2004 BCCA 650 Park v. Insurance Corp. of British Columbia

Before:	The Honourable Mr. Justice Lambert
	The Honourable Mr. Justice Braidwood
	The Honourable Mr. Justice Lowry

C. W. Ford	Counsel for the Appellant
S. B. Stewart and M. Wilhelmson	Counsel for the Respondent, Insurance Corp. of B.C.
Place and Date of Hearing:	Vancouver, British Columbia
November 26, 2004
Place and Date of Judgment:		Vancouver, British Columbia
December 17, 2004

Written Reasons by:

The Honourable Mr. Justice Lowry

Concurred in by:

The Honourable Mr. Justice Lambert

The Honourable Mr. Justice Braidwood

Reasons for Judgment of the Honourable Mr. Justice Lowry:

[1] Christina Park petitioned the court to obtain a determination as to which of two automobile insurers, the Insurance Corporation of British Columbia ("ICBC") or Royal & Sun Alliance Insurance Company of Canada ("Royal"), is liable to her for underinsured motorist protection coverage ("UMP") in respect of injuries she suffered in a motor vehicle accident in British Columbia. On hearing the petition, Madam Justice Humphries determined that Royal was liable to respond: (2002), 4 B.C.L.R. (4th) 294, 39 C.C.L.I. (3d) 231, 2002 BCSC 1114. In so doing, she gave effect to legislation that she considered precluded Royal from raising a defence based on a provision of its policy that could not be raised by ICBC under the regulations by which the coverage it provides is governed.

[2] Royal contends that the judge erred in the interpretation she gave to the legislation in question. The dispute is one between the two insurers; Dr. Park takes no part in the appeal.

[3] Dr. Park suffered serious injuries when a vehicle owned by her brother, in which she was a passenger, was struck by another vehicle. Both vehicles were insured by ICBC. The third party liability limits ($500,000) carried on the other vehicle were, however, exceeded by the damages to which Dr. Park is entitled such that the availability of underinsured motorist protection coverage ("UMP") became a concern for her.

[4] ICBC underwrites a compulsory automobile insurance plan mandated by the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231 and regulations providing insurance for third-party liability, no-fault benefits, and UMP to the limits prescribed. UMP to limits of $2.0 million is provided by ICBC under Part 10, Division 2 of the Insurance (Motor Vehicle) Act Regulations, B.C. Reg. 447/83. The coverage is available to Dr. Park subject to s. 148.1(9):

(9) Where, in the event of a claim, an insured has access to underinsured motorist protection coverage or similar insurance protection under a contract of automobile insurance of another jurisdiction, the benefits of that coverage are primary and any benefits provided under this Division are available only to the extent that the amount of benefits provided by the certificate exceeds the amount of benefits provided by the primary insurance.

[5] Dr. Park resides in Alberta. Her own car was insured under a policy of automobile insurance issued by Royal on terms which included those stated in Royal's Standard Endorsement Form 44 ("SEF 44"). The terms provide for what is stated to be Family Protection Coverage, which is UMP coverage similar to that provided by ICBC, also to limits of $2.0 million. It is available to Dr. Park subject to clause 7 of the form which relates to multiple coverages:

Subject to the provisions hereof, where an eligible claimant is entitled to payment under Family Protection Coverage under more than one Policy and the insured person

(a) is an occupant of an automobile, such insurance on the automobile in which the insured person is an occupant is first loss insurance, and any other such insurance is excess.

[6] Thus UMP is in both instances subject to a priority provision. The provisions differ. The first makes UMP coverage under a contract of insurance made other than in British Columbia the primary coverage; the second makes UMP coverage under a contract insuring the automobile in which the insured was an occupant the primary coverage.

[7] Royal maintains that its policy does not respond until the insurance on the automobile in which Dr. Park was riding – the ICBC UMP – is exhausted. Alternatively, it says that if the coverage provisions are mutually offsetting, the two insurers are, as a matter of insurance law, required to respond to Dr. Park's claim for UMP equally, citing McGeough v. Stay 'N Save Motor Inns Inc. (1994), 116 D.L.R. (4th) 137, 92 B.C.L.R. (2d) 288 (C.A.).

