2004 BCCA 50 Batchelder v. Filewich

COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:	*Batchelder v. Filewich,*
	2004 BCCA 50

Date: 20040202

Docket: CA030423

Between:

Debra Batchelder, Philip Batchelder, Jarrod Batchelder,
an Infant by his Guardian Ad litem Philip Batchelder
and Jackson Batchelder, an Infant by his
Guardian Ad litem Philip Batchelder

Respondents

(Plaintiffs)

And

Walter Ricky Filewich and
J.J.H. Enterprises Ltd. doing business as Rent-A-Reck

Appellants

(Defendants)

Before:	The Honourable Mr. Justice Hall
	The Honourable Mr. Justice Low
	The Honourable Mr. Justice Lowry

J. D. James	Counsel for the Appellants
J. M. Cameron	Counsel for the Respondents
Place and Date of Hearing:	Vancouver, British Columbia
January 20, 2004
Place and Date of Judgment:	Vancouver, British Columbia
February 2, 2004

Written Reasons by:

The Honourable Mr. Justice Lowry

Concurred in by:

The Honourable Mr. Justice Hall

The Honourable Mr. Justice Low

Reasons for Judgment of the Honourable Mr. Justice Lowry:

[1] Double recovery of no-fault automobile insurance benefits where damages for injuries suffered in a motor vehicle accident are claimed is precluded in this province by legislation that requires such benefits to be deducted from any judgment to which a claimant might otherwise be entitled. Underlying this appeal is a dispute over the amount of the benefits that is, in the circumstances of this case, to be deducted. At issue is whether the deduction is to be the amount of $5,000 US in no-fault benefits for which an insurance policy issued in an American state provides an indemnity for medical expenses or the amount that has and will actually be incurred in medical expenses up to $150,000, such being the amount of what are commonly referred to as Part Seven Benefits provided when a vehicle is insured in this province.

[2] It is contended that the American insurer is liable for the greater amount on two grounds. It is first said that a Power of Attorney and Undertaking given by the insurer to the Superintendent of Insurance in this province in 1964, as part of a legislatively sanctioned reciprocating process between various provinces and American states, obligates the insurer to pay the greater amount. It is then said that the Out of State Coverage provisions of the policy it issued provide for the greater amount to be paid in any event. The first contention is at odds with a decision of this Court: Shea v. Shea (1985), 66 B.C.L.R. 92, 21 D.L.R. (4th) 716, [1985] 6 W.W.R. 641. The second contention is at odds with another decision of this Court: Rager v. Marwick (1997), 41 B.C.L.R. (3d) 145, 98 B.C.A.C. 56, 48 C.C.L.I. (2d) 88.

The Claim

[3] On February 14, 1998, near Irishman Creek, a motor vehicle owned and operated by Philip Batchelder was involved in an accident with another vehicle owned by J.J.H. Enterprises Ltd. and driven by Walter Filewich. Mr. Batchelder, his wife, Debra, and their sons, Jarrod and Jackson, were all injured. They incurred medical expenses totalling $67,088. Some $476 of that amount was incurred by reason of the injuries suffered by Mr. Batchelder and Jackson and is of no concern on this appeal. The balance was expenses incurred as a consequence of the injuries to Debra and Jarrod Batchelder. Both have incurred expenses well in excess of $5,000 US and the present value of their future expenses is estimated at $22,000.

[4] The Batchelder family lives in the State of Idaho and Mr. Batchelder’s car was insured there by California Casualty Indemnity Exchange Index Underwriters, Inc. (“California Casualty”). A claim was made against the insurer for all the medical expenses incurred by the family as a result of the accident, but it refused to pay more than $5,000 US to each of Ms. Batchelder and Jarrod. California Casualty then sued in Idaho for a declaration of the limit on its liability under its policy. The Batchelders filed a defence there and then commenced this action for damages against the appellants whose vehicle was insured by the Insurance Corporation of British Columbia. The Batchelders were advised that a successful defence of the Idaho action was doubtful and that they could have to pay a substantial award of costs. That action was then by agreement stayed pending the outcome of the proceedings here.

[5] The appellants have accepted liability for the accident, and all of the damages to which the Batchelders are entitled have been agreed except for their medical expenses. The appellants maintain that none of those expenses are recoverable (or that they must be deducted from what would be the total damages awarded) because California Casualty is liable to pay such as no-fault benefits.

