhabit after the initial cleaning.  There was evidence that, at that time, the cleaning had not eradicated the problems with the home.

This case was originally summarized by Cameron B. Elder and edited by David W. Pilley.

The Court of Appeal was asked to consider whether the trial judge had estimated the deduction for Part 7 benefits appropriately under the regulations to British Columbia’s Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231. Part 7 benefits apply in respect of injury or death caused by an accident arising out of the use or operation of a vehicle regardless of who is at fault in the accident. The benefits cover medical and rehabilitation costs, disability benefits, and death benefits. Part 7 benefits are deducted from any tort award.

At trial the judge had allowed a deduction for future benefits based upon trial counsel’s statement in written submissions that the Insurance Company of British Columbia (“ICBC”) would pay the full amount of the proposed deduction to the plaintiff. In allowing the appeal, the Court of Appeal held that it was impermissible for the trial judge to take into consideration counsel’s opinion of what position ICBC would take as to future claims under Part 7. The Court was clear that this was not to be taken as “suggesting evidence as to ICBC policy is not acceptable on a [Part 7 benefits] application.” Rather, it is unacceptable for the court to consider ICBC counsel’s representation as to what ICBC would cover.

This case was digested by W. Jay Havelaar and edited by David W. Pilley of Harper Grey LLP.

The Insured, a Credit Union, made a claim under its fidelity bond for the actions of one of its employees. The branch manager had removed $432,000 from a vault and granted herself and others unauthorized lines of credit and overdrafts totalling $1,445,512 and credit extensions of $223, 969. The Insurer denied the entire claim, asserting that the requirements under the dishonesty provision of the bond were not met and that the loss was excluded under the unfaithful performance exclusion of the bond because the manager claimed that she had had applied the money that she took to loans that were going into default, in order to protect the Insured from attracting the scrutiny of the authorities.

The Insured moved against the Insurer for summary judgment. The motion judge granted the motion, finding that the manager and other employees participated in a single collusive scheme that resulted in losses to the Insured, and ordered the Insurer to indemnify the Insured in the amount of 1.8 million.

On Appeal, the decision was overturned. The judge should not have decided issues of fact based on evidence that was capable of supporting more than one inference. The judge should not have made a factual finding that a single, collusive scheme had been undertaken, as this was a genuine issue for trial. The quantification of damages was also a genuine issue for trial. Lastly, the application of several exclusions and conditions in the fidelity bond, including the "Termination" exclusion and the "Notice of Loss" condition, were not considered by the judge and could form the basis for genuine issues at trial.

 The interpretation of the bond was rightly undertaken by the motion judge because it was necessary to apply the bond to determine whether there was a genuine issue for trial. However, the Court of Appeal was not persuaded that the interpretation of the bond should, after deciding that the matter should proceed to trial, be left for the trial judge to interpret on a full record. The bond's interpretation was hotly contested and the trial judge's conclusions would likely be appealed to the Court of Appeal. Deciding the contentious issue of the bond's interpretation would assist the trial judge in applying the bond's application to the evidence at trial. The "dishonesty" provision, relied on by the Insurer to deny coverage, is a coverage clause and thus should be construed broadly. It requires that, in order for coverage to apply, the loss result directly from  dishonest or fraudulent acts of an employee. Furthermore, the dishonest acts must have been committed with "manifest intent" to cause the insured to sustain the loss and with "manifest intent" to obtain a financial benefit for any person or entity or oneself. The Insurer sustains a direct loss when cash is improperly removed from its vault. This is also true when an employee presents false loan applications to the loan committee for approval because the Insured parted with money it otherwise would have kept. It is of no consequence that the Insured could later collect the money. This argument confuses the issue of whether there is a "direct loss", which is but one requirement to trigger coverage, with whether the loss, once established, can be recovered, which is a question of damages. The meaning of "manifest intent" has been considered by many American courts. It is clear that the text of the bond, by including the modifier "manifest", requires that the employee's intent to cause loss be clear or obvious or show itself plainly. It is not necessary that the employee posess knowledge that certain consequences of an act are certain to occur in order to infer "manifest intent". The employee's "manifest intent" may be established by the employee's admission as to his or her intent, or by evidence which establishes that he or she knew or was substantially certain that the loss would be the consequence of the dishonest act. Knowledge may be proved by admissions, circumstantial evidence, or a combination of the two. No matter what evidence is used, the focus of the analysis should be placed on the employee's intent in performing the very act that caused the loss, and not on some act the employee performs or plans to perform later.

 In the result, the summary judgment granted by the motion judge was set aside.

This case was originally summarized by Natasha D. Morley and originally edited by David W. Pilley.

