No-Fault Benefits in B.C. And Out-Of-Province Auto Insurers: The Alberta Court of Appeal Slams The Door!

An Alberta vehicle insured by an Alberta auto policy and driven by an Alberta resident is involved in a single-vehicle accident in B.C.  rendering the driver quadriplegic.  The limits of no-fault medical benefits under the Alberta policy is $10,000, although the same limits under a B.C. policy are $150,000.  How much must the Alberta insurer pay its Alberta insured for no-fault benefits?

This question has perplexed out-of-province auto insurers for many years.  It involves an analysis of certain provisions in each province's "Insurance Act", the terms of a certain "Power of Attorney and Undertaking" filed by most insurers as part of an inter-provincial regime for reciprocal auto coverage as well as often conflicting case law respecting policy interpretation and jurisdiction of the B.C. Court to consider no-fault claims by Alberta residents.

Most of these issues are canvassed in detail in a 1995 article by Nigel Kent entitled "No-Fault Benefits in British Columbia:  Must Out-of-Province Insurers Pay the Same as ICBC?" available on Clark Wilson LLP's website.

As of early 2001, the situation was basically as follows:

• the B.C. courts were generally prepared to entertain lawsuits by Alberta residents to enforce no-fault benefits coverage under an Alberta policy so long as the accident occurred in B.C.;  
• in such cases, the B.C. courts ruled that the Alberta insurer must extend no-fault benefits coverage up to the (significantly higher) B.C. limits;  
• in order to avoid this result, Alberta insurers often started pre-emptive actions in the Alberta courts seeking a declaration that the insurer only had to pay no-fault benefits to the (much lower) Alberta policy limits; and  
• assuming the insurer won the "race to the courthouse", the Alberta courts restricted the insured's claim to the (much lower) Alberta limits.

In the April 2001 decision of Lindblom v. Wawanesa Insurance, the Alberta Court of Appeal has now slammed the door on such pre-emptive declaratory actions and has clearly ruled that, if the accident occurs in B.C., the Alberta insurer must pay no-fault benefits to the higher B.C. limits regardless of where any lawsuit is brought.

The Alberta Court of Appeal reviewed many of the relevant authorities (including the Kent article referred to above) and was highly critical of the insurer's "procedural maneuvering" designed to try and limit exposures to the lower Alberta limits.  In a departure from earlier case law, the Court ruled that the Alberta legislation itself (Section 32 of Alberta's Insurance Act) clearly meant that "the applicable insurance limit is the greater of two limits:  the limit where the policy was issued, and the limit where the accident occurred".  In the Lindblom case, because the accident occurred in B.C., that meant the much higher B.C. limits were payable by the Alberta insurer.

In an unusual move, the Court ordered that a copy of its decision be delivered to the Superintendents of Insurance for both B.C. and Alberta.  The unstated purpose of such a direction is presumably to encourage the Superintendents to take licensing or other disciplinary action against insurers who continue to deny benefits for higher policy limits.

Readers who would like to receive a copy of the Lindblom v. Wawanesa Insurance decision or who have any questions regarding out-of-province insurance issues in B.C. are welcome  to contact Nigel Kent at (604) 643-3135 or npk@cwilson.com.