No Fault Benefits in British Columbia: Must Out-of-Province Auto Insurers Pay the Same as ICBC?

Originally Published February 1995

Introduction

Out-of-Province auto insurers must be familiar with British Columbia’s legislated no-fault benefits frame work for two important reasons: firstly, the present case law in British Columbia would seem to require the out-of-province auto insurer to pay Section B (no-fault) benefits up to the (much higher) B.C. limits and, secondly, the B.C. Legislation requires the quantum of liability claims to be reduced by all no-fault benefit payments which the Plaintiff actually received or was entitled to receive from the Insurance Corporation of British Columbia (“ICBC”).

This paper approaches the above issues from the perspective of an auto insurer in Alberta. However, most of the observations apply with respect to auto insurers from other provinces or from the United States.

This paper does not address the exact nature and extent of no-fault benefits payable under British Columbia’s statutory auto insurance plan (“Autoplan”). Those benefits are provided for by Part 7 of the Revised Regulation made pursuant to B.C.’s Insurance (Motor Vehicle) Act. They are similar to the Alberta Benefits, i.e. total disability benefits, medical and rehabilitation expenses, death benefits etc. There are, however, significant differences between the two provinces respecting the amount of benefits available. In British Columbia, for example, the maximum amount claimable with respect to medical and rehabilitation benefits is presently $150,000.00 (Schedule 3 Section 3(2)). Another example of the major differences between the two programs is that in cases of catastrophic injury, total disability benefits in B.C. can extend well beyond the initial 104 week period and, indeed, might extend for the claimant’s full working life expectancy.

The British Columbia Legislation

Since March of 1974, British Columbia has operated a universal compulsory automobile insurance scheme known as “Autoplan”. The plan is administered by the Insurance Corporation of British Columbia (“ICBC”). As part of the regular vehicle licensing procedure, every owner of a licensed motor vehicle is required to purchase basic Autoplan insurance from ICBC.

It was originally intended to prohibit all private insurers from writing auto insurance in British Columbia. However, since 1976, private insurers have been able to compete with ICBC to provide coverage beyond the basic coverage afforded by Autoplan for vehicle damage and third party legal liability.

Before Autoplan came into existence, automobile insurance in the province of British Columbia was, like most other provinces, governed by the provisions of the Insurance Act, Part 7 of which deals exclusively with automobile insurance. The B.C. Insurance Act is very similar to the insurance Acts found in most of the other provinces in Canada but that legislation essentially has no application to ICBC. Rather, in British Columbia, automobile insurance is governed by the Insurance (Motor Vehicle) Act and the extensive Regulations enacted under that legislation. Nevertheless, the Insurance Act does continue to apply to out-of-province auto insurers in certain circumstances eg. Third party procedure, judgment creditors directly suing the insurer, advance payments, and so on.

Those provisions of British Columbia’s Insurance Act relevant to the no-fault benefits issue and the case law considering the same are as follows:

1(1) “motor vehicle liability policy” means a policy or part of a policy of automobile insurance evidencing a contract insuring

the owner or driver of an automobile; or

a person who is not the owner or driver where the automobile is being used or operated by his employee or agent or any other person on his behalf

against liability arising out of bodily injury to or the death of a person or loss or damage to property caused by an automobile or the use or operation of it;

32(5) A licence to carry on automobile insurance in the Province is subject to the following conditions:

in any action in the Province against the licensed insurer or its insured arising out of an automobile accident in the Province, the insurer shall appear and shall not set up any defence to a claim under a contract made outside the Province, including any defence as to the limit or limits of liability under the contract, that might not be set up if the contract were evidenced by a motor vehicle liability policy issued in the Province.

228(9) An insurer that issues a motor vehicle liability policy outside the Province shall file with the superintendent, in a form prescribed by him,

a power of attorney authorizing the superintendent to accept service of notice or process for itself in any action or proceeding against it arising out of a motor vehicle accident in British Columbia; and

an undertaking

to appear in any action or proceeding against it or its insured arising out of a motor vehicle accident in British Columbia, and of which it has knowledge;

that on receipt from the superintendent of any notice or process served on him in respect of its insured, or in respect of its insured and another or others, and sent by the superintendent to it as provided, it willimmediately have the notice or process personally served on its insured; and

not to set up any defence to any claim, action or proceeding, under a motor vehicle liability policy issued by it, that might not be set up if the policy has been issued in British Columbia in accordance with the law of British Columbia relating to motor vehicle liability policies, and to satisfy up to the limits of liability stated in the policy, and in any event to an amount not less than the limits of liability fixed by this Part any judgment rendered against it or its insured by a court in British Columbia in that action or proceeding.

245 Every contract evidenced by a motor vehicle liability policy shall provide the accident insurance benefits to at least the limits set out in Schedule 2, or as extended by the superintendent pursuant to section 228, to those persons referred to in section 262. [these are the Section B no-fault benefits requirements]

It should be noted that Section 32(5) referred to above was repealed by Section 332 of British Columbia’s Financial Institutions Act which came into force in July 1989. That Act applies to insurance companies carrying on “insurance business” in the province of British Columbia. It requires such companies, whether they be incorporated in British Columbia or they be “extraprovincial insurance corporations” to obtain a “business authorization” before carrying on insurance business in this province (over 350 such companies are registered). On March 22, 1991 the British Columbia government enacted a regulation under the Financial Institutions Act called the Insurance Company Motor Vehicle Liability Insurance Regulation and which essentially reinstituted the earlier repealed section 32(5) of the Insurance Act. The pertinent sections of the Regulation provide as follows:

Insurance Company Motor Vehicle Liability Insurance Regulation Interpretation

In this regulation

“action” means an action, claim or proceeding arising out of an automobile accident;

“motor vehicle liability policy” means a policy, or part of a policy, evidencing a contract of automobile insurance in the form, and providing coverages against perils, and for amount required by law to be provided under a contract of automobile insurance.

