No-Fault

If a window from your building falls and injures a driver of a vehicle, can your insurer deduct no-fault benefits paid to the driver?

Insurers and adjusters who deal with insureds in British Columbia may wish to note an interesting and difficult nuance in damages law in motor vehicle accident cases. While the obvious situations involve insureds who are motor vehicle accident defendants with automobile insurance coverage (with B.C. or non-B.C. motor vehicle insurers), the problem arises in those occasional cases involving insureds who are not motor vehicle operators and who are, accordingly, looking to CGL or other non-automobile coverage.

The paradigm situation, which raises no particular difficulty, is where a plaintiff is injured in a motor vehicle accident by a defendant also driving a vehicle and covered by an automobile policy. In B.C., the defendant’s coverage is usually with ICBC, but coverage could be with any automobile insurer (e.g. where the defendant is from out of province).

In such cases, the no-fault benefits (called “Part 7 benefits” in B.C., and sometimes called “Section B benefits” in other provinces) received by the plaintiff from ICBC (under the plaintiff’s first party coverage) are deducted from the tort award of damages and judgment is entered for the balance of damages awarded.

No deduction is made

But consider another example, less common but entirely plausible: A plaintiff (owner/driver) is injured because, and only because, a plate glass window falls off a building onto the plaintiff’s car. The plaintiff likely receives no-fault benefits from ICBC. No other defendant is in play. Obviously, the building owner is not covered for this situation under an automobile policy; rather, the building owner calls on its CGL coverage. It might be thought, especially by the building owner and its insurer, that the plaintiff’s no-fault benefits should be deducted from the tort award, as is usually done. But actually, in this circumstance, the deduction is not made.

In short, the deduction of no-fault benefits is only made where there is at least one defendant covered under an automobile insurance policy.  In the hypothetical above, as there is no defendant covered by automobile insurance, no deduction would be made for the Part 7 benefits received by the plaintiff.

Court decisions

The usual deduction of no-fault benefits is based on Insurance (Vehicle) Act, R.S.B.C. 1996, c. 231, s. 83 (before June 2007, this was the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231, s. 25). Although the wording of s. 83 appears to be substantially different than its predecessor, the meaning and effect is virtually identical. The well-recognized legislative intent of the deduction is: (1) to shift responsibility from the tortfeasor to the no-fault insurer, and (2) to prevent double recovery; Fisher v. Wabischewich; Baart v. Kumar. The wording of s. 83 (and earlier, s. 25) is not crystal clear that the deduction applies only where the defendant is covered by an automobile policy. However, it has been expressly held that deduction only applies in cases involving a defendant insured by an automobile policy. At the same time, it has been held that the deduction applies not only to defendants insured by ICBC, but to any defendant insured by any automobile insurer. This is the effect of the B.C. Court of Appeal decision in Ruckheim v. Robinson, where it was said (emphasis added):

“I think it is clear that the purpose of [what is now s. 83] was to continue to provide that benefits were only deductible where the tortfeasor was insured under a contract of automobile insurance. . . . and does not apply where the tortfeasor is not so insured . . .  

I respectfully agree [that the deduction applies to those] who are insured by a policy of automobile insurance. In so stating, however, I would not limit the protection afforded by the section to I.C.B.C., but extend it to any automobile insurer.”

This conclusion stemmed not so much from the clear words of the section (then s. 24), but from the nature and purpose of the legislation overall. The Court in Ruckheim started by looking at the original automobile insurance legislation (enacted in 1973) and held in part (emphasis added): “Similarly, s.-s. (5) was concerned with the liability of the tortfeasor whose liability … was reduced to the extent of the payment of the no-fault benefits. Again, that subsection applied only where the tortfeasor was insured under a contract of automobile insurance.“

The Court noted that the 1977 replacement legislation, which was very differently worded, was to the same effect (emphasis added): “This scheme of making no-fault benefits deductible only where the tortfeasor was insured under a contract of automobile insurance was continued in 1977.”

The Court then came to the same view about the legislation as it stood in the case at bar in 1995 (in para. 63, quoted above).

Although the current Insurance (Vehicle) Act s. 83 is rather differently worded, its overall tenor is similar to its legislative predecessors. Accordingly, it is most likely that, if faced with the question again in light of the wording of s. 83, a court today would follow Ruckheim.

One final nuance of note is that the deduction applies so long as at least one defendant is insured by an automobile policy. In a multi-party motor vehicle lawsuit, it is highly likely that at least one defendant will be covered by automobile insurance (either ICBC or other insurer). Accordingly, the s. 83 deduction will be made, to the benefit of all the defendants (even those not insured under automobile insurance). This is the result of the decision in Brennan v. Singh. (Incidentally, on appeal, the Court of Appeal expressly refused to consider this part of the trial Court’s reasons and dismissed the appeal on other grounds.)

Barbara Devlin is a partner with Alexander Holburn and Gregory Pun is the director of research and head of the appeals practice advisory team at Alexander Holburn. They are both members of Canadian Defence Lawyers.