The Defendant rented a vehicle from the Plaintiff rental car company. When he picked the vehicle up he signed a rental agreement. The Plaintiff signed the areas which indicated that he wished to decline additional insurance coverage and that he had read the entire agreement. He subsequently got into an accident and demolished the car.

The Defendant refused to pay for the damage to the vehicle and asserted that he did not understand the waiver because the rental agent hurried him through the process and did not give him an adequate explanation.

The Plaintiff commenced an action against the Defendant to recover the cost of the vehicle and then brought an application to have the matter proceed by way of summary trial. The Defendant argued that because there was conflicting evidence about the circumstances under which the agreement was signed, the matter could not be decided by way of summary trial.  The Court held that the matter could proceed by summary trial even though it would be necessary to assess the credibility of the Defendant and the rental agent to determine what the parties had understood the bargain to be at the time the contract was signed.

The Court awarded the Plaintiff the value of the damaged vehicle as well as costs. The rental agreement was standard and enforceable. The Defendant’s assertions about what occurred lacked credibility. The fact he had rented vehicles from the Plaintiff on two prior occasions and opted for the additional insurance at a cost of more than $160 each time was taken into account. The Court concluded that he would not have paid this additional amount in the past if he did not understand what it was for. The rental agent’s statements that it was her usual practice to go over the agreement with customers and that there were incentives from the company for employees who sold a lot of insurance coverage were accepted.

This case was originally summarized by Kim Yee and originally edited by David Pilley.

Mr. Teap is the only director and shareholder of Lexus Holdings in Canada. Lexus Holdings has owned three vehicles and purchased five new policies of insurance. Teap was the principal operator named on the first three policies, then a Mr. Osagie was named on the fourth, then no principal operator was designated on the fifth. This claim arose under the fifth policy. Teap had been involved in six at-fault accidents between 1995 and 2003, which resulted in him having a +130 Claim Rated Scale, which attached a 1300% surcharge to his name.

In 2005, the BMW was vandalized and ICBC concluded that it was a total loss. The actual cash value of the BMW was assessed at $32,640.00.

ICBC advised Teap that they were denying his claim as he was in breach of s.19 (1)(b) of the Insurance Act, which states that if an applicant knowingly misrepresents or fails to disclose a fact required to be stated in it, then all claims are rendered invalid and insurance money is forfeited. ICBC’s position at trial was that Teap recognized that he would pay significantly more as the declared principal operator than if none was designated. Teap’s position at trial was that he did not generally know who the principal operator was going to be and that he did not engage knowingly in a misrepresentation. Teap argued in the alternative that if it was found that he did knowingly misrepresent the information, the Court should grant relief from the forfeiture of the insurance benefits pursuant to s.24 of the Law and Equity Act.

Knowingly making a misrepresentation is a form of fraud. The standard of proof is on the balance of probabilities, and clear and quotient evidence is required. The judge referred to a number of cases that showed that speculation, suspicion or potentially unreliable evidence from a Plaintiff who sustains a loss, constitute an insufficient basis upon which an insurer may deny a claim based on fraud or a type of fraudulent misrepresentation. The Judge found that the circumstances of this case could be distinguished from those cases as Teap was not involved in the theft of this vehicle or any other physical act in relation to it. A finding that Teap knowingly misrepresented the matter of the principal operator rests entirely on an assessment of the inherent reliability and credibility of his testimony, contrasted against the facts likely known to him at the time.

The Judge found Teap to be a highly unreliable witness whose evidence shifted frequently when he considered it in his own best interest. He was evasive, cagey and outright contradictory in many of his answers, and the Court could have no confidence in any his assertions.

Teap had no other vehicles registered in his name during the insured period. Had he been declared the principal operator, he would have been required to pay $45,902.00 for insurance for the year as opposed to the $5,869.00 he paid.

The Judge was satisfied on a balance of probabilities that Teap knew he was a principal operator when he declared in his contract with ICBC that there was no principal operator and thus knowingly misrepresented the information. The burden was on ICBC to prove that Teap did not have an honest believe that there was no principal operator for the BMW and the burden was met.

In turning to consider s. 24 of the Law and Equity Act the Judge held that as it is purely discretionary, and Teap has shown a blatant disregard for his obligation to be truthful, the Judge declined to grant relief.

This case was originally summarized by Neil J. MacDonald and originally edited by David W. Pilley.

The Insured ("Pearlman") brought a claim against the Insurer ("ACI") alleging that, amongst other things, ACI had acted in bad faith, deceitfully and fraudulently in handling Pearlman's claim for medical expenses related to a motor vehicle accident which occurred in British Columbia. ACI brought a Summary Trial Application to dismiss Pearlman's Action. The Summary Trial Judge dismissed the Application indicating that there were "valid questions" concerning ACI's conduct which he was unable to answer on the material before him. ACI appealed from this decision.