Conditions on insurers contracting motor vehicle liability insurance

(1) Each of subsections (2) and (3) is a condition of every business authorization issued to, or held by, an insurance company or extraprovincial insurance company.
2) In an action brought in British Columbia against an insurance company or its insured or an extraprovincial insurance corporation or its insured under acontract of automobile insurance made outside British Columbia the insurance company or extraprovincial corporation
1. shall appear;
2. shall not set up any defence to the action, including a defence as to the limit or limits of liability under the contract made outside British Columbia that might not be set up if the contract were evidence by a motor vehicle liability insurance policy issued in British Columbia, and
3. shall satisfy any final judgment rendered against it or its insured in the action in respect of any type or class of coverage provided under the contract, and in respect of any type or class of coverage required by law to be provided under a contract of automobile insurance in British Columbia, up to the greater of
  1. the amount and limits for that type or class of coverage or coverages, provided under the contract, or
  2. the minimum for that type or class of coverage, or coverages, required by law to be provided under a contract of automobile insurance in British Columbia, exclusive or 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 law in British Columbia.
Many auto insurers do not actually carry on insurance business in British Columbia. As such, none of the above legislation would have direct application. Nevertheless, the manner in which the British Columbia courts have interpreted the above provisions does indeed affect the interpretation of such out-of-province insurers’ obligation for Section B benefits payable in British Columbia.

The Alberta Legislation

The relevant provisions of Alberta’s Insurance Act are very similar to their British Columbia counterparts. Those provisions include the following:

1(o) “motor vehicle liability policy” means a policy or part of a policy evidencing a contract insuring

the owner or driver of an automobile, or
a person who is not the owner or driver thereof where the automobile is being used or operated by his employee or agent or any other person on his behalf,

against liability arising out of bodily injury to or the death of a person or loss or damage to property caused by an automobile or the use or operation thereof.

32(1) A license to carry on automobile insurance in Alberta is subject to the following conditions:

in any action in another province against the licensed insurer, or its insured, arising out of an automobile accident in that province, the insurer shall appear and shall not set up any defence to a claim under a contract evidenced by a motor vehicle liability policy issued in Alberta, including any defence as to the limit or limits of liability under the contract, that might not be set up if the contract were evidenced by a motor vehicle liability policy issued in the other province.

313(1) On and after April 1, 1972 every contract evidenced by a motor vehicle liability policy (whether made or renewed before, on, or after that date) insures in respect of any one accident involving an automobile, for accident insurance benefits to at least the amounts specified in this section. [these are the Section B no-fault benefits requirements]

315(1) Every motor vehicle liability policy issued in Alberta shall provide that, in the case of liability arising out of the ownership, use or operation of the automobile in any province,

the insurer shall be liable up to the minimum limits prescribed for that province if those limits are higher than the limits prescribed by the policy,
the insurer shall not set up any defence to a claim that might not be set up if the policy were a motor vehicle liability policy issued in that province.

The Alberta requirement respecting the filing of a Power of Attorney and Undertaking is found in Section 68(8) of Alberta’s Motor Vehicle Administration Act as follows:

68(8) An insurer that issues owner’s policies outside Alberta may issue financial responsibility cards in respect of those policies, but

in the case of an insurer that is licensed to carry on the business of automobile insurance in Alberta, every card issued by it shall show that the policy mentioned on it complies with Part 7 of the Insurance Act, and

in the case of an insurer that is not so licensed, the insurer shall file with the Superintendent of Insurance, in a form prescribed by him,

a power of attorney authorizing the Superintendent of Insurance to accept service of any notice or process for itself in any action or proceeding against it arising out of a motor vehicle accident in Alberta, and

an undertaking

to appear in any action or proceeding against it or its insured arising out of a motor vehicle accident in Alberta, and of which it has knowledge,

that on receipt from the Superintendent of Insurance of any notice or process served on him in respect of its insured, or in respect of its insured and another or others and sent by the Superintendent of Insurance to it as hereinafter provided, it will forthwith cause the notice or process to be personally served on its insured, and

not to set up to any claim, action or proceeding under a motor vehicle liability policy issued by it any defence that might not be set up if the policy had been issued in Alberta in accordance with the law of Alberta relating to motor vehicle liability policies, and to satisfy up to the limits of liability stated in the policy and, in any event, to an amount not less than the limits of liability fixed in Part 7 of the Insurance Act, any judgment rendered against it or its insured by a court in Alberta which has become final in any such action or proceeding.

Obviously, for any insurer licensed to carry on automobile insurance in Alberta, the above provisions will have direct application to that insurers’ obligations respecting the payment of Section B benefits under the standard auto policy. It should be noted that similar legislation exists in all of the other provinces as well.

The Power of Attorney and Undertaking

Reference has been made to Sections 228(9) of British Columbia’s Insurance Act and Section 68(4) of Alberta’s Motor Vehicle Administration Act both of which prescribe the filing with the Superintendent of Insurance of each province of a certain Power of Attorney and Undertaking. These provisions appear in the Automobile Insurance Acts across the country. In practice, these documents have only been filed with the Superintendent of Financial Institutions (formerly the Superintendent of Insurance) for the province of British Columbia who, pursuant to a reciprocal agreement between all such Superintendents made many years ago, accepts the filing on behalf of all the provinces.

Many but by no means all auto insurers in Canada have filed such a Power of Attorney and Undertaking in British Columbia. The Financial Institutions Commission of British Columbia maintains a list of all insurers who have filed such a document and this information is readily available. There are over 1100 such P.A.U.’s which have been filed since 1964, the initial year of registration.

