Insurance law – Automobile insurance – Bad faith – Actions – Bifurcation – Practice – Parties to action – Severance of claims
Walter v. Insurance Corporation of British Columbia,  B.C.J. No. 834, 2020 BCSC 758, British Columbia Supreme Court, May 20, 2020, D.A. Crerar J.
The insurer denied coverage following a fire which destroyed several vehicles, including a tractor-trailer leased to the corporate insured, based on arson. The insureds brought actions for coverage and bad faith, naming the corporations and their directors as plaintiffs. One corporate insured settled a separate action with the lessor of the tractor-trailer, but the judgment remained unpaid. The insureds and the insurer brought several motions in both actions after the insurer filed responses to civil claim. In the first action, the corporate insured sought to add the lessor as a plaintiff while the insurer sought to remove the corporate directors as plaintiffs, obtain security for costs and sever the coverage and bad faith issues. The insurer sought the same orders in the second action.
The Court added the lessor as a plaintiff in the first action on the basis that its participation was necessary as an innocent co-insured and it was just and convenient to do so based on the strong connection between the lessor and the existing claims, and doing so would not significantly expand or delay the proceedings. The Court noted there was no prejudice to the insurer and noted the insurer’s concern that the lessor was only being added for the financial benefit of alleged arsonists would be determined at trial.
Although it was “a close point”, the Court declined to remove the directors as plaintiffs in the first action. The directors were not named insureds and, as the Court stated, would face a significant challenge at trial to establish an exception to the doctrine of privity. However, the Court could not say it was plain and obvious the individual claims were bound to fail or that it would be inappropriate for them to remain as plaintiffs. The Court noted an existing plaintiff need not have a valid cause of action on its own provided it has a direct interest in a proceeding, such as a financial interest in another party’s valid cause of action. In contrast, the director was removed as a plaintiff in the second action because no affidavit was provided on his behalf showing some basis to establish a triable issue, which was especially necessary given the tenuous nature of his personal claim.
The court ordered both corporate plaintiffs to post security for costs because there was no evidence it would stifle or stymie the insureds’ claims. The Court exercised its discretion to order a more modest security than sought given the corporate insureds’ impecuniosity and the fact that they were family-owned corporations. Finally, the Court agreed the coverage and bad faith issues should be bifurcated to avoid the insurer having to potentially produce privileged materials and because the bad faith issue would be redundant if the insureds failed in their coverage claim.
This case was digested by Michael J. Robinson, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Michael J. Robinson at firstname.lastname@example.org.
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