Defining UMP or UIM (Underinsured Motorist Protection) Primer for ICBC-Insured Drivers and Passengers

On behalf of Cross Border Law posted in UMP on Tuesday, April 22, 2014.

One hears a lot about Canada’s socialized-medicine program, but what about socialized-auto insurance? For better or for worse, Canadian auto insurance is handled Province by Province, and the “basic” or mandatory minimum insurance, at least for the Western Provinces, is entirely socialized. The Insurance Corporation of British Columbia (“ICBC”) provides the following insurance package for all licensed British Columbia drivers, all members of their household and all passengers in their vehicle:

  1. $200,000 in third party auto liability;
  2. $150,000 in PIP or no-fault medical and rehab expenses; and
  3. $1,000,000 in UIM or “UMP”.

$1,000,000 in UIM. You read that correctly. Including attorneys’ fees and litigation expenses. You read that correctly.

ICBC tells us that their insured drivers and passengers have been involved in crashes over the past ten years in every single US state and the District of Columbia. We’re talking only about residents of British Columbia. Not every one of them results in a UIM claim, but consider that most states’ mandatory minimums are a lot less than $200,000 per accident. So how does the typical injury victim receive proper compensation for his or her injury in the US? Of course, they don’t. Your policy-limits settlements attest to that.

This article is intended as a primer for attorneys in the US to ensure that they maximize the recovery for their BC clients injured down there.

Seek ICBC’s consent before you accept a policy limits settlement!

When an accident occurs outside of the Province, ยง148.2(6) of the Regulations promulgated pursuant to British Columbia’s Insurance (Vehicle) Act defines the rights and responsibilities of ICBC-insured drivers and passengers who wish to pursue a UIM claim, commonly referred to as “UMP”. Liability issues, including claims for contributory negligence, are to be determined by the laws of the jurisdiction in which the accident occurred, while “quantum of damages” is to be determined by the laws of British Columbia. “Causation”, surprisingly, has been found to fall under the latter category, even though this is one of four elements which commonly comprise “liability” for a negligence claim (duty, breach, causation and the fact that damages occurred or loss was suffered).

Importantly, one must not accept a tort settlement and dismiss a tortfeasor unless and until the UMP claim has been perfected. The only two ways that the UMP claim can be perfected are by judgment in excess of policy limits or ICBC’s consent to a policy limits settlement. Until then, there cannot be a determination that the defendant was in fact “underinsured.” As Mr. Justice Finch stated in Beauchamp v. ICBC (2005) B.C.C.A. 507:

  1. “Arbitration is not available until it is shown that the person claiming is an “insured”, and is claiming in relation to an accident with an “underinsured” motorist”. The definition of “underinsured motorist”, set out above, contains three elements, A person falls within the definition if he or she: (1) is the owner or operator of a vehicle; (2) is legally liable for the injury or death of an Insured; and (3) is unable to pay the full amount of the Insured’s damages.
  2. Until those facts are either determined by judicial decision, or by admissions, there is no “underinsured motorist” and the arbitration provisions of the Regulations cannot be engaged.”

What is the limitation for bringing such claims?

The limitation for bringing straight negligence claims in British Columbia is two years from the date of the accident. However, since there can be no determination that a defendant driver is “underinsured” until one of the two determinations above has occurred, the limitation period cannot begin to run until that time. Thereafter, the limitation period is arguably six years for breach of a written (insurance) contract. There is no case law defeating an UMP claim in British Columbia on the basis of a limitation defense.

How does one commence such a claim?

The UMP legislation actually requires the Claimant or his/her counsel to negotiate a settlement of the UMP claim first. If the parties are unable to agree on an amount, the Claimant is at liberty to file a Notice to Arbitrate with the British Columbia International Commercial Arbitration Centre (“BCICAC”) and paying the proper fee. The full process is outlined here:

How does one recover attorneys’ fees and litigation expenses?

British Columbia is a “loser pays costs” jurisdiction, whereby the victor in any litigation can recover a portion of the legal fees and all reasonable litigation expenses from the loser. The amount of the attorneys’ fees contribution is calculated by reference to a schedule in the Court Rules. An UMP arbitrator may not award the full amount of a party’s fees, but is granted wide discretion to award a sum of money which may represent a significant portion of the total fees plus all reasonable expenses including expert reports and testifying fees, deposition costs, costs of producing records and the arbitrator’s fees.

The Preservation of Joint and Several Liability for Bad Faith Involving Multiple Defendants

Advisory support

When a claim is made against a defendant driver with minimum insurance limits, this reality poses a risk for a badly injured plaintiff, who, at least in British Columbia, is fortunately able to access his or her own underinsurance up to a minimum of $1,000,000 per person. But access to one’s own underinsurance does not preclude a separate potential action against the defendant’s insurer for bad faith.

Insurers owe their clients (defendants) a duty to protect their personal assets from the risk of an excess judgment, and to make reasonable efforts to settle a claim within the policy limits of available insurance if it is possible to do so. Should the insurers value their desire to save money over the risk the case poses to the defendant’s assets, the insurer might commit “bad faith” against the defendant, such that they would be liable for an excess judgment beyond the policy limits – a source whose availability is unlikely to be impaired by bankruptcy, fraudulent attempts to conceal assets, or a general inability to pay.