Until 1988 the standard form document set forth an undertaking by the insurer 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 above language has been considered in various cases throughout Canada dealing with whether the Power of Attorney and Undertaking is limited to third party liability coverage or whether it has application to the insurers’ obligation to pay no-fault benefits under the auto policy.

However, in 1988 the standard form document used in British Columbia was amended. The amendments were apparently the direct result of the British Columbia Court of Appeal decision in the Shea case more specifically discussed later in this paper. The amendments seemed designed to ensure that the Power of Attorney and Undertaking does indeed “capture” the payment of no-fault benefits. The revised wording obliges the insurer,

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

Thus far, the Financial Institutions Commission of British Columbia has not required out-of-province insurers who have filed an “old form” to execute and submit the revised document. All new filings, however, are being made on the revised form.

As will be seen, there is varying case law on whether the “old form” Power of Attorney and Undertaking is limited to third party liability coverage or whether it has application to the insurer’s obligation to pay no-fault benefits under the auto policy.

The Case Law

There are only very few cases which directly address how the Insurance Act provisions or the wording of the Power of Attorney and Undertaking affect an out-of-province insurer’s obligation to pay no-fault benefits in the province where the accident occurs or the law suit is instituted.

In Proctor v. MacDonald (1977) 86 D.L.R. (3rd) 455 (Ont. C.A.), aff’d [1979] 2 S.C.R. 153 (S.C.C.), the Plaintiff’s automobile was insured under a Certificate issued by the Manitoba Public Insurance Corporation (“MPIC”) and was involved in an accident in Ontario. The Plaintiff received no-fault benefits from MPIC. The question was whether the no-fault benefits were deductible from the Plaintiff’s award of damages in the tort action, as would have been required by Ontario’s Insurance Act if they had been paid by an Ontario insurer.

MPIC had filed the standard form Power of Attorney and Undertaking. The Defendant argued that, as a result of filing the Undertaking, MPIC was in the same position as an Ontario insurer and therefore the Manitoba policy must be viewed as a policy that was made in Ontario (meaning that the no-fault payments must therefore be deductible). This argument was rejected with the following comments:

“The Undertaking filed simply precludes an insurer from setting up defences which can not be set up by an Ontario insurer by virtue of [Ontario’s] Insurance Act. I am unable to read the Undertaking as an agreement to incorporate into extraprovincial policies all those items that the Ontario Insurance Act obliges an Ontario policy to include ……… an Undertaking by MPIC to, in effect, observe Ontario Rules to a certain extent, where its insured is involved in Ontario proceedings, does not render the Manitoba policy one that is “made in Ontario”. ……… [Ontario’s] Insurance Act is confined to policies made in Ontario”.

This decision was affirmed in a brief judgment by the Supreme Court of Canada which simply ruled that neither the Undertaking nor Section 25 of Ontario’s Insurance Act (the “no unique defence” license condition) could be relied upon to require the no-fault benefits to be deducted.

In Kolmatychi v. Walker [1981] I.L.R. 1-1365 (Alta. C.A.), MPIC denied coverage to its insured invoking Manitoba’s legislation deeming revocation of coverage if theinsured changes residence to another province. The Court of Appeal referred to Manitoba’s “no unique defence” provision (Section 31(4) of the Manitoba Act) and also to the MPIC Undertaking and ruled that since there was no corresponding defence of revocation under the Alberta legislation, both effectively prevented MPIC from asserting the defence in this case. The Court referred to the Proctor v. MacDonald decision and emphasized that the Undertaking precluded the setting up of defences that were unavailable in the province where the action was brought.

In Motor Vehicle Accident Claims Act Administrator v. Saskatchewan Government Insurance [1981] I.L.R. 1-1373 (Alta. C.A.), SGI was being sued by the third party judgment creditor. It denied liability arguing that pursuant to Section 11 of the Saskatchewan Act the Certificate of Insurance was null and void by virtue of the insured’s misrepresentations respecting residency. The Court ruled that pursuant to Saskatchewan’s “no unique defence” provision (Section 47(3) of the Saskatchewan Act) and the Undertaking made to the Superintendent of Insurance, SGI was prevented from raising such a defence.

In Dodd v. McFadden [1981] I.L.R. 1-1454 (B.C.S.C.), the question arose firstly, whether the automatic revocation of insurance under Manitoba’s legislation (again, on account of undeclared residency changes) afforded a defence to the third party judgment creditor’s claim and, secondly whether the disability benefits paid by MPIC were deductible from the policy limits. With respect to the first issue the Court ruled that there was no similar defence available in British Columbia at that time and accordingly the MPIC Undertaking and Section 31(4) of the Manitoba legislation combined to preclude such a defence being raised. With respect to the deductibility of disability benefits the Court distinguished Proctor v. MacDonald on the basis that the Manitoba legislation had not been argued in that case. A review of the Manitoba legislation showed that (just like its Ontario counterpart in Proctor), disability benefits were to be deducted and were not payable over and above the policy limits. Consequently, MPIC was not raising any “unique” defence on this point and the disability benefits were therefore to be deducted in this particular case.