[6] The parties have taken no steps to add California Casualty as a defendant in this action. That may be for good reason, but differing resolutions of the issue that is before two courts could defeat the Batchelders in attempting to recover all the medical expenses they have and will yet incur. The dispute is actually between two insurers, one of which is not before the court. The position taken by the appellants, or more particularly the insurer of their vehicle, in the face of the two governing decisions of this Court, has required the Batchelders to make the case for California Casualty here against which they defend in the courts of Idaho.

[7] The claim for their medical expenses was heard on a summary trial. The learned trial judge held that the members of the Batchelder family were entitled to judgment for all of their medical expenses save for those amounts that had been paid by California Casualty. In other words, it is only the $5,000 US that California Casualty has paid for the medical expenses of each of Debra and Jarrod Batchelder that is to be deducted from their full tort damage awards. The trial judge reviewed the authority cited and relied in the main first on Shea in concluding that the undertaking given by California Casual in 1964 did not obligate it to pay medical expenses comparable to Part Seven Benefits and then on Rager in deciding that the insurer’s obligation under the Out of State Coverage provisions of its policy for such expenses does not exceed $5,000 US.

[8] The appellants contend that there is reason to reconsider both Shea and Rager.

[9] The Batchelders maintain there is no reason to reconsider either decision and say further that, in the unusual circumstances of this case, they are entitled to recover their medical expenses from the appellants, in any event. They maintain that the provision of the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231 that precludes a double recovery that would otherwise in law be permitted does not prevent them from recovering here. Section 25(2) of the Act provides:

A person who has a claim for damages and who receives or is entitled to receive benefits respecting the claim, is deemed to have released the claim to the extent of such benefits.

[10] The Batchelders contend that the words “who receives or is entitled to receive benefits” have to be read as referring to a person who is clearly so entitled, citing in particular Tucker (Public Trustee of) v. Asleson (1991), 62 B.C.L.R. (2d) 78, 86 D.L.R. (4th) 73, 7 C.C.L.I. (2d) 217 (S.C.) reversed in part on other grounds (1993), 78 B.C.L.R. (2d) 173, 102 D.L.R. (4th) 518, [1993] 6 W.W.R. 45 (C.A.). They say that a person who would have to attempt to have at least one decision of this Court overruled to succeed in this jurisdiction, and who would have to successfully defend a declaratory action as well as make good a counterclaim in another jurisdiction, can on no account be said to be clearly entitled to receive the subject benefits. Their contention is one that found favour with the trial judge and the appellants challenge that aspect of his judgment as well.

[11] I proceed to address the scope of the undertaking given by California Casualty and the Out of State Coverage provisions of the policy insuring the Batchelders’ vehicle in the context of the applicability of the decisions of this Court in Shea and Rager.

The Undertaking

[12] It is important that this is not a case where the subject insurer is licensed to do business in British Columbia on terms requiring that it provide benefits comparable to those available when a motor vehicle is insured here. Nor is this a case where legislation governing insurance in the jurisdiction in which the subject policy was issued is shown to mandate the provision of comparable benefits. Apart from what might be taken from the wording of the policy itself, the only basis on which it is said that California Casualty is liable for the greater amount of medical expenses claimed is the form of the undertaking it gave in 1964. It appears to have been an industry standard. In material respects, as quoted by the trial judge, it provides:

A. 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;

B. 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;

C. 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.

[13] It is also important that an amended form of the Power of Attorney and Undertaking containing broader wording in clause C was introduced into general use in 1988. The original form of the undertaking and the amended form are referred to as the “old” and the “new” forms respectively. Diotte (Guardian ad litem of) v. Insurance Corp. of British Columbia (2000), 28 C.C.L.I. (3d) 125, 9 M.V.R. (4th) 210, 2000 BCSC 1779 contains a useful explanation of the current inter-jurisdictional scheme and the distinction between the old and the new forms of undertaking. California Casualty never executed the new form so that what is said in the disposition of this appeal is confined to the terms of the old form.

[14] The question that arises, then, is whether it can be contended that the wording of the undertaking – the wording of the old form – is to be interpreted as precluding California Casualty from defending a claim if made in this jurisdiction for all of the Batchelders’ medical expenses on the basis that the defence would not be available had the contract of insurance been entered into here, where no-fault medical benefits of $150,000 are by law provided. This Court’s decision in Shea, supra, can be said to defeat the contention because, in considering the old form of undertaking, it was held that the wording employed – “under a motor vehicle liability insurance contract” - limited the undertaking to not defending claims involving liability coverage and did not extend to no-fault benefits. No-fault benefits were said to constitute additional coverage that was not part of liability insurance: Shea, at 649-50. Thus the undertaking does not obligate an insurer to pay no-fault benefits that are comparable to those provided when a motor vehicle is insured in British Columbia.

