ICBC pays $75,000 punitive damages for coverage denial.

In McDonald v. ICBC, 2012 BCSC 283,  the plaintiff was involved in a 2007 collision. She was at fault for the crash. She consumed two to three glasses of wine prior to operating a vehicle. As she was driving she “turned the wrong way into an oncoming van” causing a collision and injuries to the other motorist. The plaintiff was issued a 24 hour roadside suspension and charged criminally with dangerous driving and alcohol related offences. Eventually the criminal charges were dropped and the plaintiff plead guilty to careless driving pursuant to section 144 of BC’s Motor Vehicle Act.

The injured van driver brought a claim against the plaintiff. ICBC eventually settled the claim for just over $182,000. ICBC held the plaintiff in breach of her insurance arguing the collision occurred as a result of impairment and sought to collect the money from her.

The plaintiff disputed ICBC’s allegations. She sued ICBC for a declaration that she is entitled to coverage and further for punitive damages. Madam Justice Ballance sided with the plaintiff. The Court found that ICBC failed to prove that the collision occurred as a result of alcohol consumption and further ordered that ICBC pay the plaintiff $75,000 for their ‘bad faith’ denial of coverage. In reaching this result Madam Justice Ballance provided the following reasons:

[249] An insurer does not have to have an iron-clad case in order to deny coverage. It is not expected to investigate a claim with the skill and forensic proficiency of a detective. Nor is it required to assess the collected information using the rigorous standards employed by a judge. The duty of good faith does not impose a standard of absolute liability in respect of an insurer’s wrong decision. The duty simply dictates that an insurer bring reasonable diligence, fairness, an appropriate level of skill, thoroughness and objectivity to the investigation, and the assessment of the collected information with respect to the coverage decision. My criticisms of the calibre of Ms. Baadsvik’s investigation and the shortcomings of her ultimate assessment should not be interpreted as suggesting that each individual omission or failing is, of itself, necessarily a violation of good faith and fair dealing. It is their cumulative effect that constitutes a breach of its duty of good faith.

[250] It is not possible to perform a fair and proper evaluation in the absence of a reasonably thorough underlying investigation. The latter precludes achievement of the former. And so it was, in the case at hand. Here, that deficiency was compounded by the other failings of Ms. Baadsvik’s evaluation of whether the plaintiff had been Incapacitated…

[259] ICBC engaged in settlement negotiations and concluded a settlement binding the plaintiff without appointing legal counsel on her behalf, all the while investigating her potential breach of contract. The plaintiff was never informed of the settlement discussions despite the fact that ICBC knew that the damages in the To Action were likely to be significant and that the plaintiff would potentially have to bear them personally. Indeed, after Ms. Baadsvik’s final discussion with Constable Wood on April 1, she was essentially on the brink of deciding that the plaintiff was in breach and that ICBC would not be indemnifying her. The nature and sequence of these events, all fully within ICBC’s control, was manifestly unfair.

[260] Ms. Baadsvik was asked whether, in making the decision that the plaintiff was in breach, any consideration was paid to the settlement of the To Action. She gave the unsatisfactory answer that she understood she had to wait until that settlement was concluded before she could advise the plaintiff about the breach and tell her how much money was involved.

[261] In my opinion, ICBC’s multiple failings in the investigation, assessment and breach decision that I have outlined, and its misconduct in relation to the To Action, respectively, contravened the duty of fair dealing and good faith owed to the plaintiff…

[263] This is an exceptional case. The nature of ICBC’s bad faith behaviour took different shapes throughout the time line. The overall handling and evaluation of the claim was overwhelmingly inadequate. ICBC also allowed its objectivity to be tainted by the fact that the claim indirectly involved the “very difficult” Mr. McDonald. While I recognize that the tainting of impartiality was only slight, it was nonetheless real and improper.

[264] In my opinion, ICBC’s conduct was harsh, high-handed and oppressive as those concepts have been developed in the jurisprudence, and marked a significant departure from the Court’s sense of decency and fair play. Some of the acts of bad faith were inadvertent and others were not and they persisted over a considerable period. The plaintiff was in a vulnerable position and suffered harm in consequence of ICBC’s misconduct, not all of which is tidily rectified by this Court confirming her right to be indemnified. ICBC would not be accountable for its bad faith in the absence of an award of punitive damages, which it can well afford. Such an award is justified to deter other insurers from engaging in similar types of misconduct, and to punish ICBC and condemn its breaches of duty…

[267] I declare that the plaintiff is entitled to indemnity from ICBC for all claims arising from the accident, including the To Action.

[268] I also award her the sum of $75,000 in punitive damages.