Optional ICBC Insurance (12:XI)
|This information applies to British Columbia, Canada. Last reviewed for legal accuracy by the Law Students' Legal Advice Program on July 18, 2021.|
NOTE: The following portion of this chapter was written prior to April 30, 2021. Therefore, though it is written in the present tense, please be advised that it applies only to claims for accidents that occurred on or before April 30, 2021.
A. Introduction to OICs
Optional Insurance Contracts (“OICs”) are additional optional coverage that any person can purchase at their discretion. The following are some of the types of coverage, over and above the Basic Compulsory Coverage, that may be purchased at the owner’s option from a private insurance company. The term OIC includes, but is not limited to policies providing coverage for excess third-party liability, excess own vehicle damage, excess UMP coverage, and excess no-fault income replacement.
NOTE: Formerly, Part 9 of the IMVA Regulations (Extension Insurance) covered material under this part. Under the current legislation, it has been replaced by Part 4 of the IVA (Optional Insurance Contracts) and Part 13 of the IVR (Optional Insurance Contracts).
1. Limiting and Excluding Coverage Under an OIC
Section 61(1.1) of the IVA provides that an OIC that extends coverage in an existing certificate or policy may nevertheless limit the extended coverage as follows:
- by prohibiting a specified person or class of persons from using or operating the vehicle;
- by excluding coverage for a specified risk; or
- by providing different limits of coverage for different persons or risks or classes of persons or risks.
NOTE: The above prohibition, exclusion, and limit are not binding on the insured unless the policy has printed on it in a prominent place and in conspicuous lettering the words “This policy contains prohibitions relating to persons or classes of persons, exclusions or risks or limits of coverage that are not in the insurance it extends” (IVA, s 61(2)).
In an OIC, an insurer may provide for further exclusions and limits to coverage for losses in respect of:
- the loss of the vehicle;
- damage to the vehicle; or
- the loss of use of the vehicle.
Section 61(1.2) of the IVR provides that an OIC may not, in respect of third party liability insurance coverage:
- prohibit a person who is living with and as a member of the family of the owner of the vehicle from using or operating the vehicle; or
- exclude or provide different limits of coverage for that person.
Despite any provision of the IVA or IVR, an insurer is not liable to an insured under an OIC for loss or damage in circumstances specified in the owner’s policy if:
- the OIC relates to a vehicle that is not required under the Motor Vehicle Act to be licensed and insured (IVA, s 61(7)(a)); and
- the owner’s policy is endorsed with a statement that the insurer is not liable to the insured for loss or damage in those circumstances (s 61(7)(b)).
B. Types of OICs
1. Extended Third Party Legal Liability
Third Party Legal Liability insurance may be increased from the basic compulsory $200,000 (taxis and limousines require $300,000; buses $500,000) to a greater amount. The exclusions and conditions that apply to the basic Third Party Legal Liability coverage (Part 6) also apply to this extended coverage. See Section X.B.10: Forfeiture of Claims and Relief from Forfeiture and Section X.B.11: Breach of Conditions and Consequences.
2. Own Damage Coverage
Own Damage protection is provided by Collision, Comprehensive, or Specified Perils coverage. It covers loss or damage sustained to the vehicle named in the owner’s certificate.
a) Types of Own Damage Coverage
This insurance covers loss or damage to the insured vehicle resulting from upset or collision with another object, including the ground or highway, or impact with an object on or in the ground. This type of insurance is available with a wide choice of deductibles (IVR, s 150).
This insurance covers loss or damage from any cause other than collision or upset. In addition to the Specified Perils listed below, this includes vandalism, malicious mischief, falling or flying objects, missiles, and impact with an animal. Comprehensive coverage is subject to various deductibles (IVR, s 150).