The following is admittedly a complicated blog entry, and most of our readers should stop here. If you’re a lawyer considering this issue, read on. It’s in fact taken from our own research in trying to solve the predicament of this entry’s title-Preserving Joint and Several Liability for Bad Faith involving Multiple Defendants.


Washington law recognizes a host of duties that an insurer must fulfill to its insureds. Some of these duties are contained in laws passed by the Washington legislature, while others have developed from “common law” judicial precedents. For example, Tank v. State Farm Insurance Co., 105 Wn.2d 381 (1986) established the general rule that an insurer must refrain from engaging in any action that demonstrates a greater concern for the insurer’s monetary interest than the insured’s financial risk. This principle has been interpreted to include situations where an insurer was presented with an opportunity to settle a case posing great risk to the insured’s personal assets for a sum within the policy limits, but declines to do so. If the facts later illustrate that the insurer ignored clear evidence of the risks posed to the insured, the insurer may later be found liable for paying the entire judgment, including the portion in excess of the policy limits. See Evans v. Continental Causalty Co., 40 Wn.2d 614 (1952); see also Besel v. Viking Insurance Co. of Wisconsin, 146 Wn.2d 730 (2002).

The Besel case provides a strategy for maximizing an insurer’s risk, and involves three basic steps:

(1) entry of a consent judgment for the “fair value” of the claim;

(2) execution of covenants not to execute against the defendants beyond the limits of their available insurance; and

(3) assignment of the defendants’ collective bad faith rights to the claimants.

Under RCW 4.22.060, the court is required to conduct a reasonableness hearing to ensure the amount of the settlement was supportable by the circumstances, and not the product of fraud or collusion.

Besel stands for the proposition that the difference between the insurance limits and the value of the settlement approved by a court through RCW 4.22.060 sets the benchmark for evaluating the damages suffered by the insured (or their assignee) in the subsequent bad faith litigation. Besel also rejects the notion that the insured suffered no harm from the insurer’s conduct by virtue of the covenant not to execute. Finally, Besel establishes that the insured has the right to settle a claim on its own behalf, irrespective of any “consent to settle” or “cooperation” clauses in the insurance agreement, if the insurer has acted with negligence or bad faith in refusing to settle the claim for the policy limits (or less).

Unfortunately, there’s no provision in the caselaw under RCW 4.22.060 for allocating fault amongst the parties. Indeed, Price v. Kitsap Transit stands for the proposition that the judge’s authority in a reasonableness hearing is limited to evaluating the fairness of the settlement amount and nothing more.

A “perfect scenario” for resolving a case against multiple defendants would be the entry of a consent judgment which allocates fault…..and then an acceptance of that allocation, with preservation of joint and several liability against any insurer whose conduct led to an inability to settle within the policy limits. However, a settlement executed under RCW 4.22.060 expressly extinguishes any right of contribution between settling and non-settling defendants. If contribution has been extinguished, joint and several liability seems patently unfair. The insurers will undoubtedly argue that joint and several liability does not just “carry over” from the tort litigation to the bad faith litigation.

The problem is one of fundamental fairness for the insurer. If the reasonableness inquiry isn’t broad enough to permit a binding allocation of fault, what inquiry might be? It seems clear that if one seeks to bind defendants to an allocation of fault by way of the settlement process, one would need to propose another method alongside the reasonableness hearing for doing so.

Does RCW 4.60 offer a Solution?

There may be a way to accomplish a binding allocation of fault which has been approved by the court for fairness. RCW 4.60 deals with “judgments by confession”, a species of consent decree which appears to have been (1) usually used in the context of property disputes, and (2) not the source of much reported case law for the last 75 years. Still, the statutes are on the books, so they have to mean something – and they might be used to fill the gaps in the reasonableness hearing process.

Take a quick look at these short statutes:

RCW 4.60.010 authorizes the use of these judgments, without limitation to type of action.

RCW 4.60.060 requires every judgment by confession to include a written statement by the defendant which states the amount owing to the plaintiff and a concise statement of the facts supporting the indebtedness, and a recitation of why the debt is “justly due”.

RCW 4.60.070 suggests that the court must evaluate the writing supporting a judgment by confession for sufficiency before agreeing to enter the stipulated judgment. Upon entry, a judgment by confession operates the same as any other judgment.

Arguably, any Besel style settlement could be submitted to the court for review under both RCW 4.22.060 and RCW 4.60 et. seq. The reasonableness hearing, addressing whether the dollar amount is fair and not the product of collusion, is more of a damages inquiry with some limited evaluation of liability. The judgment by confession would be supported by a statement of facts supporting the allocation of fault between the parties, and could be used to focus squarely on the evidence in favor of the liability breakdown. Presumably, the court could conduct some limited evidentiary inquiry into liability pursuant to its authority to evaluate the sufficiency of the writing supporting the confession judgment. The Claimant wants the court to do this – because the more the court does to establish the propriety of the Claimant’s allocation of fault, the less likely the insurers will be able to collaterally attack it in a subsequent bad faith suit.

The use of the “confession by judgment” statute to “plug the holes” in RCW 4.22.060 is a novel approach. There may be other, simpler ways of obtaining a binding allocation of fault between multiple defendants in the context of a consent decree. Apparently, no one has attempted to completely settle a case with multiple co-defendants and allocate fault through the use of a consent judgment and had their case go up on appeal. The judgment by confession statute may at least provides a solution to offer a judge should one get to the point where judicial approval is required for a settlement.