[15] As noted by the trial judge, the precursor to Shea was MacDonald v. Proctor, [1979] 2 S.C.R. 153, 105 D.L.R. (3d) 169, [1980] I.L.R. para.1-1164, where the Supreme Court of Canada upheld a decision of the Ontario Court of Appeal, (1977), 19 O.R. (2d) 745, 86 D.L.R. (3d) 455, [1979] I.L.R. para.1-1135, determining that the old form of undertaking did not serve to convert a policy issued in Manitoba to one incorporating all of the mandatory requirements of a policy issued in the jurisdiction where an action is brought. What was at issue there was whether, under the provisions of the governing Ontario legislation at the time, benefits paid under a policy issued in Manitoba could be deducted from tort damages awarded by an Ontario court. It was held that there was no provision for deducting benefits other than those payable under contracts of insurance made in Ontario.

[16] In Shea, the Court was faced with a number of complex issues arising out of an accident that occurred in British Columbia where the owner of one of the vehicles involved was insured in Manitoba. The panel divided in part but was unanimous in concluding that neither the undertaking, which was given in 1971, nor what was in material terms a similarly worded provision of Manitoba legislation, first enacted in 1970, provided for the payment of no-fault benefits comparable to those in this province, although there was reciprocal provision for such being deducted from the tort damages awarded.

[17] It is said that the decision in Shea ought to be reconsidered because it has not been followed on the point since the later decision of this Court in Anderson v. Co-Operators Gen. Insurance Co. (1990), 51 B.C.L.R. (2d) 93, 75 D.L.R. (4th) 359, [1991] 2 W.W.R. 645. It is said that, since Anderson, the argument that the old form of undertaking does not include no-fault benefits has been made on a number of occasions and been consistently rejected. Indeed, it is said that the point has for some time been settled law such that it was not open to the trial judge to conclude that the wording of the old form of undertaking did not include no-fault benefits. His having done so is said to be “out of step” with the development of the law in this country and the United States. Reliance is placed on the recent decision of the Supreme Court of Canada in Unifund Assurance Co. v. Insurance Corp. of British Columbia (2003), 227 D.L.R. (4th) 402, [2003] 9 W.W.R. 1, 2003 SCC 40.

[18] Anderson was not a case where an undertaking had been given. It involved a claim for medical expenses by an infant passenger injured in a motor vehicle accident in British Columbia where the car in which he was riding was being driven by his mother. Her policy of insurance had been issued in Alberta and insured the infant as a named “insured” for no-fault benefits of $5,000. The insurer was licensed to do business in British Columbia and was by statute precluded from setting up any defence to a claim under the contract of insurance that could not be set up if the contract were evidenced by a “motor vehicle liability policy” issued in this province. The wording of the Insurance Act, R.S.B.C. 1979, c. 200 that had to be considered was s. 32(5):

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

a) 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.

[19] It was held that, under the Act and Regulations then in force in British Columbia, such a policy included no-fault benefits up to $100,000 and that the insurer was accordingly liable for an amount exceeding the stated amount of the coverage.

[20] The appellants contend that Shea was effectively overruled by Anderson because the approach to the insurer’s liability for no-fault benefits taken in Shea differed from the approach taken in Anderson. Unlike the analysis undertaken in Anderson, no consideration was given to the statutory definition of a “motor vehicle liability insurance policy” then in force, which included no-fault benefits, before concluding that what was described as “a motor vehicle liability insurance contract” in the undertaking given twenty years earlier did not include such benefits. The contention is that Anderson mandates that an insurer that gave an undertaking in the old form is liable for no-fault benefits as it would be under the Act if it was licensed to carry on business in this province.

[21] Support for what the appellants say is the approach that must be taken is found in two decisions of the Ontario Court of Appeal: Potts v. Gluckstein (1992), 8 O.R. (3d) 556, 56 O.A.C. 290, (1992) 14 C.C.L.I. (2d) 175; and Healy v. Interboro Mutual Indemnity Insurance Co. (1999), 44 O.R. (3d) 404, [1999] I.L.R. I-3704, 44 M.V.R. (3d) 167, leave to appeal refused [1999] S.C.C.A. No. 384. In the first, uninsured motorists’ benefits, and in the second no-fault benefits, were held to be recoverable in Ontario where the subject accidents occurred because undertakings in the old form had been given by out-of-province insurers.

