In a recent BCSC decision ICBC was found guilty of malicious prosecution after ICBC wrongfully accused a new immigrant of making fraudulent insurance claims. The Court ordered an extraordinary punitive damage award of $350,000 against ICBC. Although not a typical insurance case, Arsenovski v. Bodin, 2016 BCSC 359 highlights ICBC's responsibility to act in good faith during its investigation process as a public insurer, and reminds private insurers that there are consequences for failing to undertake investigations reasonably.
The plaintiff, Mrs. Arsenovski, moved to Canada with her husband in September 1999. On January 31, 2000, Mrs. Arsenovski and her husband crossed a road when a car struck Mr. Arsenovski. Mrs. Arsenovski also fell down, and suffered some bruising.
At the time, the Arsenovskis spoke almost no English. However, the Arsenovski's reported the accident to ICBC through a friend who acted as a translator. Mrs. Arsenovski did not advance a claim for bodily injury, only benefits to pay for her medical treatment.
The ICBC adjuster who reviewed the claim took an aggressive stance against the claim, and engaged the powers of ICBC's Special Investigations Unit. The ICBC investigator concluded that Mrs. Arsenovski filed a misleading report that contained false statements. The alleged false statements included Mrs. Arsenovski's version of event regarding how she fell and the extent of her injuries.
The investigator recommended to Crown Counsel that Mrs. Arsenovski be charged with fraud over $5,000 contrary to s. 380(1)(a) of the Criminal Code, and making a false statement contrary to s.42.1(2)(b) of the Insurance (Motor Vehicle) Act ("IMVA"). The Crown accepted one of the recommendations and charged Mrs. Arsenovski with making a false statement. The charge proceeded but the charges were stayed by the Crown on the day of trial.
Mrs. Arsenovski sued ICBC, the adjuster and investigator for malicious prosecution on the basis that the defendants misstated evidence to support the criminal charges against her.
Malicious prosecution is made up of four components:
- the proceedings were initiated by the defendant;
- the proceedings were terminated in favour of the plaintiff;
- there was an absence of reasonable and probable cause for the defendant's conduct; and
- the defendant was actuated by malice or a primary purpose other than carrying the law into effect.
In reviewing the evidence Justice Griffin spared no sympathy for the ICBC's conduct. Justice Griffin concluded that none of the alleged false statements suggested by the ICBC investigator were supported by the evidence. Justice Griffin found the ICBC investigator was not a neutral fact-finder but rather a biased advocate who set out to show that Mrs. Arsenovski was not involved in the accident and was not injured. Justice Griffin concluded that the alleged false statement by Mrs. Arsenovski was an invention of the ICBC investigator and that the investigator never looked at the evidence objectively for its possible innocent interpretation, he only looked at it to the extent he felt it could support his theory of fraud.
The court concluded that the ICBC investigator used his special status for the collateral purpose of deterring civil claims against ICBC and not a genuine investigation into Mrs. Arsenovski's claim for medical benefit. Therefore because the investigator neither had reasonable grounds for suspicion and belief of Ms. Arsenovski's guilt, and the primary purpose for advancing the prosecution was the deterrence of a potential civil claim against ICBC, the investigator and ICBC were guilty of malicious prosecution.
The court awarded Mrs. Arsenovski $30,000 in general damages for mental suffering and distress and $350,000 in punitive damages.
The award for punitive damages was based on the finding that the conduct of the ICBC and its investigator was so high-handed, reprehensible and malicious that it offended the Court's sense of decency and is deserving of punishment. The court recognized that ICBC "as an insurance company...is expected to act in good faith. As a public company, its employees are also expected to meet high standards of professional conduct" and that:
While the community would find it reasonable for ICBC to fight fraud, I am confident that the residents of British Columbia would find it outrageous for a public corporation to use its resources maliciously. The conduct that occurred here must be condemned and punished to reflect the community's censure and to ensure that the message is brought home to the corporation and its employees not to engage in this kind of misconduct again. The residents of British Columbia are entitled to expect professional, objective treatment by the employees of ICBC, as well as an appropriate degree of cultural sensitivity towards people who are recent migrants from other countries.
The result in this case is timely since ICBC has recently undertaken a public campaign to fight insurance fraud. It serves as a reminder that while it is reasonable for ICBC to fight fraud, it still must act reasonably. For private insurers, this case serves as a reminder that all insurance contracts are contracts of good faith. Although a private insurer is not usually in a position where it can be liable in malicious prosecution, there is still a real risk of punitive damages being awarded where an insurer fails to investigate a claim in good faith generally.
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