Corbett v. Co-Operative Fire and Casualty Company [1985] I.L.R. 1-1879 (Alta. Q.B.) is the first case to specifically address the quantum of Section B benefits payable under an Alberta policy arising out of a motor vehicle accident in British Columbia. The Court referred extensively to Proctor v. MacDonald and also to the insurer’s Undertaking commenting as follows:

“[Pursuant to the Undertaking] the Defendant is precluded from raising defences that would not be valid or recognized by the law of British Columbia ……… the Undertaking submitted to the Superintendent can not be said to do what the contract does not do ……… the Alberta policy can not be taken to be one that is ‘made in B.C.’ ……… the policy of insurance between this Defendant and its insured provided for the payment of Section B benefits and it is that amount for which the Plaintiff has a rightful claim ……… the Undertaking does not presume, in this case, to create an agreement to incorporate into this Alberta policy all of the items required by British Columbia legislation. Indeed, the legislation of both British Columbia and Alberta does not require it to do that. It is correct to say that the Legislature of the Province of British Columbia cannot dictate the terms of a policy issued in the province of Alberta. As I understand the purpose of the reciprocal restrictions placed on insurers in terms of defences which they can or can notraise, it is simply to ensure that they will not evade contractual liability by having recourse to legislative provisions unique to their own province.”

The result was that the Section B benefits payable to the Plaintiff (a quadriplegic resident in British Columbia) were limited to the amounts stipulated in the Alberta policy.

In Shea v. Shea [1985] 6 W.W.R. 641 (B.C.C.A.), the British Columbia Court of Appeal specifically addressed the impact of the standard form Undertaking on the payment of no-fault benefits. The issue involved the extent of no-fault benefits available to the Plaintiff B.C. resident pursuant to the Manitoba insurance frame work. The Court ruled the MPIC must pay no-fault benefits in accordance with the Manitoba legislation. It commented:

“A number of issues turn on the fact that the actions arise other than in Manitoba. That brings into play Section 31(4) of the Manitoba Act [the “no unique defence” provision] and it also brings into play the Undertaking given by MPIC which is not identical to Section 31(4) [the Court goes on to set out Part C of the Undertaking]. ………… In my view, Section 31(4) is part of a Manitoba policy. The Undertaking is quite different. It is an arrangement with legislative sanction made between the provinces through the Superintendents of Insurance. It is a promise to the world, not a promise to the insured Section 31(4) and the Undertaking, by limiting the defences available to MPIC, give to this Plaintiff rights that would not be available if the accident had happened in Manitoba. The result is this: the Plaintiff has the usual rights set out in the Manitoba Act and Regulations; as part of that, he has advantages under Section 31(4). In addition, he has rights under the Undertaking. The Undertaking does not reduce benefits available under the Manitoba scheme. ………… A problem arises respecting no-fault benefits. Should MPIC be liable beyond the limits contained in its scheme, by reason of Section 31(4) or the Undertaking? In my view, neither the Undertaking nor Section 31(4) applies to no-fault benefits. ………… I think that Section 31(4) only applies to liability coverage. No-fault benefits are payable by an insurer to an injured person irrespective of liability. Provisions for them may be tacked on liability insurance policies, but such provisions are not with respect to liability insurance. They are accurately termed [by the Manitoba legislation] “Accident Insurance Benefits”. ………… Part C of the Undertaking is similarly qualified. It only relates to a defence to a claim “under a motor vehicle liability insurance contract” not available in accordance with British Columbia law “relating to motor-vehicle liability insurance contracts”. ………… The result is that no-fault benefits available to this Plaintiff are the same as the no-fault benefits that would be available if the accident had happened in Manitoba ………… Neither Section 31(4) nor the Undertaking enlarges that liability ………… the essential distinction between no-fault benefits and other claims against an insurer is clear. No-fault payments are not made because the owner or driver is liable for them; they are not made on behalf of an insured owner or driver; they are not made as part of liability insurance at all. In British Columbia, as in Manitoba, a liability insurer must provide no-fault coverage. That coverage is provided in addition to the liability insurance, but is not part of it.”

The next case is Bissky v. Co-Operators General Insurance (1986) 17 C.C.L.I 149 (B.C.S.C.) which addressed the question of the limitation period applicable to the third party judgment creditor’s action on the policy. The Ontario Insurance Act imposed a one year limitation. The British Columbia limitation, however, was two years. The accident had occurred in British Columbia but the defendant’s vehicle was insured by an Ontario auto policy. The Court ruled that the “no unique defence” provision of the Ontario Act (which was incorporated into the Section A coverage of the Ontario policy) applied to prevent reliance on the shorter Ontario limitation period.

In Schrader v. U.S.F. & G. [1987] I.L.R. 1-2173 (Ont. Div. Ct.) the U.S. insurer had filed the usual Power of Attorney and Undertaking and the issue was whether the policy was obliged to extend unidentified motorist coverage even though such coverage was not afforded by the U.S. policy wording. Interestingly enough, the case proceeded on a mistaken assumption, namely that the U.S. insurer was licensed to carry on auto insurance in Ontario. Consequently, the Court concentrated its comments on Section 25(1) of the Ontario Insurance Act (the “no unique defence” provision). It ruled as follows:

“The intent of Section 25(1) is to require insurers who carry on automobile insurance in Ontario to extend to their U.S. state’s policy holders and, incidentally, to Ontario residents the same benefits as if the insurer had written this policy in Ontario. I add that the same would apply with respect to any extraprovincial motor vehicle liability policy where the issuing insurer is licensed to do such business in Ontario ………… [Section 25(1)] clearly deals with any defence. This would include any defence that the policy did not include coverages or limits mandated by the Ontario Act ………… [subsequent amendments to Section 25(1) were] made simply to clarify that all coverages and limits mandated by the Ontario Act were included. These words were not designed to limit but rather to clarify that all coverages and limits required to be included in an Ontario motor vehicle liability policy were covered by the prohibition ………… the Legislature of this Province did intend by Section 25(1) to include both types of coverage and monetary limits therein so that Section 25(1) precludes [the extraprovincial insurer] from setting up any defence based upon its policy which conflicts with the mandated coverages and limits provided by the [Ontario] Insurance Act. In the result, [the insurer] can not here set up the defence that it does not insure against loss or damage caused by an identified motorist.”

