Category: Breach of Insurance Policy

Plaintiff Forfeits Right To Insurance Coverage For Lying About Principal Operator

In Lau v. ICBC, the Plaintiff was involved in a motor vehicle accident, in which his car was declared to be a write off. ICBC determined that the Plaintiff was at fault for the accident. Further, ICBC decided to breach the Plaintiff under his insurance policy, claiming he had made a willfully false statement as to who the principal operator of the vehicle would be. The Court agreed, and declared that the Plaintiff had forfeited his right to coverage under his policy.


[6] The reason I reach the conclusion I do with reluctance is that in my view, the misrepresentation was made in order to save a relatively modest amount of insurance premium, and almost certainly without any real appreciation that forfeiture of the insurance could result, with dire financial consequences. The result is harsh for the plaintiffs.


[7] However, ICBC does not have to prove that the plaintiffs were aware of the consequences of a misrepresentation concerning the insurance.  A contract of insurance is one of utmost good faith, and one cannot commit frauds or make wilfully false statements about the subject-matter of the claim without risking the loss of the right to indemnity: Inland Kenworth Ltd. v. Commonwealth Insurance Company (1990), 48 B.C.L.R. (2d) 305 (C.A.) at 310.


[8] Judging by the number of similar cases that have come before the courts, it seems likely the plaintiffs’ lack of understanding of the consequences of a false declaration as to the vehicle’s intended principal operator is shared with many members of the public. The result in this case should serve as a warning.

Court Of Appeal Upholds Decision Of Plaintiff’s Entitlement To Accident Benefits

In Hagen v ICBC, the Plaintiff had a motorcycle learner’s license, and was involved in an accident. ICBC refused to pay for “no faultbenefits, arguing that the accident occurred because the Plaintiff was not at all times under the supervision of a fully licensed motorcyclist, which was a requirement under his insurance policy. In the Supreme Court of British Columbia, the Plaintiff was successful in obtaining a declaration from the Court that he be entitled to his “no faultbenefits. ICBC’S lawyer appealed this declaration to the Court of Appeal, however the Court dismissed the appeal.


[21]         One may ask whether it was intended that a learner motorcyclist would be in breach of the supervision requirement when, having arranged for supervision, the supervisor acted contrary to agreement and took another route? In my view the answer is no.


[22]         This discussion is akin to the discussion of “due diligence” urged upon us by the appellant in saying we need not concern ourselves with the “offence” consequences of the interpretation it advocates. It says Mr. Hagen could answer a charge of breaching the supervision requirement by saying that he demonstrated due diligence in his attempt to comply, and that his non-compliance was outside of his control. In other words, it says a charge of breaching s. 30.06(4) would be treated as a strict liability offence. If that is the case, why, then, should other consequences, perhaps more grave, adhere to Mr. Hagen in a civil context because his supervision failed in spite of his reasonable efforts to comply with the section?


[23]         Section 30.06(4) is directed entirely to the behaviour of the learner, and in my view s. 30.06(5), in articulating the requirement of observation at all times, must be read as focusing upon the behaviour for which the learner can be responsible. Taking this approach, s. 30.06 of the Regulations, read in context, requires the learner to take all reasonable steps to ensure he (or she) is being supervised in compliance with the Regulations. This requires the learner to arrange for supervision by a person who commits to keeping him in sight at all times, and requires the learner to refrain from driving where it is not reasonable for him (or her) to think such supervision is occurring. I readily acknowledge that there will be circumstances in which a supervisor who fails to follow may nullify the learner’s Part 7 benefits, as in a failure to keep sight of the learner for such a period of time or distance that the learner, acting reasonably, should have become aware the plan for supervision had been compromised. Thus there will be a factual question: did the learner take all reasonable steps to ensure he was being supervised? In this case that translates to the question: should the learner have been aware he was not in sight of the supervisor?


[24]         This is a case in which the supervisor, not the learner, made a mistake, a mistake which was so near in time and distance to the accident it was open to conclude Mr. Hagen could not be faulted for failing to detect his loss of supervision. The judge described the lack of supervision as momentary. He referred to evidence that Mr. Hagen had seen the supervisor behind him at the previous intersection. The judge considered the evidence of the street design and the evidence that the many stop signs had permitted some vehicles to fall in between Mr. Hagen and his supervisor. I consider it was open to him on the evidence to conclude that this was a case of loss of contact that did not put Mr. Hagen in breach of the Regulations.


Plaintiff Ordered To Repay ICBC $36,000 For Being In Breach Of Insurance Policy

In King v ICBC, the Plaintiff had a learner’s license, and was involved in a motor vehicle accident. He did not have a qualified accompanying passenger with him, so ICBC held him in breach of his insurance policy, and asked him to repay over $36,000 that they had previously paid him for “no faultbenefits. The Plaintiff went to court on this issue, however the Court sided with ICBC. To make matters worse for the Plaintiff, an award of double costs was made.


[29]           Here, Mr. King brought and pursued to trial an action against the Insurance Corporation of British Columbia for breach of contract.  Where an appropriate evidentiary foundation exists, the court may take into account the disparity in the financial positions of a plaintiff and a corporate defendant in the exercise of its discretion to award costs under Rule 9-1.  In this case, in the absence of evidence of the plaintiff’s financial circumstances and, I would add, in the absence of any material failure on the part of the defendant to perform its obligations to the plaintiff, “the relative financial circumstances of the parties” is not a factor that weighs in favour of the plaintiff.


[30]           The plaintiff’s claim failed as a result of the court finding that neither his testimony, nor that of his witness, Ms. Gromova, was credible.  The court found that the plaintiff had wilfully made a false statement respecting Ms. Gromova’s presence in the vehicle at the time of the accident.