[22] In Potts the case actually turned on a determination that uninsured coverage was in fact liability insurance, although the distinction drawn in Shea between liability coverage and no-fault benefits was said to be inapplicable to automobile insurance in Ontario and ought not to be followed there (pp. 559-60). Healy was, however, decided on the basis that the old form of undertaking was not limited in its application to the kind of motor vehicle insurance that was available in Ontario when it was given in 1964 but was “intended to have a prospective reach to Ontario law as it may develop”. It was said that requiring the insurer to respond only to a liability claim would frustrate the purpose of the inter-provincial reciprocal scheme (pp. 408-09).

[23] In my view, however, Anderson cannot be said to have overruled Shea. The frailty in the appellants’ contention lies in the fact that the issues in the two case were quite different. In Shea the Court was concerned only with the scope of the wording of an undertaking; in Anderson the concern was with the provisions of a statute. Shea was actually quoted in support of the judgment in Anderson with respect to statutory interpretation (p. 100), and I am unable to find anything in Anderson that in any way undermines Shea. On the point at issue here, Shea simply decided that the term “a motor vehicle liability insurance contract” employed in the old form of undertaking did not include no-fault benefits.

[24] The appellants cite a number of authorities that they say establish that Shea has not been followed on the point at issue here since Anderson and that the argument that succeeded in Shea on the old form of undertaking has been consistently rejected. Of the many cases upon which they purport to rely, I am able to find only three decisions in this jurisdiction where an undertaking in the old form was given: Marchand (Guardian ad litem of) v. Alberta Motor Association Insurance Co. (1994), 89 B.C.L.R. (2d) 293, [1994] 5 W.W.R. 764, 44 B.C.A.C. 178; Maligmat v. Ross (1995), 10 B.C.L.R. (3d) 318 (S.C.); and Court v. Albert Motor Association Insurance Co. (1994), 90 B.C.L.R. (2d) 195, [1994] 7 W.W.R. 171, 25 C.C.L.I. (2d) 74 (S.C.).

[25] Marchand is a decision of a judge of this Court sitting in chambers who denied leave to appeal an order refusing a stay of proceedings. The plaintiff had sued his Alberta insurer for no-fault benefits in British Columbia where he had been injured in a motor vehicle accident. The insurer contended he was forum shopping in an effort to recover more than he would in the courts of Alberta. The insurer had given an undertaking to the Superintendent of Insurance in this province in 1975.

[26] The learned chambers judge took the opportunity to explain in brief form the reciprocal arrangements that exist between provinces to permit non-residents to drive in a province without having to purchase additional insurance sufficient to meet the minimum requirements which of course differ between provinces. In so doing, he stated that the material wording of the legislation considered in Anderson was the same as the wording in the old form of undertaking that the Alberta insurer had given. He said that Anderson had followed Shea and that the effect of those decisions (and an earlier decision, Cunningham v. Manitoba Public Insurance Corp. (1979), 13 B.C.L.R. 199, 100 D.L.R. (3d) 424, [1979] 5 W.W.R. 397 (C.A.)) was that a claimant can obtain benefits at the higher limit in the scheme in this province. In my respectful view, the judge appears to have perceived the two decisions to stand for the same point. But what was decided in each was different. As discussed above, in Shea the undertaking was held not to include no-fault benefits while in Anderson the governing legislation was held to render payable benefits comparable to those available in this province.

[27] Maligmat is a trial judgment where one of many issues discussed was the deduction of no-fault benefits from the total awarded for injuries suffered in a motor vehicle accident that occurred in British Columbia. The plaintiff was entitled to no-fault benefits under a policy of insurance issued in the United States by an insurer who had given an undertaking to the Superintendent of Insurance in this province in the old form. In what occupied ten paragraphs of an 82 paragraph judgment, the learned trial judge held that the plaintiff was entitled to recover benefits comparable to what she could have recovered had her policy been issued in British Columbia from the American insurer such that her total award was to be reduced accordingly. The amounts involved were quite small. The judgment contains no discussion of the wording of the undertaking and neither Shea nor Anderson are mentioned. In my respectful view, the point was wrongly decided in that case.

[28] Court is a decision in a summary proceeding on a stated case. The question was whether an Alberta insurer was liable for no-fault benefits, in respect of a motor vehicle accident that occurred in British Columbia, that were comparable to those that would have been available if the contract of insurance had been made in this province. The insurer had given the Superintendent of Insurance an undertaking in the old form. The learned judge took the view that the insurer was obligated to pay what were substantially greater benefits than those for which the policy provided for substantially the same reason as that conclusion was reached in Anderson. However, he also concluded that the same obligation arose by virtue of the undertaking notwithstanding this Court’s decision in Shea. That, he said, was the result of the undertaking being interpreted in the context of the Alberta legislation as, in his view, the undertaking in Shea was interpreted in the context of the Manitoba legislation. It appears to me that a consideration of the undertaking was not necessary to his decision.