In a formal Addendum to Reasons, [1987] I.L.R. 1-2219, the Court dealt with the misunderstanding respecting whether the insurer was licensed in Ontario. It clarified that the insurer had filed the standard form Power of Attorney and Undertaking and expressed the view that,

“The same result would have been reached by reason of the filing of the Power of Attorney and Undertaking in Ontario by a foreign insurer”.

In other words, the Court specifically interpreted the Undertaking as requiring the insurer to extend coverage (in this case, unidentified motorist coverage) that was ordinarily available in Ontario but which was not to be found in the U.S. policy in question.

In Froese v. I.C.B.C. (1988) 33 C.C.L.I. (B.C.C.A.) the U.S. insurer had filed the standard form Undertaking with the Superintendent of Insurance in B.C. Pursuant to the Undertaking it had agreed not only to set up “no unique defence” but had also agreed to satisfy any judgment in an amount not less than the statutory limits in B.C. “exclusive of interest and costs”. The judgment was for substantially more than the statutory minimum limits and included an award for pre-judgment interest. The question was whether having regard to the undertaking, the U.S. insurer was liable to pay the pre-judgment interest in addition to the statutory minimum limits.

A similar issue had been considered by the British Columbia Court of Appeal in Shea which had concluded that the foreign insurer (MPIC) was indeed liable for the pre-judgment interest. In Froese, the Court distinguished Shea on the grounds that it wasSection 31(4) of the Manitoba legislation, not the Undertaking which had made the foreign insurer liable for Court order interest. In this case, only the Undertaking had application. Since the Undertaking specifically made the foreign insurers obligation “exclusive of interest and costs” it did not impose an obligation to pay Court order interest.

The Court did comment, however, that the words “any defence to any claim” appearing in the Undertaking were comprehensive and “in a different context” could well prohibit a defence to a claim for Court order interest. One wonders if a claim for extended Section B benefits would constitute a “different context”.

The question of pre-judgment interest being payable in addition to policy limits arose once again in Quock v. Co-Operative Fire and Casualty Company (1989) 36 C.C.L.I. 17 (B.C.S.C.). Once again the tort judgment was well in excess of policy limits. The policy was a standard Alberta Auto policy which contained the usual obligation to pay policy limits, costs and post-judgment interest only. The insurer had not filed the usual Undertaking with the Superintendent of Insurance but had nevertheless obtained an auto insurance license in British Columbia. Accordingly, the Court ruled,

“The Defendant is clearly governed by Section 32(5) of the Insurance Act and, if that be the case, they must pay those claims which would be payable under a British Columbia policy. Court order interest is such a claim and is payable.”

The Froese case was distinguished on the basis that it was dealing solely with the Undertaking and not the statutory obligation. Accordingly, Quock stands for the proposition that out-of-province insurers who have obtained a license in British Columbia will find themselves obliged to pay not only policy limits, but also pre-judgment interest on the claim in addition to those limits in appropriate cases.

In Prudential Assurance v. MPIC [1989] A.J. No. 1161 (Alta. C.A.), MPIC sought to deny coverage on grounds that it was excess to the Prudential coverage. It was conceded that such a submission could not succeed if the policy had been issued in Alberta and,

“that being so, a defence peculiar to Manitoba becomes unavailable to MPIC in Alberta by the Undertaking it provided to the Superintendent of Insurance”.

The second issue in the case related to “special defences” to accident benefit claims, which were peculiar to Manitoba and which were not available to an Alberta insurer. The Court commented:

“Accident benefit coverage in Alberta is stipulated by Section 313 of the Alberta Insurance Act. The opening words of that Section add accident benefit coverage into the motor vehicle liability policy. Therefore the appellants undertaking to the Superintendent of Insurance forecloses reliance by MPIC on special defences peculiar to Manitoba which are not available to an insurer under a motor vehicle liability policy issued in accordance with the Alberta Insurance Act.”

The exact nature of the “special defences” respecting the accident benefit plans are not clear from the reported case. The case stands for the proposition, however, that the Undertaking doeshave application to no-fault coverage. It also supports the proposition found in the Anderson case that by definition a “motor vehicle liability policy” necessarily includes accident benefit coverage.

The seminal case respecting no-fault benefits in British Columbia is Anderson v. Co-Operators General Insurance (1990) 51 B.C.L.R. (2nd) 93 (B.C.C.A.). The Plaintiff was a passenger in an Alberta insured motor vehicle which was involved in a British Columbia accident. The question arose whether the Plaintiff’s claim for medical and rehabilitation expenses was limited to the $5,000.00 contemplated by the standard Alberta auto policy or whether the insurer was obliged to pay such benefits up to the $100,000.00 limit contemplated by the British Columbia legislation. As the insurer was licensed in British Columbia as well as Alberta, the Court did not consider the wording of the standard form Undertaking. Rather, it considered the provisions of both provinces’ Insurance Act (set forth earlier in this article) and ruled that the proper interpretation of the legislation required the insurer to pay no-fault benefits up to the substantially higher B.C. limits. It was specifically argued before the Court of Appeal that:

the definition of “motor vehicle liability policy” as set out in the Insurance Act was limited to third party liability coverage and did not include no-fault benefits; and
accordingly, the limitation under Section 32(5) of the B.C. Act applied only to the limits of third party liability coverage under the policy.

The Court of Appeal specifically rejected this approach. Rather, it concluded:

while the definition made specific reference to liability coverage, Section 245 of the B.C. Act required that same policy to extend no-fault benefits and, accordingly, Section 32(5)(a) must be interpreted to apply not only to third party liability limits but also to the limits applicable to no-fault benefits; and
such an interpretation was in accord with the interprovincial legislation arrangements contemplated by both the British Columbia and the Alberta legislation.