(3) Specified Perils
This insurance is more limited than Comprehensive. It covers only loss or damage caused by fire, lightning, theft or attempted theft, windstorm, earthquake, hail, explosion, riot or civil commotion, falling or forced landing of an aircraft or part of an aircraft, rising water or the stranding, sinking, burning, derailment or collision of a conveyance in or on which a vehicle is being transported on land or water (IVR, s 150).
b) Limit on Liability
The limit on the amount of indemnity payable is determined, by whichever of the following is lesser (IVR, s 169 and Schedule 10 s 5):
a) the cost of repair of the vehicle and its equipment;
b) the actual cash value of the vehicle and its equipment; or
c) the declared value of the vehicle and its equipment.
c) Exclusion of Liability
Own Damage Coverage does not cover loss or damage:
- to tires, unless the loss or damage is caused by fire, theft, or malicious mischief, or is coincidental with other loss or damage;
- to any part of the vehicle resulting from mechanical breakdown, rust, corrosion, wear and tear, explosion within the combustion chamber, or freezing, unless caused by fire, theft, malicious mischief or coincidental with other loss or damage;
- consisting of mechanical or physical failure of the vehicle or any part of it; or
- to contents of the vehicle including personal effects.
Other situations to which coverage does not apply are:
- conversion (i.e., when a seller does not own the vehicle sold);
- voluntary parting of ownership, whether or not induced to do so by fraud; and towing of an uninsured vehicle that is required to be insured
d) Coverage Available Through ICBC Policy
Although Part 9 of the IMVAR has been repealed and many of its sections are not covered by the IVA or IVR, ICBC continues to implement much of the content of that Part through internal policy. The following are types of policies that are available through ICBC policy.
(1) Loss of Use Coverage
Loss of Use coverage can be purchased only in conjunction with Own Damage (collision, comprehensive, or specified perils coverage). It provides reimbursement up to the limits purchased by the insured for expenses incurred for substitute transportation when a valid claim can be made under Own Damage coverage. Subject to the regulations, an insurer may provide for exclusions and limits of loss in an OIC, in respect of loss of use of the vehicle (IVA, s 65).
An OIC providing insurance against loss of use of a vehicle may contain a clause to the effect that, in the event of loss, the insurer must pay only an agreed portion of any loss that may be sustained or the amount of the loss after deduction of a sum specified in a policy. For such a clause to have legal effect, it must be printed in a prominent place on the policy and in conspicuous lettering contain the words “this clause contains a partial payment of loss clause” (IVA, s 67).
(2) Limited Depreciation Coverage
This optional coverage is available for first owners of certain new vehicles who have purchased Own Damage Coverage. Its purpose is to protect the owner from the high rate of depreciation during the first two years of the vehicle’s life, when such depreciation is a significant factor in payment of a claim by ICBC. Total Loss Payout is the full purchase price or the manufacturer’s list price, whichever is less. Damage for other than a total loss will be repaired with similar kind and quality of parts, without depreciation.
e) Forfeiture of Claims and Breach of Conditions
Apart from exclusions described above, a claim may be forfeited:
- under s 75 of the IVA, which states that an insured must not falsely describe the vehicle in respect of which the application is made, misrepresent or fail to disclose in the application a fact required to be stated, violate a term or condition of the insurance contract, or wilfully make a false statement with respect to a claim;
- under s 169 of the IVR;
- if certain conditions are breached, including failure of the insured to comply with the IVR; or
- if any regulation is breached by the insured. For an exhaustive list, see IVR, s 55.
The principal examples of failure to comply with, or breach of, regulations are:
a) being under the influence of liquor or drugs so as to be incapable of proper control of the vehicle;
b) being convicted for an offence under ss 249, 252, 253, 254, or 255 of the Criminal Code;
c) operating a vehicle when not authorized and qualified (IVR, s 55);
d) using the vehicle in illicit trade, or to avoid arrest, or other police action (s 55);
e) towing an unregistered, unlicensed trailer (s 55);
f) permitting others to breach a condition (s 55);
g) using a vehicle in a manner contrary to the insured person’s statement in their application for coverage, the result being a form of breach of condition. This happens most commonly in cases where coverage of a vehicle for “pleasure purposes” is applied for, and the vehicle is damaged when in fact being used to take the insured person to or from work (s 55 sets out the specifics);
h) failing, without reasonable cause and to the prejudice of ICBC,
(i) to make a police report within 48 hours after the discovery of theft, loss, or damage;
(ii) to obtain a police case file number; and
(iii) to advise ICBC within seven days of making the report to the police of the circumstances of that loss or damage as well as the police case file number (s 136 (a)); and
i) failing, without reasonable cause and to the prejudice of ICBC, to comply with ss 67 or 68 of the MVA, or similar provisions in the law of another Canadian or American jurisdiction, relating to the duties of a driver directly or indirectly involved in an accident (IVR, s 136(b)).
f) Exceptions to Forfeiture
If a vehicle is used “contrary to statement in application”, the right to indemnity is not forfeited when the damage occurs during a mere “occasional” use of the vehicle in violation of the statement in the application.
g) Reporting Accidents
Coverage may be denied where an insured person fails to comply with ss 67 or 68 of the MVA, without reasonable cause and to the prejudice of ICBC The onus of proving compliance lies on anyone who is bound to report.
