Canadian Underwriter

How these auto reforms could reduce liability exposure for hospitality clients

May 10, 2021   by David Gambrill

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B.C.’s move towards a form of no-fault auto insurance could wind up reducing liability exposure for commercial insureds in the hospitality and other high-risk sectors, according to a recent blog by Borden Ladner Gervais LLP.

The province’s no-fault amendments came into force on May 1, 2021. Among other things, the new regime:

  • bars legal action for motor vehicle accident claims (with some exceptions, see below);
  • increases healthcare and rehabilitation benefits to up to a maximum of $7.5 million per accident (an increase from the current limit of $300,000); and
  • expands income replacement benefits up to a maximum of $1,200 per week, based on an estimated gross annual income of up to $93,400 (an increase from the current limit of $740 per week).

Another key aspect of the new regime is that it does away with the principle of “joint and several responsibility,” which allowed trial lawyers to go after the proverbial “deep pockets” in auto accident claims.

“Under the previous regime, parties are joint and severally liable for all damages,” as Borden Ladner Gervais authors Leon Beukman, Emily Pitre, Julia Law, and Jennifer Pepper observe in a May 6 blog post published by Mondaq. “This means that an injured party can go after any one responsible party for the entire amount of the damages, and the responsible party then has to commence a separate claim to recover from a co-defendant.

“Under the previous regime, this means a venue [serving alcohol, for example] could potentially have to pay out a multi-million-dollar settlement if someone was seriously injured by a drunk driver the venue had overserved…

“Under the new regime, the venue would only be liable to the injured party for a portion of the non-pecuniary, punitive, exemplary, or other non-compensatory damages. Accordingly, no-fault insurance warrants a re-evaluation of certain industries in British Columbia that were previously seen as risky.”

The principle of joint and several liablity is relevant in so-called “social host” liability cases, in which the court determines who is responsible (and to what degree they are responsible) for an auto accident involving alcohol and impaired driving. Litigators in these cases will often attempt to pin responsibility on parties defended by “deep pockets” (i.e. such as insurers).

That’s because, theoretically, under the principle of joint and several liability, an insurer defending a client in a large auto claim could wind up paying for the entire court award and costs — even if their client was found to be only 1% responsible for the accident. This could potentially happen in cases where the other defendants did not have enough money to pay for the plaintiff’s court award or costs.

But under B.C.’s new no-fault auto insurance model, legal actions are barred for injuries arising from motor vehicle accidents, apart from some limited exceptions. These exceptions include lawsuits involving vehicle and vehicle part manufacturers, vehicle retailers, garage service operators, establishments licensed to serve alcohol, and drivers who cause bodily injury and are subsequently convicted of a prescribed Criminal Code offence.

But even for these exceptions, the recovery is limited to non-pecuniary, punitive, exemplary, or similar non-compensatory damages. Also, each defendant in these cases is now just “severally liable,” meaning that if more than one party is liable, each party is only responsible for paying its share of the damages. In other words, a defendant found to be only 1% responsible for an accident will only pay 1% of the legal award or costs.

This has implications for the hospitality sector and other high-risk insureds, as the blog authors suggest. Theoretically, if these and other establishments have their liability exposure reduced in auto crash cases, that could mean underwriters could be asked to review the risk. Currently, it is very difficult for hospitality organizations to find liability insurance, much less inexpensive coverage.

“The implementation of the no-fault insurance regime reduces legal costs, including litigation support required by many insured individuals,” the BLG authors note. “As the proposed legislation limits the circumstances in which a claim can be commenced, as well as the types of damages that can be recovered, no-fault insurance could reduce risk for various industries.

“The largest components of most personal injury cases are cost of future care and wage loss, so shifting these damages into a no-fault regime makes a significant difference in terms of exposure.”


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