The Continuing Saga of Bad Faith and Hapless Insurance Companies

While one is perhaps hesitant to term "hapless" the largest auto insurer in the country (ICBC), one cannot help but feel sympathy for the plight of the adjuster tarred with a completely unwarranted ruling of "bad faith" in the recent B.C. Supreme Court decision of Thornber v. ICBC.  It is sometimes said that "hard cases make bad law" and the Thornber case surely qualifies.

In British Columbia, it is an offence for a driver of a vehicle to not remain at the scene of the accident.  ICBC has a "statutory" auto policy in the sense that coverage is provided by the Regulations issued under the Insurance (Motor Vehicle) Act.  One such regulation provides that ICBC owes no coverage to any insured who "without reasonable cause and to the prejudice of ICBC fails to remain at the scene of an accident".

On March 29, 2002 Mr. Thornber was drinking beer at the local pub in Sechelt, B.C.  He bought some beer at the off-sales and drove towards home approximately 10 kilometers away.  On the way, his truck left the road, flipped over and landed upside down in a ditch.  Mr. Thornber got out of his truck, left the keys in the ignition with the engine running, walked home, entered his house through a back window and allegedly drank more beer.

In due course, the police came calling.  When told that Mr. Thornber had been drinking after the accident, the police decided there was no point in having Mr. Thornber submit to a breathalyzer but did issue him a ticket for driving without due care and attention.  Three weeks later Mr. Thornber attended with a lawyer to an ICBC claims office and gave a statement to the ICBC claims adjuster.  She gave him a form letter stating that ICBC was conducting an investigation and that they were concerned with respect to a possible policy breach.  She advised him that alcohol was a concern.

Approximately a week later, the adjuster spoke with the investigating constable.  She explained that there were three types of charges that might prevent the payment of Mr. Thornber's insurance claim, namely, impaired driving, failing to provide a breath sample and failing to remain at the scene. She told the officer she had to be sure that the insured was not going to be charged with any of these offences before she paid out the collision claim.  The investigating constable later testified that "a light bulb went on" in his head when he was asked the question by the adjuster and a couple days later he issued Mr. Thornber a ticket for failing to remain at the scene of the accident.  As at the date of the insurance case, no court date had been set for the offence.

ICBC denied coverage for the collision claim invoking the breach referred to above (failing to remain at the scene of the accident without reasonable cause and to the prejudice of ICBC).  Mr. Thornber promptly sued ICBC to enforce coverage.

Justice Allan concluded it was not reasonable for Mr. Thornber to have left the scene of the accident and then turned to the issue of whether ICBC had been prejudiced in the circumstances. Justice Allan acknowledged it was certainly possible that Mr. Thornber's alcohol consumption had contributed to the accident and also acknowledged there was "an air of reality" to ICBC's submission the insured knew that drinking after the accident would be a potential defence to an impaired driving charge. And the court expressed sympathy for the adjuster's concerns that a claim not be paid out before all charges were laid.

But then, unbelievably, the court concluded:

1.   The adjuster should not have alerted the police to 
       the three possible offences that might create grounds 
       for denying coverage to the insured;

2.   Rather, the adjuster should simply have made the 
       narrow inquiry whether the insured had been charged 
       with failure to remain at the scene of the accident; and

3.   The "volunteering" of the additional information to the 
       police amounted to a "breach of its duty of good faith 
       to its insured" which prevented ICBC from invoking the 
       policy breach in the circumstances.

There is no analysis whatever in the case of the law on bad faith generally or the recent appellate rulings on the standard of care imposed on insurers and adjusters.  

The insurance industry often observes, perhaps cynically, that the courts bend over backwards in an insured's favour.  The Thornber decision is an example of just that and is a singularly unhelpful and unwelcome addition to the burgeoning case law on bad faith.

Readers interested in reviewing the Thornber decision can access it at:
http://www.courts.gov.bc.ca/jdb-txt/sc/03/03/2003BCSC0326.htm  

Readers looking for a more in depth analysis of the law of bad faith in Canada may wish to review our recent article on the subject at:
http://www.cwilson.com/pubs/insurance/npk10/