Forfeiture of Part 7 coverage by breach or fraud

Even if a claimant is an “insured”, was injured in an accident, and meets all other requirements to be entitled to Part 7 benefits, the claimant may nevertheless be found to have forfeited coverage due to certain types of “bad behavior”. This page discusses the types of behavior that may result in forfeiture of Part 7 coverage, and also provides information on relief from forfeiture.

 

Statutory provisions regarding forfeiture of Part 7 coverage

Section 75 of the Insurance (Vehicle) Act specifies circumstances in which entitlement to coverage will be lost through wrongful acts by the claimant:

 

All claims by or in respect of the applicant or insured are invalid and the right of an applicant, an insured, or a person claiming through or on behalf of an applicant or insured or of a person claiming as a dependant of the applicant or the insured, to insurance money under the plan or an optional insurance contract, is forfeited if

(a) the applicant for coverage under the plan or the optional insurance contract

(i) to the prejudice of the insurer, falsely describes the vehicle in respect of which the application is made, or

(ii) knowingly misrepresents or fails to disclose in the application a fact required to be stated in it,

(b) the insured violates a term or condition of or commits a fraud in relation to the plan or the optional insurance contract, or

(c) the insured makes a wilfully false statement with respect to the claim.

(Insurance (Vehicle) Act, s. 75)

 

The primary effect of the above provision is that coverage will be lost if the claimant:

  • does something which is expressly prohibited by the terms of the insurance contract (which contract is set out in the Insurance (Vehicle) Act and the Insurance (Vehicle) Regulation); or
  • commits fraud or makes a false statement when applying for insurance or when making a claim.

 

The ways in which a claimant may breach the insurance contract, and the types of false statements which can lead to forfeiture of Part 7 coverage are discussed below.

 

Loss of Part 7 coverage for breach of contract

Even if the claimant meets all other requirements for Part 7 coverage, the claimant will nevertheless lose entitlement to Part 7 coverage if he or she is in breach of the contract of insurance established by Part 7 of the Insurance (Vehicle) Regulation. This is stated in s. 75 of the Insurance (Vehicle) Act which says that coverage is forfeited if “the insured violates a term or condition” of the insurance contract.

 

Statutory provision regarding breaches

Section 55(3) of the Insurance (Vehicle) Regulation sets out the ways in which the contract can be breached and applies to Part 7 coverage as it does to other coverages under the Insurance (Vehicle) Act and the Insurance (Vehicle) Regulation:

 

An insured shall not operate a vehicle for which coverage is provided under section 49 or 49.3 (1) (a) and (c), Part 6 or 7, or Division 2 of Part 10

(a) if the insured is not authorized and qualified by law to operate the vehicle [i.e. driving without a licence],

(b) for an illicit or prohibited trade or transportation,

(c) to escape or avoid arrest or other similar police action, or

(d) in a race or speed test.

(Insurance (Vehicle) Regulation, s. 55(3)).

 

Section 55(3) applies only to DRIVERS of vehicles

Note that s. 55(3) applies only to the driver of the vehicle, not all of its occupants. Therefore, even if the driver of the vehicle does not have a licence s. 55(3) would not prevent a passenger in that vehicle from claiming Part 7 benefits. Also, s. 55(3) does not apply to pedestrians or cyclists; so if they were, for example, injured by a vehicle when trying to escape or avoid arrest s. 55(3) would not prevent them from claiming Part 7 benefits.

 

Certain illegal acts are not breaches that eliminate Part 7 benefits

Note that the following are illegal acts that are not breaches that prevent entitlement to Part 7 coverage:

  • Operating a vehicle contrary to the restrictions of learner’s license: s. 55(3.1) of the Regulation.
  • Driving while impaired: s. 55(8) (although this will result in loss of third party liability coverage under Part 6).

 

Breach by driving without a license

In Lu v. Insurance Corp. of British Columbia, 1995 CanLII 469 (BCSC) the plaintiff was

injured when his vehicle was struck from behind. His right to Part 7 benefits was forfeited because, to his knowledge, his driver’s licence had expired several months before. Note however that the court noted that knowledge that the licence has expired is not relevant to whether the terms of the contract has been breached, it is simply lacking a license that precludes entitlement to benefits:

 

Whilst his state of awareness regarding his qualifications to drive may bear upon the question of his entitlement to relief from forfeiture, it does not relate to the threshold question: Was his right to Part 7 benefits forfeited as a consequence of his failure to have a valid and subsisting driver’s licence at the time of the accident.

 

I conclude that by virtue of the statutory scheme relating to Part 7 benefits and the fact Mr. Lu did not have a valid and subsisting driver’s licence at the time of the accident, his right to such benefits has been forfeited.

 

(Lu v. Insurance Corp. of British Columbia, 1995 CanLII 469 at para. 11-12 (BCSC)).

 

In Lewis v. ICBC (1987), No. SC6917 (BCSC Nanaimo Registry) the claimant driving a motorcycle was held in breach because although he held a class 5 driver’s license he did not have a motorcycle license.

 

Note that it is not necessary for the breach by the insured to be a contributing cause of the accident. Therefore, even if the claimant was not at fault for the accident, the fact that the claimant was driving without a licence will result in a loss of entitlement to Part 7 benefits: Lu v. Insurance Corp. of British Columbia, 1995 CanLII 469 at para. 18-24 (BCSC).

 

Loss of Part 7 coverage for fraud or misrepresentation

Making a false statement in relation to a claim will result it forfeiture of Part 7 benefits if the statement is “material” (i.e. important / meaningful). The onus is on ICBC to establish that the statement is material.

 

In Peterson v. Bannon 1993 CanLII 4719 (BCCA) the claimant made a misrepresentation about the circumstances of the accident. The misrepresentation was considered to be material because it affected the way in which ICBC investigated and managed the claim prior to the truth coming out and therefore resulted in loss of entitlement to Part 7 benefits.

 

Relief from forfeiture

Where an insured has breached the contract by committing one of the acts prohibited by s. 55(3), he or she may nevertheless be forgiven and allowed coverage in sympathetic circumstances. Section 19 of the Insurance (Vehicle) Act specifies the circumstances in which relief from forfeiture may be granted:

 

Relief from forfeiture

19 (1) [Repealed 2003-94-13.]

(2) If a forfeiture under section 75 would appear inequitable, the corporation may relieve a person affected by it from the forfeiture of all or any insurance money.

(3) The corporation must relieve an insured from a forfeiture of the benefits under section 75 that it considers equitable if, as a result of an accident, the insured dies or suffers a loss of function of mind or body that renders the insured permanently incapable of engaging in any occupation for wages or profit.

(Insurance (Vehicle) Act, s. 19).

 

Relief from forfeiture is generally not grated in cases of deliberate misrepresentation:

 

The authorities are clear that in cases where courts with the required jurisdiction are asked to grant equitable relief against forfeiture in relation to insurance benefits, they generally do not do so in circumstances of deliberate misrepresentation. In this regard, I refer to the judgment of Coultas, J. in [Demontigny v. Insurance Corporation of British Columbia, [1989] B.C.J. 2475 (S.C.) (QL)] and, in particular, paras. 63 et seq. and the authorities noted therein.

(Stone v. ICBC, 2009 BCPC 33 at para. 51).

 

 

 

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