2 - Third Party Liability

Question 1

What are the four legal concepts that regulate the settlement of automobile accident claims?
2-3

Answer 1

Negligence, onus of proof, subrogation, and absolute liability.

Question 2

Who are the parties to an insurance contract?

2-3

Answer 2

Insured - first party
This is that party that is protected by the policy.

Insurer - second party
This is the company that provides the insurance.

Others - third party
This refers to anyone else involved in a motor vehicle accident. There can be multiple third parties involved in any claim.

Question 3

Who are third parties?

2-3

Answer 3

Third party refers to anyone else besides the insurer and insured involved in a motor vehicle accident. There can be multiple third parties involved in any claim.

Question 4

Define the concept of negligence.

2-4

Answer 4

Negligence is the omission to do something which a reasonable person, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable person would not do.

Question 5

What does it mean when we say that a person is liable?

2-4

Answer 5

Liable means legally responsible. Each province has passed legislation which states that the negligent person in an automobile accident is liable for the damages caused.

Question 6

Who is liable for the damages caused in an automobile accident?
2-4

Answer 6

Legislation says that the owner and driver are equally legally responsible/liable.

Question 7

What is an important proviso in determining a vehicle owner’s liability for a driver’s negligence?
1-4

Answer 7

An important proviso in determining the owner’s liability for a driver’s negligence is that the driver must be operating the vehicle with the consent of the owner.

The owner is not liable for damage or injuries to others when the vehicle is being operated without the owner’s consent. An example of this is when the vehicle is stolen.

Question 8

What is onus of proof and how does it relate to automobile insurance?
1-4

Answer 8

Onus of proof means the burden or responsibility of proof, and is sometimes referred to by its Latin term, onus probandi.

In the realm of automobile insurance, when two motorists are involved in an accident, the one who alleges the other is negligent must prove the allegation of negligence.

Question 9

What is subrogation and how does it affect the settlement of automobile insurance claims?
1-5

Answer 9

Subrogation is the transfer of legal rights (to an insurer) of someone whose debts or expenses have been paid to pursue recovery from an at-fault party.

In other words, an insurer that paid to repair an insured’s vehicle damaged by an at-fault third party, has the right to pursue recovery from that at-fault third party.

Question 10

Who benefits from the absolute liability provision of automobile liability insurance?
2-7

Answer 10

Third parties. They are given a direct right of action against the insurer to have the insurance money under the policy paid directly to them.

Question 11

What is covered by Automobile Third Party Liability coverage?
2-9

Answer 11

Damage to a third party can be of two types: bodily injury or death (BI) or property damage (PD).

Automobile Third Party Liability insurance covers:
Automobile - since it arises from accidents involving motor vehicles.

Third party - since the damage for which one is responsible is to an innocent third party.

Liability - since an individual is legally liable for the damages caused by the negligent operation of a vehicle.

Question 12

Who is insured under Third Party Liablity coverage?

2-10

Answer 12

This coverage protects a motorist who is legally liable for an accident, against claims for bodily injury, death, or damage to property of others, up to the total limit purchased.

In addition, reasonably emergency medical aid, certain emergency equipment or supplies, court costs (as awarded by the court), prejudgment and post judgment interest, and legal and claims investigation costs are covered.

Question 13

Who provides Third Party Liability coverage in British Columbia?
2-10

Answer 13

ICBC, under basic Autoplan.

Question 14

Summarize who is insured under Autoplan Third Party Liability coverage.
2-11

Answer 14

As per the Regulations pursuant to the Insurance (Vehicle) Act, the insured means:

a) a person named as an owner in an owner’s certificate
b) an individual who, with the consent of the owner or while a member of the owner’s household, operates the vehicle described in the owner’s certificate
c) where the owner is deceased, the personal representative of the owner or a person having, with the consent of the personal representative, custody of the vehicle until the grant of letters probate or of administration to the personal representative, and
d) Where the owner is not an individual
i) An officer, employee, or partner of the owner for whose regular use of the vehicle described in the owner’s certificate is provided, or
i) a member of the household of an officer, employee, or partner of the owner, who, with the consent of the owner, operates the vehicle described in the owner’s certificate.

Question 15

What is the purpose of liability cards (pink cards)?

2-12

Answer 15

The liability insurance pink cards are designed to serve as evidence of automobile Third Party Liability insurance with at least the minimum limits as set by law in each jurisdiction.

Question 16

What do financial responsibility laws require of owners and operators of automobiles?
2-12

Answer 16

Financial responsibility laws require owners and operators of automobiles to maintain enough money to compensate those they injure.

Question 17

Why might a person need to file proof of financial responsibility and how would this proof be filed?
2-13

Answer 17

A person might need to file proof because of a previous conviction under the Criminal Code of Canada or Motor Vehicle Act or because of being involved in an accident while uninsured.