[31]            The over-riding principle is whether, if the Offer to Settle had been accepted, there would have been significant, or any savings in litigation costs to the parties or to the court: LeFler v. Anderson, 2008 BCSC 1563 (CanLII), 2008 BCSC 1563, at para. 18. Here, acceptance of the offer would have spared both parties the significant costs of a four day trial where the amount in dispute was, exclusive of court order interest, less than forty thousand dollars.


[32]           Taking all these factors into consideration, I conclude that an award of double costs should be made in this case, and is consistent with the objective of deterring unreasonable conduct in litigation.  I find that the plaintiff was entitled to a reasonable time to consider the defendant’s Offer to Settle, following its delivery on September 24, 2010.  Taking into account the disclosure of the will say statements of the defendant’s witnesses on September 29, and allowing Mr. King a reasonable time to consider his position, and the defendant’s Offer following the delivery of the will say statements, I find that the defendant is entitled to an award of double costs  commencing October 7, 2010.


Plaintiff Held Not To Be In Breach Of Insurance Policy With Respect To Naming Of Principal Operator

In Barsaloux v ICBC, the Plaintiff’s vehicle was stolen, then later recovered in a badly damaged condition. ICBC refused to pay the Plaintiff for the vehicle, claiming that he misrepresented who the principal operator was, and was therefore in breach of his insurance policy. The Court disagreed.


[33] … Again, it is common ground that the time to consider the issue of a knowing misrepresentation is the time the insurance was purchased.


[34]           In Demontigny v. Insurance Corp. of British Columbia (1989), 16 M.V.R. (2d) 103 at 111 (B.C.S.C.), the Court set out the test this way:


Considering first the plaintiff’s representation that she was the “principal operator” of the Jeep the question is:  How must she have perceived the use of the vehicle at the time the insurance was applied for? She testified that she understood principal operator to mean she would be driving it “most of the time”.


The Court noted that that was a correct understanding in terms of the statutory definition.


[35]           In Lexis Holdings Int’l Ltd. v. Insurance Corporation of British Columbia, 2009 BCSC 344, the Court said at para. 16:


[16]      … It is therefore ICBC that bears the burden of proving that Mr. Teap knowingly made a false representation in the matter of the principal operator of the vehicle without belief in its truth, or reckless as to its truth, as all parties have agreed that Lexis Holdings has shown that its loss falls within the policy coverage.


[36]           The Court also said that the defendant must show on a balance of probabilities that the insured knew at the time he entered into the contract of insurance that he was, in fact, going to be the principal operator of the vehicle.


[48]           Based on all the evidence, I conclude that the plaintiff was, in fact, the principal operator at the time of the accident, and even if he was not, he did not knowingly misrepresent that fact when the insurance was purchased. There was therefore no breach of the insurance policy and the plaintiff is entitled to coverage as well as costs of this action.

Plaintiff Held To Be In Breach Of Insurance For Misrepresenting Principal Operator Of Vehicle

If ICBC is of the belief that you breached a term of your insurance policy with them, they can refuse to pay you your “no fault” benefits. This, however, has no effect on your tort rights to sue for personal injuries. ICBC can also refuse to pay for the value of your vehicle in the event of a total loss, can refuse to pay for your repairs, and can refuse to cover you in the event that the accident was your fault, and ICBC claims are brought against you.


In Booth v ICBC, a woman had purchased a vehicle, naming herself as principal operator. While her son was using the car, he struck another vehicle, thereby injuring an occupant of the other vehicle. ICBC paid out the injured person’s claim, and then demanded repayment from the mother, alleging that she misrepresented who the principal operator would be. The Plaintiff then sought a declaration from the Court that she was not in breach of her insurance. The Court ruled in favour of ICBC in this instance.


[5] The phrase “principal operator” is defined in s. 1 of the Insurance (Motor Vehicle) Regulation, B.C. Reg. 447/83, as follows:


“principal operator” means the person who will operate the vehicle described in an application for a certificate for the majority of the time the vehicle is operated during the term of the certificate;


[6] Section 19 of the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231, deals with forfeiture of claims. It provides, in part, as follows:


19(1) If

(b) an applicant for an owner’s certificate or driver’s certificate knowingly misrepresents or fails to disclose in the application a fact required to be stated in it…


all claims by or in respect of the applicant or the insured are rendered invalid…


[7] It is common ground that an applicant for an owner’s certificate by which insurance is acquired under the Act is required to identify the principal operator of the insured vehicle. It is also common ground that the defendant bears the burden of proving, on a balance of probabilities, that the insured knowingly misrepresented a fact contemplated by s. 19(1)(b). (See generally Gill v. Insurance Corp. of British Columbia, 2006 BCSC 1397 at para. 20, and Rai v. ICBC, 2005 BCSC 92 at para. 3.)


[8] Because an assertion that an insured knowingly misrepresented a material fact is tantamount to a claim of fraud, until the Supreme Court of Canada’s decision in F.H. v. McDougall, 2008 SCC 53, it was thought that in order to establish such a claim, it was necessary that it be proven on something more than a mere balance of probabilities and/or that the evidence said to support it be subjected to a heightened scrutiny (see Bevacqua v. I.C.B.C., 1999 BCCA 553 at para. 44). In F.H., the court concluded at para. 40 that:


…it is time to say, once and for all in Canada, that there is only one civil standard of proof at common law and that is proof on a balance of probabilities. Of course, context is all important and a judge should not be unmindful, where appropriate, of inherent probabilities or improbabilities or the seriousness of the allegations or consequences.


[9] Finally, whether an insured has knowingly misrepresented a material fact is to be determined on the basis of the circumstances at the time the policy of insurance was issued (see s. 19(1)(b) and Rai at para. 14).