[8] ICBC contends that, because Dr. Park has commenced an action against Royal in this jurisdiction, Royal is precluded by regulation from raising clause 7 of the SEF 44 in its defence. ICBC then says that it follows that, because of s. 148.1(9) of the regulations that govern its coverage, it need not respond unless Dr. Park's damages exceed the limits of Royal's UPM coverage under its policy.

[9] The regulation which ICBC says precludes Royal raising clause 7 of the SEF 44 in its defence, and to which Humphries J. gave effect, is the Insurance Company Motor Vehicle Liability Insurance Regulation, B.C. Reg. 84/91 (the "Regulation") promulgated pursuant to the Financial Institutions Act, R.S.B.C. 1996, c. 141. In material respects, the Regulation provides:

1 In this regulation:

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

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

2 (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 a contract of automobile insurance made outside British Columbia the insurance company or extraprovincial corporation

(a) shall appear,

(b) 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 evidenced by a motor vehicle liability insurance policy issued in British Columbia, and

(c) 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

(i) the amount and limits for that type or class of coverage or coverages, provided under the contract, or

(ii) 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 of interest and costs, and subject to any priorities as to bodily injury or property damage with respect to such minimum amounts and limits as may be required by law in British Columbia.

[10] Royal holds an authorization to write automobile insurance in British Columbia, although automobiles registered in this province must be insured for third party liability, no-fault benefits, and UMP by ICBC to the limits prescribed. Section 2(2)(b) is accordingly a term of Royal's authorization. That section, read with the definitions of an "action" and a "motor vehicle liability policy" in s. 1, precludes Royal from setting up a defence to this proceeding that might not be set up if its contract of insurance were evidenced in a form, and provided coverages against perils and for amounts required by law to be provided under a contract of automobile insurance issued in British Columbia.

[11] The question then becomes whether clause 7 of Royal's SEF 44 is consistent with an automobile insurance contract made in British Columbia as required by the law of this jurisdiction having regard for the form, the perils insured against, and the amounts of coverage afforded.

[12] Royal contends that, on a purposeful interpretation of the Regulation, clause 7 of its endorsement is not inconsistent with what the law of British Columbia requires. It maintains that the Regulation is part of a reciprocal interjurisdictional insurance scheme developed to ensure that those injured in automobile accidents will have adequate insurance available to them regardless of where an accident occurs. Royal says that the purpose of the Regulation is served by confining its meaning to the coverage and insuring limits required in this jurisdiction as distinct from the regulatory wording of the priority clause that forms part of the ICBC contract of automobile insurance. Royal says that the Regulation does no more than preclude an insurer which has issued a policy outside of this jurisdiction from raising a defence that would result in an injured person receiving less than would be available under the universal compulsory scheme ICBC underwrites.

[13] In support of its contention, Royal points to the fact that priority clauses do not affect the availability of insurance to those injured but rather affect only which insurer must respond first. Royal acknowledges the difference in wording between the regulatory provision and the clause in its endorsement but says the difference is of no consequence given that priority provisions are not precluded under the law that governs automobile insurance in this jurisdiction.

[14] Royal cites three authorities in particular: MacDonald v. Proctor (1977), 86 D.L.R. (3d) 455, 19 O.R. (2d) 745 (C.A.) aff'd [1979] 2 S.C.R. 153; Unifund Assurance Co. v. Insurance Corp. of B.C., [2003] 2 S.C.R. 63; and Anderson v. Co‑Operators Gen. Ins. Co. (1990), 75 D.L.R. (4th) 359, 51 B.C.L.R. (2d) 93 (C.A.).

[15] I find no real support for Royal's contention in either of the first two. Neither involved a question of whether a defence raised by an automobile insurer was precluded although, in both, a form of insurer's undertaking in common use that effectively incorporated the wording of s. 2(2) of the Regulation was considered.