Question 18

Can Autoplan third-party liability coverage be transferred to a vehicle other than the one described on the owner’s certificate? If so, what conditions are there for coverage to be transferred?
2-14

Answer 18

Yes, Autoplan Third Party Liability coverage can be transferred to a vehicle other than the one described on the owner’s certificate if the vehicle is driven by:

a) a person named as an owner in an owner’s certificate
b) a member of the owner’s household
c) an employee or partner of the owner for whose regular use of the vehicle described in the owner’s certificate is provided
d) The spouse of an employee or partner described in paragraph (c) where the spouse resides with the employee or partner

Question 19

Briefly describe the Third Party Liability coverage provided under a driver’s certificate.
2-15

Answer 19

The Insurance (Vehicle) Regulation also provides Third Party Liability coverage to an insured under a driver’s certificate, when driving a vehicle not owned by him or her or a member of the insured’s household.

The only person insured under this coverage is the person named on the driver’s licence (driver’s certificate), because all British Columbia drivers’ licenses incorporate a driver’s certificate in accordance with the Regulation.

Question 20

What are the duties of ICBC for Third Party Liability claims?
2-16

Answer 20

Duties:
As outlined in the Insurance (Vehicle) Regulation (Part 6, Section 74), upon receiving notice of a claim under this coverage, at its own expense, ICBC will:

a) assist the insured by investigating and negotiating a settlement, where in the Corporation’s opinion its assistance is necessary, and
b) defend in the name of the insured any action for damages brought against the insured

Question 21

What are the rights of ICBC for Third Party Liability claims?
2-16

Answer 21

Rights:
The Regulation goes on to state that, upon assuming the defence of an action for damages brought against an insured, the Corporation shall have exclusive conduct and control of the defence of the action and, without limiting the generality of the foregoing, the Corporation shall be entitled to:

a) appoint and instruct counsel to defend the action
b) admit liability, in whole or in part, on behalf of the insured,
c) participate in any non-judicial process which has as its goal the resolution of a claim; and
d) compromise or settle the action

Question 22

What are the duties of the insured under Third Party Liability coverage?
2-16, 2-17

Answer 22

The Insurance (Vehicle) Regulation also outlines the duties of the insured (Part 6, Section 73). The responsibilities outlined for an insured are the same as those outlined in the Statutory Conditions applicable under the Standard Policy Form 1 (SPF 1):

1 - An insured shall

a) promptly give the Corporation written notice, with all available particulars, of
i) any accident involving death, injury, damage, or loss in which he or a vehicle owned or operated by him has been involved
i) any claim made in respect of the accident: and
iii) any other insurance held by him providing coverage for the accident
b) on receipt of a claim, legal document, or correspondence relating to a claim, immediately send the Corporation a copy of a claim, document, or correspondence
c) cooperate with the Corporation in the investigation, settlement, or defence of a claim or action
d) except at his own cost, assume no liability and settle no claim: and
e) allow the Corporation to inspect an insured vehicle or its equipment or both at any reasonable time

2 - The Corporation is not liable to an insured who, to the prejudice of the Corporation, fails to comply with this section.

Question 23

How does insurance provided by the owner’s certificate attached to the vehicle involved in the accident interact with other coverage that may be available, such as through a driver’s licence?
1-17

Answer 23

The insurance provided by the owner’s certificate attached to the vehicle involved in the accident is primary.

Any other coverage available from either a driver’s licence or an owner’s certificate attached to another vehicle is excess.

But this is only to the extent that the limit on this other insurance is higher than the limit provided by the owner’s certificate for the vehicle involved in the accident.

This other insurance would also not apply if the vehicle involved in the accident:

a) is owned or leased by the person, or a member of the same household as the person, who owns or leases the vehicle involved in the accident; or
b) is part of the same fleet, or deemed to be part of the same fleet, as the vehicle involved in the accident.

Question 24

What coverage is available for a newly acquired motor vehicle, trailer, or semi-trailer?
2-17

Answer 24

Ten days’ coverage is provided for a newly acquired motor vehicle, trailer, or semi-trailer, if it is a substitution and replaces a vehicle for which the title or interest has been transferred from the insured.

However, there is a limitation; the newly acquired motor vehicle must be the same type as the one it replaces.

For example, a private passenger vehicle must be replace by a private passenger vehicle.