The Court found that there was no evidence tendered by Pearlman in support of the argument that ACI failed to act in good faith throughout or that it acted with anything less than the requisite degree of care for Pearlman's interest in processing his claim. Similarly, there was no evidence to support the allegations of deceit, fraud, abuse of process or misrepresentation. The Court found that there was sufficient evidence to find all the facts necessary to support ACI's Application for the dismissal of the Plaintiff's Action and that it would not be unjust for the Court to dismiss the Action.

In the result, the Court allowed ACI's appeal and dismissed Pearlman's Action.

This case was originally summarized by Jonathan D. Meadows and originally edited by David W. Pilley.

The appellant was convicted criminally of arson and arson related offences in respect of an explosion and fire that destroyed his property.  He sued his insurer, the respondent, for indemnity under his insurance policy and the respondent sued the appellant for the amount it had been required to pay a mortgagee pursuant to a standard mortgage clause in the insurance contract.  Both actions were heard by chambers motion and in both case the respondent insurer was granted summary judgment on the basis that the appellant had not demonstrated that there was a genuine issue for trial and that the certificate of the appellant’s criminal conviction established a prima facie case for success by the respondent in each trial.

The appellant argued that his denial that he had anything to do with the explosion and fire established a genuine issue for trial.  The Court of Appeal disagreed, holding that while the appellant’s denial may raise a credibility issue, more was required to raise a genuine issue for trial.  The appellant’s bare denial did not raise sufficient evidence to overcome the prima facie case established by the certificate of his criminal conviction.

This case was originally summarized by jhavelaar@harpergrey.com and originally edited by dpilley@harpergrey.com

The Insured had been receiving income replacement indemnity ("IRI") benefits since 1996 as a result of injuries she suffered in a 1994 car accident.  In 2006, a senior case manager with the Provincial Motor Vehicle Insurer reconsidered the 1996 decision after reviewing information that the Insurer received in 2000 from the Insured's Canada Pension Plan ("CPP") disability benefit file.  The case manager determined that the Insured had not been capable of holding employment at the time of the accident in light of a pre-existing disability and that she therefore did not qualify for income replacement benefits in accordance with the section 105 of the Manitoba Public Insurance Act (the "Act").  This section provides that a victim who is regularly incapable, before the accident, of holding employment for any reason except age is not entitled to an income replacement indemnity or a retirement income.

The Commission allowed the Insured's appeal from the case manager's decision and ordered the Insurer to reinstate her IRI benefits from the date of their termination.  The Commission's ruling was based on four separate grounds.  First, that there was no new information upon which the decision to terminate benefits had been made.  Second, that the Insurer had not exercised due diligence in obtaining the new information and, as a result, could not rely on this information to decide the Insured's entitlement to benefits.  Third, the Insurer’s reconsideration of the 1996 decision was untimely because the Insurer had only 60 days from the date of the case manager's decision to correct an error pursuant to Section 171(2) of the Act.  Fourth, the case manager for the Provincial Motor Vehicle Insurer had correctly considered section 105 in deciding the Insured's entitlement to benefits in 1996. 

The Insurer was granted leave to appeal the Commission's decision on two questions of law, these being whether the Commission had erred in its interpretation of Section 171(2) of the Act or whether the Commission erred when it found that the principles set out in Palmer et al. v. The Queen, [1980] 1 S.C.R 759 apply to a Section 171(1) consideration of new information.

The Manitoba Court of Appeal noted that the Commission's finding that there had been no error by the case manager in 1996 was sufficient on its own to resolve the dispute and that the appeal based on the approved questions of law was therefore moot.  The Court of Appeal nonetheless went on to exercise its discretion and address the issues raised by the approved questions.

On the first issue of law, the Court of Appeal found for the Insurer, finding that the Commission had erred in its intepretation of section 171(2) by reading in a 60-day time limit on the Insurer for correction of errors made by a case manager.  The Court of Appeal held that section 171(2) should be read to give the Insurer the authority to correct errors in certain circumstances provided that the decision being reconsidered is not the subject of review or appeal, as the words of that section clearly state.  On the second issue of law, the Court of Appeal found for the Commission and found that it had not erred in applying the principles for "fresh evidence" from R. v. Palmer, this being that the information must be relevant and decisive to the issue and the claimant must not be prejudiced by a lack of due diligence on the part of the Insurer in bringing the information forward, to the section 171(1) consideration.  The Court of Appeal noted that the Palmer principles offer logical and reasonable considerations when exercising discretion under section 171(1) to make a fresh decision because of new information, whether that exercise of discretion is by the Insurer in the first instance, or by the Commission on hearing of an appeal.