[29] The recent decision of the Supreme Court of Canada in Unifund Assurance, supra, does not appear to me to advance the appellants’ argument at all. The issue in the case was whether an undertaking given in the new form by the public insurer in this province rendered it liable to reimburse an Ontario insurer for no-fault benefits paid in consequence of injuries suffered in an accident in British Columbia. The majority held that it did not. The court’s decision in MacDonald, supra, was referenced as indicative of the limitations of undertakings given by insurers (¶ 98). I recognize that the majority decision cites the Ontario Court of Appeal decision in Potts, supra, with apparent approval, but not in respect of any aspect of the issue that is at odds with Shea.

[30] I do not consider there to be any basis on which to reconsider Shea. It is a unanimous decision of this Court that has stood for almost 20 years and, apart from the Ontario Court of Appeal decisions in Potts and Healy, it is not shown to have been questioned in this or any other jurisdiction. Indeed, it appears that the appellants greatly overstate the inconsistency in the development of this area of motor vehicle insurance law that they say it represents.

[31] Shea is consistent with the Supreme Court’s decision in MacDonald and it is, in my respectful view, an entirely sound interpretation of the old form of undertaking. I do not consider that an insurer who effectively undertook to provide coverage comparable to that provided in British Columbia by a liability insurance contract can be held to have undertaken to provide an entirely different kind of insurance coverage. The old form of undertaking may not now fully serve the purpose of the reciprocating insurance scheme for which it was given, but that is to be rectified by obtaining a broader form of undertaking where it is needed to meet the objectives of the scheme. It is not to be achieved by requiring an out-of-province insurer to provide coverage that is substantially different than the coverage that 40 years ago it undertook to provide.

[32] It follows that I would not accede to the first ground of appeal.

The Policy

[33] The appellants’ submission on the effect of the wording of the California Casualty policy can be more succinctly addressed. The Out of State Coverage provides:

If the state or province has:

1. A financial responsibility or similar law specifying limits of liability for bodily injury or property damage higher than the limit shown in the Declarations, your policy will provide the higher specified limit.

2. A compulsory insurance or similar law requiring a non-resident to maintain insurance whenever the non-resident uses a vehicle in that state or province, your policy will provide at least the required minimum amounts and types of coverage.

[34] The question then is whether the legislation in this province in force in February 1998, when the accident occurred, required Mr. Batchelder to maintain insurance in order to use his vehicle in British Columbia.

[35] In Rager, supra, in considering the same wording in a policy issued by another California insurer, this Court determined that, on a comprehensive consideration of the governing legislation, there was no such requirement.

[36] The appellants maintain that Rager should be reconsidered for essentially three reasons.

[37] The first reason is that no consideration was given to what is now s. 3 of the Motor Vehicle Act, R.S.B.C. 1996, c. 318. But, in my view, that section can have no application to non-residents. It provides for the acquisition of licence plates and insurance policies issued in British Columbia.

[38] The second reason is that s. 106 of the Motor Vehicle Act has been amended since Rager was decided. But that section relates only to proof of financial responsibility and does not affect the conclusion.

[39] The third reason advanced is that the decision in Rager is inconsistent with some American decisions and that the Court did not have the benefit of the decision of the Supreme Court of Michigan in Perry v. Sied, 611 N.W.2d 516 (2000). I am unable to see on what basis decisions of the courts in the United States could be said to justify the reconsideration of a decision of this Court interpreting legislation enacted in this province.

[40] I see no basis on which Rager should be reconsidered and I would not accede to the second ground of appeal.

Conclusion

[41] I conclude, then, that neither of the first two grounds advanced on the appeal can succeed. The undertaking given by California Casualty in 1964 did not obligate the insurer to pay no-fault benefits comparable to those that would have been available at the time of the accident had the insurance contract been made in this province. Nor did the Out of State Coverage provisions of the policy provide any entitlement to no-fault benefits exceeding $5,000 US.

[42] It follows that it is not necessary to consider the s. 25(2) argument advanced by the Batchelders that they cannot in any event be said to have received or to be entitled to receive their medical expenses.

[43] I would dismiss the appeal.

“The Honourable Mr. Justice Lowry”

I agree:

“The Honourable Mr. Justice Hall”

I agree:

“The Honourable Mr. Justice Low”