It is important to note that the British Columbia Court of Appeal specifically reviewed and interpreted the Alberta legislation. It adopted exactly the same interpretation of “motor vehicle liability policy” under the Alberta Act and concluded that Section 32(1)(b) of the Alberta Act required the Alberta policy to extend British Columbia limits not only to liability coverage for but also to coverage for no-fault benefits payable in relation to British Columbia accidents.

In Potts v. Gluckstein [1992] I.L.R. 1-2849 (Ont. C.A.) [leave to appeal to S.C.C. refused (1993) 149 N.R. 399 (note)], the Court was called upon to again specifically interpret the formal Power of Attorney and Undertaking filed by ICBC with respect to an accident in Ontario. The Plaintiff was a resident of B.C. and insured by ICBC. He was injured when his vehicle was struck by an uninsured Ontario motorist. ICBC refused to pay the tort damages on the basis that the B.C. legislation did not provide for uninsured motorist coverage respecting accidents outside British Columbia. The Court held that, pursuant to its Undertaking, ICBC’s denial of liability was a defence which could not be set up in Ontario and was therefore not available in the circumstances. The Court considered several of the leading cases and commented as follows:

“This appeal involves the interpretation of the reciprocal scheme for the enforcement of motor vehicle liability insurance policies in Canadian provinces and territories. ………… The reciprocal scheme is based upon a Power of Attorney and Undertaking filed by each participating motor vehicle insurer with the Superintendent of Insurance of British Columbia. He accepts the filing on behalf of the Superintendents of Insurance in the other provinces and territories, and sends copies to them. ………… The reciprocal scheme provides a uniform basis for the enforcement of motor vehicle insurance claims in Canada. This ensures that a person who has entered into a motor vehicle insurance contract in one province, is recognized as insured in other provinces. In the event of an accident, the insurer agrees to be bound by the law of the province or territory where the action is brought and not the province where the policy is issued. The insurer also accepts liability to the limits prescribed in its policy or, at least, to the minimum limits established in the province or territory where the action is brought.”

The Court distinguished and disagreed with Shea v. Shea which had declared that the formal Undertaking did not apply to no-fault benefits but only to liability coverage:

“The immediate answer to this argument is that uninsured automobile coverage is not no-fault coverage as counsel for the appellant assumed it to be. No-fault benefits, like uninsured and unidentified automobile coverage, are dealt with under the heading of “limited accident insurances” in the Act, but legally they are not the same ………… [in any event] since uninsured automobile coverage is mandated by the Insurance Act to be an integral part of the standard Ontario motor vehicle liability insurance contract, there can be no foundation for the argument that it is not included within the context and meaning of the Undertaking executed by ICBC.

Secondly, and most importantly, ICBC in its Undertaking agreed not to raise a “defence”, which was not available in Ontario, by denying coverage mandated by the Act. The denial of liability by ICBC with respect to an uninsured automobile, is a “defence” within the meaning of the Undertaking. I agree with and approve the interpretation placed upon the word “defence” in the Undertaking by the Divisional Court in Schrader v. U.S.F. & G. ………… For these reasons, the dictum of Seaton J. A. in the Shea case does not apply to Ontario automobile insurance and should not be followed in this province.”

The Court referred to and distinguished the Proctor v. MacDonald decision on the grounds that it did not deal with “defences” of the sort contemplated by the legislation or the Undertaking. Lastly, the Court also addressed the Corbett decision noting that,

“It follows from the decision of Shannon J. that, if the Alberta insurer had been sued in British Columbia, it would have been precluded by its undertaking from the defence that its liability was limited to benefits on the Alberta scale ………… this conclusion is reinforced by the decision in Schrader v. U.S.F. & G. I approve and adopt the conclusion [in Schrader] because, in my opinion, the same obligation arises under both Section 25(1) and the Undertaking and prohibits the setting up of any defence under a policy issued outside Ontario that might not be set up if such policy were issued in this province.”

In Court v. A.M.A. #1 (1993) 15 C.C.L.I. (2d) 51 (B.C.S.C.) the Court was asked to decline jurisdiction in British Columbia for an action seeking Section B benefits under the Alberta policy. In the course of dealing with the jurisdictional issues, it was pointed out to the Court that the Anderson case may no longer be good law in light of the repeal of Section 32(5) of British Columbia’s Insurance Act. The Court refused to decide whether Anderson was still applicable in British Columbia but commented:

“It seems to me that the Undertaking might arguably be said to contain substantially the same language, or at least express the same purpose, as that contained in Section 32(5)(a) of the Act. It is possible that a Court might apply the reasoning in Anderson to the interpretation of the Undertaking and arrive at the same result as in Anderson.”

The Court also observed there existed potential “irreconcilability” between the Anderson and Shea decisions.

In Tourond v. S.G.I. (1993) 22 C.C.L.I. (2d) 150 (O.I.C.), the Ontario Insurance Commission arbitrator had to determine a preliminary issue respecting the impact of the P.A.U. on an out-of-province insurer’s (S.G.I.) liability to pay no-fault benefits in accordance with the Ontario framework. The arbitrator ruled that a “motor vehicle liability policy” in Ontario included mandatory no-fault benefits and that, accordingly, the P.A.U. obliged the out-of-province insurer to pay no-fault benefits in accordance with the Ontario framework. In that regard the arbitrator relied on the Ontario Court of Appeal decision in Potts v. Gluckstein which, it will be recalled, expressly rejected the dictum of Seaton, J.A. in the Shea v. Shea (B.C.C.A) decision.

