When an automobile insurer elects to salvage an insured’s damaged vehicle, it is entitled to deduct the insured’s own damage deductible from the cash value owed to the insured

29. April 2004 0

Doyon v. Insurance Corp. of British Columbia, [2004] B.C.J. No. 890 British Columbia Supreme Court

Mr. Doyon purchased a 1995 Chevrolet Cavalier and obtained automobile insurance from the Insurance Corporation of British Columbia (“ICBC”). Mr. Doyon was aware that in the event that his vehicle was damaged through his own fault, a $300 deductible would be deducted from any amount paid to him by ICBC in respect of his collision coverage for the total loss of the vehicle, or for its repair. Mr. Doyon was involved in a single vehicle accident in which he was entirely at fault. The cost of repairing his vehicle exceeded the car’s value. ICBC determined the actual cash value of the vehicle to be $9,690 and paid Mr. Doyon the sum of $9,390, representing the actual cash value less the $300 deductible. When he was paid the monies, Mr. Doyon signed a salvage release and thereby transferred the vehicle to ICBC for purposes of enabling it to receive the salvage of the vehicle. As Mr. Doyon was entirely at fault for the accident, he could look to no other person for reimbursement of his deductible. The sole issue at trial was whether the Defendant was entitled to deduct $300 from its payment of the vehicle’s actual cash value to Mr. Doyon, in circumstances where ICBC had elected not to repair the car but to pay the vehicle’s actual cash value in exchange for its salvage value. Although the amount involved in the dispute is relatively small, the exposure for ICBC could run into millions of dollars; if Mr. Doyon was successful in obtaining the requested declaration, and subsequently applied to have his action certified as a class proceeding.

The court noted that this issue was considered by the Ontario courts in McNaughton Automotive Ltd. v. Co-operators General Insurance Co. (2000), 50 O.R. (3d) 300 (S.C.J.) rev’d (2001), 54 O.R. (3d) 704 (C.A.). In McNaughton, the trial judge determined that if the insurer was not entitled to claim the deductible from their insured, the net result would be that they would have to pay more net monies if they took salvage of a vehicle than if they let the insured retain the salvaged vehicle. The trial judge viewed such result to be absurd, because insurers would not opt to pay more when they could pay less. The trial judge’s decision was overturned by the Ontario Court of Appeal, on the basis that the trial judge had assumed that the entire policy, including the statutory conditions, should be read as a whole, with no priority given to the statutory conditions. The Ontario Court of Appeal determined that the Ontario legislation created a hierarchy of contractual terms in which the statutory conditions were to be accorded priority. As a result, since the statutory conditions did not make reference to a deductible, the insurer was not permitted to take the deductible into account when it elected to take salvage in a vehicle.

The court also noted that the same issue had been considered by the Alberta courts in Pauli v. Ace Ina Insurance (2003), 334 A.R. 104 (Q.B.), aff’d 2004 ABCA 84. In Pauli, the Alberta Court of Appeal distinguished the McNaughton case, decided by the Ontario Court of Appeal, on the basis that the Alberta legislation did not need to be interpreted using a hierarchical approach. The Alberta Court of Appeal upheld the trial judge’s interpretations that the Alberta provisions allowed an insurer to take title to salvage by paying the actual cash value of an insured’s vehicle less the policy deductible.

The trial judge reviewed the McNaughton and Pauli decisions at length, but concluded that they were distinguishable because they were essentially based upon interpretations of different legislations. After reviewing British Columbia’s current and previous legislation, the court concluded that it was permissible for ICBC to deduct the applicable deductibles when it elected to take the salvage in an insured vehicle by paying the actual cash value of the vehicle to the Plaintiff.

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