This case was originally summarized by sdavies@harpergrey.com and originally edited by dpilley@harpergrey.com

In the context of an action for statutory accident benefits arising out of a motor vehicle accident, the plaintiff sought an order that counsel for the defence re-attend on an examination of her Affidavit. Counsel for the defence had sworn the Affidavit in support for an order that the plaintiff attend three defence medical examinations. Counsel for the defence refused to answer a question regarding communications between the insurance company and the lawyer representing the insurance company in the tort action. The court found that such a refusal was proper on the basis of privilege. Counsel for the defence also refused to answer a question regarding a "firewall." The court found that the refusal to answer that question was not justified. The question was relevant and not subject to privilege.

The Insurer appealed a decision dismissing its counter-claim against the Respondents, Leanne Giilck and Discount Auto Appraisals, in which it was found that it had no right to compel the Respondent, Rehman Baig (the "Insured"), to attend for an examination under oath pursuant to Statutory Condition 6(4) of the Insurance Act.

The Ontario Court of Appeal allowed the appeal based on the finding that the Statutory Condition does not cease to operate once litigation is commenced and that the scope of examination extends to all matters material to the Insurer's liability, and extent thereof, which the Insurer has an objective and reasonable basis to explore.

The Insurer insured the Insured's 1999 BMW M3 convertible beginning in 2002. The insurance included an endorsement that insured the vehicle for a specified value. To obtain that coverage, the Insured submitted an appraisal report signed by Giilck of Discount Auto Appraisals. Upon receiving the appraisal, the Insurer provided the Insured with an endorsement on the vehicle in the amount of $71,300.

The vehicle was damaged in a collision on December 10, 2004 and the Insured submitted a Proof of Loss to the Insurer claiming the full amount specified in the endorsement. The Proof of Loss indicated that the vehicle had been purchased on February 23, 2002 for $12,500 U.S. "as per salvage price". The Insurer had also learned that Giilck was the common law partner of the Insured and that together they operated Discount Auto Appraisals.

The Insurer required the Insured to attend an examination under oath pursuant to Statutory Condition 6(4). The Insured attended with counsel who refused to allow the Insurer to ask any questions about how the amount of the appraisal had been determined. He took the position that the examination was restricted to the particulars of the claim and did not extend to the appraisal report, which he regarded as a prior underwriting event.

The Insured later commenced an action against the Insurer claiming damages for loss of the automobile, together with punitive, exemplary and aggravated damages of $100,000 each. The Insurer then filed a Statement of Defence alleging that the appraisal prepared by Discount Auto Appraisals had been greatly overstated due to the poor condition of the BMW at the time and that the Insured, Giilck and Discount Auto Appraisals had misrepresented the value of the BMW. The Insurer counter-claimed against the Insured, Giilck and Discount Auto Appraisals for misrepresentation and detrimental reliance.

The Insurer brought a motion for an order compelling the Insured to attend to be examined under oath pursuant to Statutory Condition 6(4) and to answer questions relating to the initial valuation of his vehicle. In response, the Insured, Giilck, and Discount Auto Appraisals sought summary judgment dismissing the counter-claim.

The Motions Judge found that the statutory examination under oath was redundant because the Insurer had a right to examine the Insured for discovery in the lawsuit. The Motions Judge took the view that once the relationship between an insurer and insured becomes adversarial, or at least once a lawsuit is commenced, the examination under Statutory Condition 6(4) is no longer available to the insurer.

The Court of Appeal disagreed finding that there are no words in the provision to indicate that an insurer's right to examine an insured is limited to the situation in which the relationship is not adversarial. The Court of Appeal held that the statutory condition must be applied according to its plain terms. An insured cannot evade the plain requirement to submit to an examination by simply commencing an action. The Court of Appeal found that the potential for redundancy can be eliminated because the Court, in controlling its own procedures, is able to consider questions that have already been asked and answered on a statutory examination improper on a subsequent examination for discovery.

The parties agreed that the scope of the examination is defined by the term "the matters in question", though those words are used in Statutory Condition 6(4) to refer to the Insured's obligation to produce relevant documents in the examination. The Motions Judge took the view that the scope of the statutory examination was limited to the Insured's claim for insurance benefits. In the Motions Judge's view, the Insurer had agreed to the value of the vehicle when the policy was issued; accordingly, its value was not a "matter in question" in respect of the Insured's claim for benefits when the vehicle was damaged two years later.

The Court of Appeal found that the purpose of the statutory examination is to provide insurers with the opportunity to obtain the knowledge of facts necessary to enable them to determine their obligations and to protect them against false claims. Questions that are material to the Insurer's liability and the extent thereof are within the scope of the statutory examination. Whether the initial appraisal of the vehicle was fraudulent is a matter that is relevant to the Insurer's defence to the Insured's action. Therefore, as the Insurer had an objective and reasonable basis for suspecting that the initial appraisal was fraudulent, the Insured was obligated to submit to examination about it.