All of the cases referred to above were placed before Justice Scarth in Court v. A.M.A. #2 (1994) 90 B.C.L.R. (2d) 195 (B.C.S.C.). The injured Plaintiff, an Alberta resident, was a passenger in a motor vehicle driven by its Alberta owner and insured under the Alberta Standard Auto Policy. The accident occurred in British Columbia. The question before the Court was whether the P.A.U. or the Alberta “no unique defence” license condition found in Alberta’s Insurance Act obliged the insurer to pay no-fault benefits to the limits prescribed by the B.C. framework i.e. Part VII of the Regulations under the Insurance (Motor Vehicle) Act. The Court ruled that both the P.A.U. and section 32(1)(b) of Alberta’s Insurance Act had this effect and that, because the lawsuit had been commenced in British Columbia, the Alberta insurer was indeed obliged to pay no-fault benefits up to the (much higher) B.C. limits.

A.M.A.’s primary argument was that the issues between the parties were solely ones of contract to which neither section 32(1) of Alberta’s Insurance Act nor the P.A.U. applied. It submitted that the license conditions and the P.A.U. dealt only with administrative matters between the insurer and the provincial bodies governing insurance to rely on the P.A.U. or the license condition to impose coverage far beyond that expressly contemplated by the policy directly conflicted with the concept of privity of contract and (unfairly, it was submitted) granted the insured benefits for which she had neither contracted nor paid a premium.

In the alternative, A.M.A. argued that neither section 32(1)(b) of the Alberta Insurance Act nor the P.A.U. applied to no-fault accident benefits coverage. In that regard it relied heavily on the express ruling to this effect found in Shea although it was obliged to concede that the Shea and Anderson decisions are irreconcilable on this point. It pointed out the following matters which supported the view that Shea was correctly decided (and which none of the other cases had expressly considered):

both section 32(1) of the Alberta Insurance Act and the P.A.U. came into being long before no-fault accident benefits became mandatory under the Alberta Standard Auto Policy (SPF1) i.e. when drafted, these provisions were obviously not intended to extend to no-fault benefits coverage but applied only to liability coverage of the sort extended by the standard policies at the time;
the no-fault coverage afforded under the Alberta Standard Policy has been expressly amended to provide for supplemented benefits respecting accidents occurring in both Quebec and Ontario … such amendments were made by the Superintendent of Insurance for Alberta (who is the only person who can approve the policy wording) and obviously would not have been necessary if the Act or the P.A.U. had the effect of incorporating the no-fault accident benefit coverages available in other provinces and respecting accidents occurring in those other provinces;
the “no unique defence” provision contemplated by both the Act and the P.A.U. actually appears as paragraph 6 of the Additional Agreements of Insurer under Section A – Third Party Liability Coverage in the SPF 1 … another clear indication from the Superintendent of Insurance for Alberta that the restrictions apply only to liability coverage;
in 1988 the wording of the standard form P.A.U. was substantially revised in order to “capture” no-fault benefits coverage afforded under standard auto policies … further reinforcement for the conclusion that neither the Act nor the original form of P.A.U. executed by A.M.A. apply to no-fault accident benefits coverage.

The privity of contract arguments received very short shrift; Justice Scarth simply commented,

“That contention, I think, is met by Mr. Justice Seaton’s words in Shea at page 97, set out supra.:

“the undertaking … is a promise to the world, not a promise to the insured”.”

If the P.A.U. is “not a promise to the insured”, then how are its provisions incorporated into the contract between the insurer and the insured? Perhaps Justice Scarth had in mind some sort of estoppel arising from the mere fact that a formal undertaking had been made. It is respectfully suggested that Justice Scarth’s ruling on this crucial, threshold issue leaves much to be desired.

With respect to section 32(1)(b) of the Alberta Insurance Act (the license condition), while noting the “different approaches” taken by the Court of Appeal in the Anderson and Shea cases, Justice Scarth ruled that Anderson dealt expressly with the identical Alberta legislation, that its reasoning was “binding” upon him and that he was therefore “compelled by the principle of stare decisis to adopt the same approach“. The conclusion in Anderson which Justice Scarth considered himself obliged to follow was as follows:

“The Alberta insurer [is] bound to provide no-fault benefits to the same extent as I.C.B.C. under its policy because of the fact the policy is issued in both jurisdictions [are] similar in that each was required to provide no-fault benefits, and the legislation in Alberta prevented an Alberta insurer from setting up a defence in an action in British Columbia with respect to the limits of its liability which could not be set up had the policy been issued in British Columbia.”

Justice Scarth referred to the “purposive” approach of the Court of Appeal to “the interprovincial legislative arrangements regarding automobile insurance”, and noted that,

“as a result of that approach [the Court of Appeal] determined that for actions brought in British Columbia an out-of-province insurer is bound to provide the same coverage, third party and no-fault as provided by a motor vehicle liability policy issued by I.C.B.C.”

To accept A.M.A.’s submissions in this case “would entail rejection of a fundamental aspect of the reasoning of the Court of Appeal in Anderson”, something Justice Scarth was simply not prepared to do.

There is one other decision worthy of mention, namely the B.C. Court of Appeal decision in Marchand v. A.M.A. (1994) 89 B.C.L.R. (2d) 253. It will be recalled that both section 32(1)(b) of the Alberta Insurance Act (the license condition) and the P.A.U. apply only if the lawsuit is brought in British Columbia. As the Corbett decision amply demonstrates, if the insured sued in Alberta to enforce no-fault benefit coverage for an accident occurring in British Columbia, then the Alberta policy limits apply. Accordingly, if the out-of-province insurer can convince the B.C. Courts to decline jurisdiction for the no-fault claim, then it can neatly circumvent the above case law and arguably “reduce” its exposure to the limits expressly stated in the policy.