Question 25

State the exclusions to coverage under Autoplan’s Third Party Liability coverage. 2-17, 2-18, 2-19

Answer 25

There is no coverage for: a) loss or damage to property carried in or on a vehicle owned, rented, or in the care, custody, or control of an insured b) loss or damage to property owned or rented by the insured or in the care, custody, or control of the insured c) liability directly or indirectly arising out of the operation of attached equipment - machinery or equipment that is mounted on or attached to the vehicle, and which is not required for the safe operation of that vehicle - at a site where such equipment is operated, unless the attached equipment is used in accordance with the Insurance (Vehicle) Regulation d) garage service operators or their employees while working on customers’ vehicles in their care, custody, or control for a purpose relating to the business e) losses suffered when an insured is operating a motor vehicle not described in an owner’s certificate issued to the insured when i) the vehicle is owned or regularly operated by an insured ii) the motor vehicle is used for carrying passengers for compensation or hire or for commercial use iii) the vehicle is being operated by the insured in connection with the business of a garage service operator iv) the vehicle is unlicensed, under the Motor Vehicle Act, and the insured does not have reasonable grounds to believe that it is licensed v) the insured is operating the vehicle without the consent of the owner and does not have reasonable grounds to believe he or she has consent: or vi) the motor vehicle is owned or operated by the government of Canada or the government of another province, territory, or state, or is used in extraprovincial trade f) loss or damage arising out of nuclear energy hazard, declared or undeclared war, insurrection, rebellion, or revolution g) punitive, exemplary, or other non-compensatory damages h) driving a vehicle while not authorized or qualified i) a general or special assessment, penalty, or premium, payable under the Worker’s Compensation Act or similar act: or j) bodily injury or death of the spouse of insured driver from the driver’s operation of a vehicle if the injury or death occurred before 1985

Question 26

How might an insured cause a claim under Third Party Liability coverage to be forfeited?

Answer 26

An insured may cause a claim under Third Party Legal Liability coverage to be forfeited by doing or failing to do certain things. This includes an applicant for an owner’s certificate - falsely describing the motor vehicle or trailer for which the application is made to the prejudice of ICBC; or - knowingly misrepresenting or failing to disclose in the application a fact required to be stated therein This also includes an insured - violating a term or condition of a plan of insurance - committing fraud with respect to the Insurance (Vehicle) Act: or - making a “wilfully false statement” with respect to a claim under a plan of insurance

Question 27

Third Party Liability coverage may be lost if an insured breaches certain other conditions. Briefly state these conditions. 2-19, 2-20

Answer 27

a) failing to notify ICBC by prompt written notice of any claim or failing to cooperate with ICBC in the investigation, settlement, or defence of a claim or action to the prejudice of ICBC b) operating the motor vehicle while unauthorized or unqualified to do so c) using the vehicle in illicit trades, racing, or to avoid arrest or other police action d) towing an unregistered, unlicensed trailer e) misrepresenting who is the principal driver of the insured vehicle f) using a vehicle for a purpose different from the use declared by the insured in the application for insurance except as “occasionally” permitted; or g) operating a vehicle while under the influence of intoxicating liquor or a drug to such an extent that the insured is incapable of proper control of the vehicle

Question 28

What is the limitation on recovery for acts of violence? | 2-20

Answer 28

The Insurance (Vehicle) Act excludes claims for injuries or death caused by weapons. It the dominant cause of the injury or death is the use of any weapon or any object other than a motor vehicle used as a weapon, ICBC is not liable to indemnify or pay any benefit to or make any other payment to - the person using the weapon or object - the person suffering the injury or death: or - a spouse, child, parent, or personal representative of a person referred to in either of the first two points

Question 29

What is the minimum limit for Third Party Liability coverage in British Columbia? 2-22

Answer 29

Under this basic coverage, the limit of liability is $200,000.

Question 30

Where can an insured purchase additional Third Party Liability coverage above the minimum limit? 2-22

Answer 30

Higher limits are available through extension insurance offered by ICBC and private insurers.

Question 31

Does purchasing higher limits of liability coverage provide extra provisions of coverage? 2-22

Answer 31

No. Purchasing higher limits of liability coverage does not provide extra provisions; it only provides higher limits for payment to third parties, in the event of a claim.

Question 32

When are priorities of payment applied? | 2-22

Answer 32

Priorities of payment are only applied when the damages awarded to the third party claimant are greater than the limit of Third Party Liability purchased.

