ICBC was not in breach of its duty to its insured for failing to provide independent counsel and failing to provide its insured to a defence on a third party claim in an action involving damages that could exceed their insurance limits

The Court dismissed the Insured’s claim against the Provincial Motor Vehicle Insurer (ICBC) for alleged breach of duty for failing to provide the Insured with a defence to a third party claim and for failing to appoint independent counsel to advise the Insured on the possibility of liability in excess of the policy limits.

McLean v. Insurance Corp. of British Columbia, [2007] B.C.J. No. 95. British Columbia Supreme Court. Rogers J.. January 19, 2007

The Insured was sued by his passenger after a motor vehicle accident in which he drove his vehicle off of the road. ICBC hired an investigator who concluded that the preponderance of the evidence suggested that the Insured was intoxicated at the time of the accident. ICBC therefore issued a Third Party Notice putting the Insured on notice that he was in breach of his policy for being “incapable of proper control of his vehicle by reason of consumption of alcohol”. The Insured hired independent legal counsel to defend him in the third party claim.

ICBC later withdrew the Third Party Notice and retained counsel to defend the Insured. As the litigation matured, ICBC put the Insured on notice that the third party claim might exceed his policy limit and the Insured again retained independent legal counsel.

After the third party claim was settled for the policy limit, the Insured brought this claim against ICBC for damages to cover the cost of his independent legal counsel.

In rejecting the Insured’s claim, Mr. Justice Rogers held that it was not necessary for ICBC to have an “iron clad case” against the Insured before putting him on notice that it believed he was in breach of the policy. Justice Rogers concluded that there was nothing unreasonable in ICBC issuing the Third Party Notice to its Insured, which necessitated him retaining independent legal counsel.

The Court also rejected the Insured’s claim that ICBC breached its duty to instruct and retain independent counsel to advise the Insured on the possibility of liability in excess of his policy limit. The Court found that there was no actual conflict between ICBC and the Insured as ICBC and appointed defence counsel had, at all times, conducted themselves entirely in keeping with the Insurer’s obligation to give equal consideration to its own interests and to those of the Insured. In reaching this conclusion, Justice Rogers referred to the case of Fredrickson v. ICBC (1990), 44 B.C.L.R. (2d) 303, which he said was indistinguishable from the present case. Fredrickson stands for the proposition that an exposure in excess of policy limits sets up a potential conflict between the Insurer and Insured, but that potential does not in and of itself give rise to a requirement that the Insurer retain independent counsel for its Insured.

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