Marchand involved another A.M.A. insured injured in a motor vehicle accident occurring in British Columbia. The claimant, the named insured under the policy, resided in Alberta and to the date of the hearing remained hospitalized in that province. A.M.A. argued that the insured was engaging in “forum shopping” and had chosen to sue in British Columbia simply in order to expand the limits of coverage i.e. to claim the $150,000.00 as medical benefits as opposed to the $5,000.00 contemplated by the Alberta policy. It asked the Court to decline jurisdiction on the basis that Alberta was the forum with the required “natural” or “real and substantial connection” with the case: Amchem Products Inc. v. B.C. (WCB) (1993) 77 B.C.L.R. (2d) 62 (S.C.C.). The B.C. Supreme Court dismissed the application and A.M.A. sought leave to appeal.

Donald, J.A. refused leave to appeal on the basis that “it is extremely unlikely that a panel of this Court would disturb the discretionary order made by the Chambers Judge”. He commented,

“Forum shopping is not so much a basis of objection to jurisdiction as a condemnatory label applied after the real analysis has taken place. The labelling does not add anything to the decision making process. The task is to determine which jurisdiction has the closest connection to the case. The factors involved in that analysis should not be effected by the motive of the party in choosing the disputed jurisdiction because it is only rational to sue in the most advantageous place. … In my view the Chambers Judge put the forum shopping argument in its proper place and considered juridical advantage along with the other factors in the manner suggested in Amchem.”

Conclusions and Commentary

The case law referred to above leads to the following conclusions:

the dicta in Shea to the effect that the legislative license condition and the P.A.U. do not apply to no-fault benefits coverage will probably continue to be rejected by the Courts in favour of the “purposive” approach adopted in Anderson and followed in Court v. A.M.A. #2;
accordingly, if the out-of-province insurer has obtained a “business authorization” under B.C.’s Financial Institutions Act, then it is subject to the limitations imposed by that province’s Insurance Company Motor Vehicle Liability Insurance Regulation and is likely obliged to extend no-fault benefits to its insureds in the same manner as I.C.B.C.;
in addition, the out-of-province insurer may be subject to a license condition imposed by the Insurance Act of other provinces which purport to limit defences available to claims under the policy arising out of an automobile accident in British Columbia and such license conditions will be enforced in B.C. so as to provide for no-fault benefits coverage to B.C. limits;
out-of-province insurers (particularly those from the U.S.) who are not subject to the B.C. licensing legislation or who are not exposed to “license conditions” imposed by legislation in other provinces, may nevertheless have filed a P.A.U. with the Superintendent of Financial Institutions for B.C. and, if so, then they too are obliged to extend no-fault benefit coverage in the same manner as I.C.B.C. (subject to possible limitations respecting interest); and
so long as the accident giving rise to the injury occurs in B.C., the B.C. Courts will not likely decline jurisdiction to hear any actions instituted by insureds to enforce no-fault benefits coverage in amounts equal to similar coverage available in B.C.

There are other consequences arising from the case law which will likely disturb most out-of-province insurers. Although there is not yet a case exactly on point, it would appear that the out-of-province insurer will be subject to the limitation period contemplated by section 103 of the B.C. Regulations namely two years after,

the date of the accident for which the benefits are claimed, or
where benefits have been paid, the date he received the last benefit payment.

Similarly, out-of-province insurers will not only find themselves exposed to greater limits of coverage but may also be obliged to extend the types of coverage available under their policy. For example, unlike most provinces, Underinsured Motorist Protection (UMP) coverage has been mandatory in B.C. since January 1992. At that time the required limit was 2 million dollars. However, effective November 27, 1992 for all new policies and for all renewals after January 1st, 1993, the limits of the mandatory UMP coverage were reduced from 2 million to 1 million dollars per insured person. Applying the “no unique defence” rationale, it would appear that if an Alberta insured sues the Alberta auto insurer in B.C. to enforce coverage under the auto policy, the policy will be deemed to extend UMP coverage even though the insured never purchased such coverage in the first place (i.e. an SEF 44 Endorsement)!

As well, a claimant who might not otherwise fall within the definition of “insured” under the policy, may nevertheless be able to rely upon the “no unique defence” legislative/P.A.U. provisions to obtain “standing” to make a claim under the policy. Take, for example, the B.C. resident who is a passenger in an Ontario insured vehicle and who suffers injury as a result of a single vehicle accident occurring in British Columbia. Such a person would not fall within the definition of “insured person” with section 2.2.3 of Part B of the Ontario Standard Owners Policy (OPF1); however, section 78 of B.C.’s Insurance (Motor Vehicle) Act Regulation provides that an occupant of a B.C.-licensed vehicle qualifies as an “insured” for the purposes of Part VII (no-fault) benefit entitlements. Accordingly, assuming the passenger is not otherwise entitled to Part VII benefits in British Columbia, he would theoretically be entitled to sue the Ontario insurer in British Columbia, rely on the “no unique defence” legislative/P.A.U. provisions to require the insurer to treat him as an “insured person” and thereafter claim accident benefits in accordance with the Ontario or British Columbia framework to maximize his recoveries.

Other important questions arise. Is the insurer obliged to volunteer the extended coverage? Assume that the insured Alberta resident is catastrophically injured in an accident in B.C. and requires future care costing well in excess of the $150,000.00 limits contemplated by the B.C. legislation. Can the Alberta insurer simply advance the $5,000.00 contemplated by theAlberta policy and extract a Release from its (presumably unsuspecting) insured? Or must it advise its insured that, so long as the insured sues the insurer in B.C., the insurer might be obliged to pay medical benefits up to $150,000.00? Prudent insurers should obtain the advice of legal counsel before wandering into the minefield posted by this and the various other questions respecting obligations to pay no-fault benefits outside their home province or state.