Section 67 of the MVA deals with the duty to file accident reports in cases where aggregate damage apparently exceeds $1,000, or where there is any bodily injury, and provides that the reports are normally confidential.
Section 68 deals with the immediate duties of persons in charge of vehicles involved in a highway “incident”, namely: to remain at the scene, render assistance, and provide identification of person and insurance coverage. If the other vehicle is unattended, the driver of the colliding vehicle must leave full identification conspicuously posted.
Any breach of these duties is an offence punishable under the MVA. Similar duties are created by ss 249 and 252 of the Criminal Code. A breach of them can result in more severe penalties. These duties apply to any highway “incident” regardless of any insurance aspects of the case, and even if the driver was only “indirectly” involved in the incident.
There is some confusion about which claims must be brought within one year of the accident and which have a limitation period of two years. The IVA stipulates that any action by an insured person against ICBC “shall be commenced within one year after the happening of the loss or damage, after the cause of action arose, or after the final determination of the action against the insured (IVA, s 17 & 76(7)). IVR, s 103, on the other hand, stipulates that no action shall be brought against the Corporation for loss or damage under Part 7 of the IVR after the expiration of two years from the occurrence of the loss or the last day benefits were provided. From a practical point of view, it is almost always better to commence an action as soon as possible to avoid any problems with limitation periods.
i) Dispute Resolution and Appeals Process
(1) How Decisions Regarding Liability are Made
Disputes frequently arise when the vehicle of a person insured by ICBC is damaged by another insured person. In that situation, an adjuster will decide the degree of fault between the two parties. The adjuster’s decision is based on traffic regulations, and the rules of negligence, with the party in contravention of the MVA generally being found at fault. If both parties have contravened some regulation, however, a 50-50 assessment is often made. This is also the case when there are no independent witnesses.
(2) Appeal Process: Two Routes
If a client is dissatisfied with an adjuster’s decision, there are two available courses of action:
a) the client can go through ICBC’s internal appeal procedure by asking the adjuster to review their decision and, if there is no change, by asking the claims manager to review it. If the client is still not satisfied, the third step is to present the client’s case to an appeal panel; or
b) the client can sue. This is commonly the most satisfactory course, particularly where the amount in issue is relatively small, as where the damage is about the same amount as the “deductible”. Such an action is not brought against ICBC under the policy, but against the driver (and owner, MVA, s 86) whose negligence is said to have caused the accident. In such a case, that ICBC was not liable to pay the “deductible” to its own insured does not relieve the negligent party from liability, assuming always that negligence can be established.
There are two ways in which to frame the action. The plaintiff can either claim the total amount of damage resulting from the negligence, even though ICBC has already paid a portion of it, or the plaintiff can claim merely the amount that ICBC has not paid. Remember, however, that a plaintiff cannot collect twice, and if they sue for more than the deductible, they may be held to be acting as a trustee for the Corporation and therefore liable to account for anything in excess of the deductible. In either case, the plaintiff bears the onus of proving the negligence alleged against the defendant.
NOTE: If ICBC denied liability to indemnify a person insured by it and that person is sued, ICBC is entitled to apply to the court to be joined as a third party (IVA, s 77(3)). Upon being made a third party, ICBC can then defend the action fully, despite its previous denial of liability to indemnify the defendant (IVA, s 77(4)). In West v Cotton (1994), 98 BCL R (2d) 50 (SC), the third party, ICBC, conducted the defence of a defendant to whom it denied coverage and who did not participate in the proceedings. Having succeeded in proving his claims, the plaintiff was not entitled to recover their costs, with one exception: that being against the third party. In this case, ICBC would have suffered significant prejudice if it had been precluded from presenting its defences as third-party since the defendant did not demonstrate any interest in maintaining the action.
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