Question 33

While driving to work. Dominique is involved in an accident with another vehicle, in which the other driver is 100% at fault. There were several individuals who witnessed the accident take place. The accident caused serious damage to the Dominique's vehicle, which was covered by his own insurer. In this scenario who is considered the first party? a) Dominique b) The Witness c) The insurance company d) The other driver

Answer 33

a) Dominique The first party is the party that is protected by the policy. 2-3

Question 34

In respect to automobile accidents, the onus of proof lies with the a) Crown b) Defendant c) Plaintiff d) Evidence

Answer 34

c) Plaintiff When one person sues another, the law puts the onus of proof upon the person suing - the plaintiff - to satisfy the court that there is enough evidence to uphold the allegation that negligence of the person being sued - the defendant - caused the damages. 2-5

Question 35

Subrogation is the transfer of legal rights to the a) Insurer b) Insured c) Third Party Injured d) Evidence

Answer 35

a) Insurer Subrogation is the transfer of legal rights (to an insurer) of someone whose debts or expenses have been paid to pursue recovery from an at-fault party. 2-9

Question 36

An insurer's best defense against absolute liability claims is to a) Hire effective legal representation b) Use the defense of misrepresentation c) Ensure you prove onus probandi d) Do research before binding coverage

Answer 36

d) Do research before binding coverage The best defense for insurers against absolute liability claims is to do thorough research before they bind coverage. 2-9

Question 37

What is the percentage priority in British Columbia that bodily injury claims have over property damage claims in respect to Priorities of Payment? a) 20% b) 50% c) 75% d) 90%

Answer 37

d) 90% In British Columbia, claims for BI have a 90% priority over PD claims. 2-22

Question 38

Outline who the Insured Persons are under Autoplan Third Party Liability. (10 marks)

Answer 38

Insured Persons under Autoplan Third Party Liability 2-11 - Who is insured under Autoplan Third Party Liability is defined under the Regulations pursuant to the Insurance (Vehicle) Act. Paraphrased, they state that insured means: a) A person named as an owner in an owner's certificate b) An individual who, with the consent of the owner, or while a member of the owner's household, operates the vehicle described in the owner's certificate c) Where the owner is deceased, the personal representative of the owner, or a person having, with the consent of the personal representative, custody of the vehicle until the grant of letters probate, or of administration to the personal representative d) Where the owner is not an individual - An officer, employee, or partner of the owner for whose regular use the vehicle described in the owner's certificate is provided, or - A member of the household of an officer, employee, or partner of the owner, who, with the consent of the owner, operates the vehicle described in the owner's certificate

Question 39

List six pieces of information that you would find on a pink card. (6 marks)

Answer 39

Pink Cards 2-12 - Name and address of insurer - Name and address of insured - Agency or brokerage name or number - Description of insured vehicle - Policy number (licence plate number in those provinces with full government plans) - Effective date and expiry date

Question 40

Describe Autoplan Third Party Liability coverage for non-owned vehicles. (Which non-owned vehicles would not be covered under Autoplan?) (10 marks)

Answer 40

2-14 - A person named as an owner in an owner's certificate - A member of the owner's household - An employee, or partner of the owner for whose regular use of the vehicle is described n the owner's certificate is provided - The spouse of an employee or partner described in paragraph where the spouse resides with the employee or partner - Autoplan Third Party Liability coverage is not transferable in situations where the insured is operating the motor vehicle in connection with the business of a garage service operator. Where the insured is working as a garage employee and driving the non-owned vehicle in the course of his or her work in the garage coverage is not transferable. - The motor vehicle is owned or regularly operated by an insured. Coverage is not transferable if the non-owned vehicle being driven is owned or regularly operated by an insured such as the husband driving a vehicle registered to his wife while they are residing in the same household. - The motor vehicle is used for carrying passengers for compensation. Or hire or for commercial use. There is no coverage if the non-owned vehicle is being used as a taxi or for commercial purposes such as a delivery vehicle. - The motor vehicle is not licensed under the Motor Vehicle Act, the Commercial Transport Act, or similar legislation of another jurisdiction, and the insured does not have reasonable grounds to believe the motor vehicle is licensed. - There is no coverage if the insured operates a non-owned and unlicensed vehicle and does not have reasonable grounds for believing it was licensed.

Question 41

Outline the rights of ICBC Third Party Liability Claims. (4 marks)

Answer 41

2-16 - Corporation shall be entitled to appoint and instruct counsel to defend the action. - Admit liability, in whole or in part, on behalf of the insured. - Participate in any non-judicial process which has as its goal the resolution of a claim. - Compromise or settle the action.

Question 42

Explain Inverse Liability. (10 marks)

Answer 42

2-21 - Inverse Liability coverage is part of basic Autoplan. - It is included under First Party Coverage (Regulations, Part 10), which also includes Underinsured Motorist coverage. - Inverse Liability covers British Columbia insureds who are involved in collisions in parts of Canada, or the USA, where local laws prevent them from seeking compensation from the other (at-fault) driver after the crash. And jurisdictions where insureds and/or their insurers are responsible for paying the costs of repairing their own vehicles. - Inverse Liability covers vehicle damage only. - It does not cover any medical or rehabilitation costs, as these would be covered by Accident Benefits. - The amount of coverage provided under Inverse Liability corresponds to the degree of fault assigned to the other driver for the loss. - This means that insureds who are partially at fault will be responsible for paying part of their loss. - To be fully covered, they would require collision coverage.