IN THE SUPREME COURT OF
BRITISH COLUMBIA

Date: 20121213

Docket: M119991

Registry:
New Westminster

Between:

Ryan James Milton
McCord, by his

Litigation
Guardian, Adelene McCord

Plaintiff

And:

Insurance
Corporation of British Columbia and

Western Assurance
Company

Defendants

Before:
The Honourable Mr. Justice A. Saunders

Oral Reasons for Judgment

In
Chambers

[1]            
THE COURT: The plaintiff applies for a declaration that Statutory
Accident Benefits Schedule – Accidents on or after November 1, 1996, O. Reg.
403/96, s. 57(1.1) (the “Regulation”) does not apply to his
application for benefits under an insurance policy  issued in Ontario to the
parents of the plaintiff by the defendant Western Assurance Company (the
“Western Policy”).

[2]            
The plaintiff was injured as a pedestrian in an automobile accident here
in British Columbia. He has been paid no fault benefits by ICBC. After electing
to receive benefits from ICBC, he made a claim under the Western Policy.

[3]            
There is an issue in the underlying action as to whether the plaintiff
was, in fact, an insured under the Western Policy, and there is a further issue
as to the amounts that would be payable to Mr. McCord as benefits. The
subject matter of this application today is whether or not Western Assurance
can also rely in this action on s. 57(1.1) of the Regulation to
exclude liability for payments under the insurance policy.

[4]            
Subsection 57(1) of the Regulation sets out the benefits that are
to be paid in respect of an accident that occurs in a province other than
Ontario. Subsection 57(1.1), which is the subsection relied upon by Western Assurance
in this case, provides:

(1.1) Subsection (1) does not
apply if the person receives benefits under the law of the jurisdiction in
which the accident occurred.

Western Assurance says that Mr. McCord has elected to
take benefits from ICBC, he has received benefits from ICBC, and therefore is
not entitled to benefits otherwise payable under s. 57(1) of the Regulation.

[5]            
The plaintiff’s position is that Western Assurance cannot rely on the Regulation
to limit benefits payable, because of aspects of the statutory insurance scheme
in Ontario, and because of the wording of an undertaking given by Western
Assurance, as an out-of-province motor vehicle insurer, to the B.C.
Superintendent of Financial Institutions.

[6]            
Section 252 of the Ontario Insurance Act, R.S.O. 1990, c. 1.8,
s. 252(1), reads:

Every motor vehicle liability policy issued in Ontario shall
provide that, in the case of liability arising out of the ownership or,
directly or indirectly, out of the use or operation of the automobile in any
province or territory of Canada, in a jurisdiction of the United States of
America or in any other jurisdiction designated in the Statutory Accident Benefits
Schedule,

(a) the insurer is liable up to the
minimum limits prescribed for that province, territory or jurisdiction if those
limits are higher than the limits prescribed by the policy;

(b) the insurer will not set up a defence to a claim that
could not be set up if the policy were a motor vehicle liability policy issued
in that province, territory or jurisdiction;

[7]            
The plaintiff’s position in this case is that by relying on the Ontario Regulation,
Western Assurance is, in effect, setting up a defence to the coverage claim
which is not available in British Columbia.

[8]            
Western Assurance is also a signatory to the Power of Attorney and
Undertaking (the “PAU”) filed with the Superintendent. Under the PAU, Western Assurance
has given undertakings to appear in any action against its insured; to serve
its insured with any notice or process it receives from officials; and:

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 laws relating to motor vehicle liability insurance
contracts or plan of automobile insurance 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, in respect of any kind or
class of coverage provided under the contract or plan and in respect of any
kind or class of coverage required by law to be provided under a plan or
contracts of automobile insurance entered into in such Province or Territory of
Canada up to the greater of

(a)  the amounts and limits for
that kind or class of coverage or coverages provided in the contract or plan,
or

(b)  the minimum for that kind or class of coverage or
coverages required by law to be provided under the plan or contracts of
automobile insurance 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 amounts and limits as
may be required by the laws of the Province or Territory.

[9]            
Western Assurance says that there has been no violation on its part of
the PAU; it has not set up a defence as to coverage, but has simply taken a
position as to the amount of coverage available. Western Assurance points to Froese
v. I.C.B.C. (1988), 31 B.C.L.R. (2d) 231 (BCCA), in which the Court of
Appeal agreed with the chambers judge’s characterization of Undertaking “C” of the
PAU as having been drafted in two parts: one prohibiting the foreign insurer
from avoiding coverage which could not be avoided by a local insurer, and
another concerned with the minimum amount the foreign insurer must pay. That is
a correct characterization of the undertaking in Froese, however it is a
misreading of Froese to say that the prohibition on raising defences in
the first provision of the PAU deals only with coverage defences and not with
defences as to limits of benefits payable.

[10]        
The PAU sets out two provisions. One is an undertaking not to raise
defences. The other is an undertaking to pay limits as set out in (a) and (b)
of the PAU. A “position” taken by a foreign insurer that only the minimum
amount is payable, and not the full amounts otherwise payable under the foreign
insurer’s policy, is, in every sense of the word, a defence. The position being
taken here by Western Assurance is one of the types of conduct which the PAU is
designed to prevent.

[11]        
Western Assurance also relies upon the decision of this court in Schuk
v. York Fire & Casualty Insurance Co., 2010 BCSC 1557, a decision of
Madam Justice Brown, sitting in chambers. In my view, the Schuk case cannot
assist. In Schuk, the defendant, Manitoba Public Insurance Corporation (“MPIC”)
was able to avoid liability for payments, under what in Manitoba are referred
to as Personal Injury Protection Plan (“PIPP”). This, however, was not because
MPIC was held to be taking a defence under the policy that was not available to
an insurer in British Columbia. Rather, the judgment is clear in distinguishing
PIPP benefits from no fault benefits. PIPP benefits are not benefits payable under
a contract of insurance; they are payable purely as a result of a statutory
scheme. Therefore, the undertaking under the PAU, which only covers payments
that an insurer is obliged to make under a motor vehicle liability insurance
contract plan, has no application. MPIC’s liability was limited in that case to
paying the minimum amount, which it did not contest.

[12]        
In my view, the raising of the provisions of the Regulation by
Western Assurance is a defence within the meaning of the PAU, and reliance on
those provisions as a defence would constitute a breach of the undertaking under
the PAU.

[13]        
The application is therefore allowed, and s. 57(1.1) of the Regulation
will have no application to Mr. McCord’s claim for benefits.

“A.
Saunders J.”