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Tuesday, December 14, 2010

"Power of Attorney and Undertaking" - Out of Province Insurer Bound to Pay BC Provincial Insurance Limits


Out of Province vehicles are able to drive in to British Columbia and British Columbians are able to drive their vehicles out of BC in to other jurisdictions because the insurance companies who insure vehicles in the United States and Canada have filed in each North American jurisdiction a document called a Power of Attorney and Undertaking ("PAU").  A PAU is essenttially a promise to the world that that if a driver of car from another jurisdiction gets in to an accident in BC, their insurance company will not raise a defence that is not available in BC.  The reciprocal is also true, if you drive your BC vehicle into another jurisdiction and get into an accident ICBC is bound by the PAU it filed in that jurisdiction from raising any defence on your behalf that is not available in the jurisdiction.  One practical implication of the PAU's filed in BC is that when vehicles from the United States, or other Canadian Provinces, drive in to BC their insurance companies must match our Provincial insurance minimums - regarless of whether the contract of insurance in question provides for lower insurance policy limits.  Insurance companies don't like having to pay more than the limits dictated in their policies.  The BC minimums are $200,000 for third party liability and $150,000 for no-fault medical expenses.

This principle was recently applied in a case called Moldovan v. ICBC, 2010 BCSC 1778.  In the case an Arizona insurance company, Republic Western Insurance Company, was forced to pay rehabilitation benefits up to the $150,000 BC limit all though the policy they wrote in Arizona provided for much lower insurance policy limits.

In the case Madam Justice Loo of the BC Supreme Court stated as follows:

[24]         The PAU is a “promise to the world” by RWIC that it will not raise defences that are unavailable to a British Columbia automobile insurer and that it will not rely on any limits of liability contained within its policy that are more restrictive than the minimum limits that must be available under a policy issued in British Columbia.
[25]         RWIC contends that by filing the PAU, RWIC opts into a scheme of compulsory universal automobile insurance and has all of the rights and obligations of ICBC; it steps into the shoes of ICBC in terms of its rights and obligations under Part 7 of the Insurance (Vehicle) Regulation, including s. 103.
[26]         RWIC relies on what it describes as four “key cases”: Shea v. Shea (1985), 21 D.L.R. (4th) 716, 66 B.C.L.R. 92 (C.A.); McIlvenna (litigation guardian of) v. Insurance Corp. of British Columbia, 2008 BCCA 289; Batchelder v. Filewich, 2004 BCCA 50; and particularly Diotte at para. 37:
[37]      ... By filing a PAU with the Superintendent, Progressive is doing more than simply complying with a statutory obligation: Progressive is voluntarily opting into the scheme of compulsory universal automobile insurance in B.C., thereby creating enforceable rights and obligations.
[27]         RWIC relies on Shea at 721 that in British Columbia there is a compulsory scheme of motor vehicle liability insurance, and “...there are no policies or contracts in the traditional sense; there is a legislative scheme”. The rights and obligations are created by statute and regulation. Therefore RWIC’s legal rights in British Columbia include the right to rely on s. 103 of the Insurance (Vehicle) Regulation.
[28]         RWIC further contends that as there is no contract of insurance, the Agreement or Rental Contract Addendum is not relevant. With respect to clause 4 of the Rental Contract Addendum, RWIC argues that “it’s just a representation”, and not meant to be a legal document for any no fault benefits. RWIC argues that it does not matter what U-Haul sets out in the documents because it is meant to be a rental contract for a motor vehicle and not meant to be a policy of insurance. RWIC further argues that the only relevant document is the PAU, and all that is relevant is the filing of the PAU. The “actual interpretation” of the PAU is not relevant.
[29]         I am unable to agree with RWIC’s contention.
[30]         In McIlvenna, Mr. Justice Tysoe for the Court of Appeal described Part 7 of the Insurance (Vehicle) Regulation as a contract and s. 103 a contractual provision of the contract. Tysoe J.A. stated at paras. 22-24:
[22]      In interpreting section 103, it must be borne in mind that Part 7 of the Regulation constitutes a policy of insurance between ICBC, as insurer, and the plaintiff, as insured: see Baluk v. Swiderski (1996), 83 B.C.A.C. 1, 38 C.C.L.I. (2d) 1 at para. 2; Fredrickson v. Insurance Corp. of British Columbia, [1985] 5 W.W.R. 342 at 352, 64 B.C.L.R. 301 (S.C.); and Kraeker Estate v. Insurance Corp. of British Columbia (1992), 93 D.L.R. (4th) 431 at 433, 69 B.C.L.R. (2d) 145 (C.A.). Although the plaintiff argued at the hearing of this appeal that Part 7 of the Regulation should be interpreted as social welfare legislation, I agree with counsel for ICBC that the contractual nature of the relationship is clearly established in the case law and legislation.
[23]      Section 103 is a contractual provision limiting the ability of the insured to sue the insurer. It is not a limitation provision contained in a statute other than the Limitation Act that expressly applies to all causes of action against a specified category of persons (for example, section 285 of the Local Government Act, R.S.B.C. 1996, c. 323, in relation to actions against municipalities).
[24]      Part 7 of the Regulation is a contract pursuant to which the insured is entitled to certain benefits from the insurer, ICBC. Section 103 is a limitation on the right of the insured to enforce his or her contractual right to the benefits by way of action. In my opinion, section 103 must be interpreted in the context of this contractual arrangement, and should not be construed broadly to apply to all causes of actions that the insured may have against ICBC as a result of their dealings.
[31]         Both Shea and Batchelder dealt with the “old” form of PAU, rather than the broader wording in Part C of the “new” form of PAU that RWIC filed. The difference between the new form and the old form is explained in Diotte at paras. 26 to 28:
[26]      The language of the PAU signed and filed by Progressive distinguishes this case from Shea. The PAU in the case at bar contains terms which are identical to those used in Court, with the exception of the following addendum:
.... in respect of any kind or 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...
[Emphasis added.]
[27]      By virtue of this additional clause, the undertaking to which Progressive is a signatory is both wider in scope and more powerful in effect than the undertaking considered in Court. The inclusion of the words “any kind or class of coverage” is a clear reference not only to liability, but to other kinds of coverage, including Part 7 benefits.
[28]      Thus, once the PAU has been filed, the extraprovincial or foreign insurer is precluded by law from setting up any defence on the basis that the contract of insurance does not include a provision for Part 7 benefits. Because all contracts of insurance issued in B.C. contain provisions for the payment of Part 7 benefits, an extraprovincial or foreign insurer who has filed a PAU is obliged to pay Part 7 benefits up to the limits prescribed in this province.
[32]         RWIC argues that on the basis of Batchelder, Shea is still good law.
[33]         However Shea was concerned with s. 31(4) of the Manitoba Public Insurance Corporation Act, 1970 (Man.), c. 102 (C.C.S.M., c. A180), and the scope of the wording of Part C of the undertaking in the PAU. Seaton J.A. stated at 722:
... I think that s. 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 "Accident Insurance Benefits" in Part II of the Regulations Respecting Coverage Under  the Manitoba Public Insurance Corporation Act, Man. Reg. 33/74.
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".
[34]         RWIC’s argument can be summed up this way: British Columbia motor vehicle insurance legislation, which imposes on ICBC certain rights and obligations, including those under Part 7, is imposed on an out-of-province or United States insurer by the filing of a PAU.
[35]         However, in Unifund Assurance Co., the Supreme Court of Canada recognized that to give effect to that argument would give British Columbia legislation an impermissible extraterritorial effect. The PAU is an undertaking and not an agreement to incorporate into RWIC’s insurance policy all those terms that the Insurance (Vehicle) Act and Regulations, including Part 7, of this Province requires a British Columbia or ICBC policy to include.

CONCLUSION

[36]         The plaintiff’s appeal is allowed, the order of Master Keighley pronounced November 13, 2009 is set aside and the following order substituted in its place:
a)    Republic Western Insurance Company be added as a defendant;
b)    The style of cause be amended accordingly;
c)     The plaintiff has leave to amend the Writ of Summons as set out in schedule  “A” to the Notice of Motion dated September 4, 2009; and
d)    The plaintiff is entitled to its costs of this appeal and costs of the application before the Master, in any event of the cause.

posted by Collette Parsons at


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