Bad Faith: Strike One For The Good Guys

It is now commonplace for allegations of bad faith and claims for aggravated and punitive damages to be advanced in disputes against insurers. One tool which insurers have at their disposal in appropriate cases is to apply for an order striking the bad faith claim under Rule 19(24) (a) of the Rules of Court for disclosing no reasonable claim and being destined to fail. Such a step was successfully taken by ICBC and upheld on Appeal in the recent decision of Planidin v. ICBC 2004 BCCA 498.

There the plaintiff was suing out of a incident of damage to her automobile which occurred while it was in the care of repairers. She sued the repairers and those involved in the accident that initially caused the damage, but she also sued ICBC and an adjuster for aggravated and punitive damages. The allegations were that ICBC and the adjuster acted in bad faith, and breached contractual, statutory, and fiduciary duties in their dealings with the plaintiff, all of which she maintained stemmed from the fact that she had purchased collision coverage from ICBC for her automobile.

The Plaintiff sought to bring a claim against ICBC based on the contention that, when she first reported the damage, she should have been told that she could make a claim directly against ICBC under her collision coverage rather than pursuing the repairers. The plaintiff argued that not advising her of this alternative was a failure to exercise good faith.

The Court of Appeal looked at whether the claim for failure to exercise good faith could succeed in such circumstances and noted an absence of any case law to support the suggestion that an insured person may look to an underwriter to advise on coverage. The Court noted that the relationship between insured and insurer is purely contractual in nature and that contracts of insurance contain obligations to indemnify in return for the premium paid, not obligations to advise on claims that might be made. The principle of good faith inherent in insurance contracts was broadly expressed by the Court of Appeal as:

However, the Court of Appeal went on to hold that there was no basis in law for the assertion that an insurer's obligation to act in good faith carried with it an obligation to give advice on coverage and the claims that might be made against an insurer, particularly where no inquiry in that regard is made and no service of that kind is offered.

As it was "plain beyond question" that the plaintiff's claim against ICBC and the adjuster was bound to fail, the Court ruled the judge had been correct in striking the pleadings and the appeal was dismissed.

Insurable Interest Subscribers who would like to read the decision in full can access the Reasons for Judgment at:
http://www.courts.gov.bc.ca/Jdb-txt/CA/04/04/2004BCCA0498.htm

There are several articles on our website about bad faith: http://www.cwilson.com/cgi/webadmin/search.cgi?query=bad+faith

Readers with any questions regarding bad faith issues are invited to contact Nigel Kent at (604) 643-3135 or npk@cwilson.com, or Krista Prockiw at (604) 643-3105 or kxp@cwilson.com).