An insurer does not owe a duty of “fairness and reasonableness” to a third party claimant in settling that party’s claim

Young v. Insurance Corp. of British Columbia, [2006] B.C.J. No. 274 British Columbia Supreme Court

Young was injured in a motor vehicle accident when she was 16 years old. At the time, she was insured by the Insurance Corporation of British Columbia (“ICBC”). After Young turned 19, she signed a release of her claims against the Defendant driver, also insured by ICBC, in relation to her tort claim against him. Subsequently, Young commenced an action against ICBC alleging that it breached various duties owed to Young in failing to provide her with fair and reasonable compensation for the true value of her tort claim.

Young argued that ICBC owed a duty of “fairness and reasonableness” to all third parties claiming against those insured by ICBC. If such a duty did not exist generally, Young argued it arises where, as here, ICBC deals with claimants in two capacities, both as third party claimants and as first party claimants for Part 7 benefits.

ICBC argued that there was no authority to support the proposition that it owed Young a duty of “fairness and reasonableness” in Young’s capacity as a third party claimant such that a breach of that duty would give rise to a cause of action, relying upon the decision of the British Columbia Court of Appeal in Joe (Next Friend of) v. Insurance Corp. of British Columbia (1984), 55 B.C.L.R. 118 (C.A.). In the case at bar, the Court agreed with ICBC, noting that ICBC owed a duty as the insurer of the Defendant driver to investigate the Plaintiff’s claim against him and it was obliged to use reasonable care in discharging that duty. However, as the insurer of the Defendant driver, which was the capacity in which ICBC was acting when it negotiated the damage portion of Young’s claim, ICBC did not owe a duty to Young as the Plaintiff.

In the result, Young’s action was dismissed with costs.

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