[16] In MacDonald, it was held that a person who was liable for injuries caused by a motor vehicle accident in Ontario was not entitled to deduct from an award of damages against him no‑fault benefits paid by a Manitoba insurer to the person injured. The Manitoba insurer was not a party to the action. The case is cited for the proposition that precluding an insurer from raising a defence does not have the effect of incorporating all the legislated requirements of a jurisdiction into a contract of insurance made elsewhere. Unifund is cited to the same effect.

[17] In Unifund, it was held that ICBC was not liable under Ontario legislation to reimburse another insurer for no-fault benefits paid under a policy of automobile insurance issued in Ontario to two people who were injured in a motor vehicle accident in British Columbia. The undertaking given was determined to have no application to the facts of the case (Binnie J. for the majority at para. 96). The issue in Unifund, as in MacDonald, was the applicability of Ontario legislation. Here, it is not the applicability but the interpretation of legislation that is in issue.

[18] Anderson is a unanimous decision of this Court. Royal relies on it to support s. 2(2) being interpreted in a manner that it says is consistent with its purpose. In that case it was held that an insurer that had issued an automobile insurance policy in Alberta was precluded by s. 32(5)(a) of the Insurance Act, R.S.B.C. 1979, c. 200 (now s. 2(2) of the Regulation) from raising the limits of no-fault benefits provided under its policy as a defence to an action brought in British Columbia arising out of a motor vehicle accident that occurred here. The insurer was liable for no-fault benefits to the substantially greater limits provided by the regulations prescribing ICBC's coverage. The interpretation given to the legislation was said to be consistent with interprovincial legislative arrangements which are to provide a person injured in British Columbia, but insured elsewhere, with the benefits of the universal compulsory automobile insurance scheme available to a person insured here (p. 101 B.C.L.R.).

[19] In my view, what was decided and what was said in that case does not support Royal's contention. Indeed, it is to the contrary.

[20] Potts v. Gluckstein (1992), 8 O.R. (3d) 556, 14 C.C.L.I. (2d) 175 (Ont. C.A.) is an example of the way interjurisdictional arrangements have worked against ICBC. There it was held that a motorcyclist insured by ICBC, who was injured in Ontario by an uninsured driver, was entitled to coverage, although uninsured motorist protection was limited at the time by regulation to injury sustained in British Columbia. In Ontario, coverage of that kind was mandatory and was not limited to injury in that province. ICBC had given an undertaking that effectively incorporated the wording of s. 2(2) of the Regulation. It was thereby precluded from raising a defence, as it sought to do, that could not have been raised if its contract of insurance with the motorcyclist had been made in Ontario.

[21] Having particular regard for the interpretation that was given to the wording of what is now s. 2(2) of the Regulation and the reasoning employed in Anderson and Potts, I consider Royal is precluded from raising clause 7 of its SEF 44 in defence to Dr. Park's petition. Clause 7 is inconsistent with the provisions of an automobile insurance contract made in British Columbia. The insurance required by law in this province is provided in the Insurance (Motor Vehicle) Act Regulations. No section of those regulations can be said to equate to Royal's priority clause. Section 148.1(9) of the regulations is a priority clause upon which ICBC can rely, but it affords a different defence on a factual basis to the defence Royal raises on clause 7 of its endorsement.

[22] I can see no sound reason to confine the interpretation of s. 2(2) to the extent that Royal suggests. There is nothing in the wording of the Regulation or in the purpose it serves that warrants the limitation for which the insurer contends. In exchange for the opportunity to offer automobile insurance in British Columbia, Royal accepts having to forgo any defence not available in the automobile insurance coverage that is mandated by the regulations prescribing the universal compulsory scheme. Those regulations include Part 10, Division 2 that provides for UMP. The UMP provided by the Royal policy is accordingly primary coverage that is available to Dr. Park. ICBC is liable to her for UMP only as excess coverage.

[23] I would dismiss the appeal.

"The Honourable Mr. Justice Lowry"

I agree:

"The Honourable Mr. Justice Lambert"

I agree:

"The Honourable Mr. Justice Braidwood"

Citation:	*Park v. Insurance Corp. of British Columbia,*
	2004 BCCA 650