After a car accident the injured expect ICBC to act honestly when administrating accident insurance benefits under the universal auto insurance coverage. However the law in Canada has never imposed a duty on the Insurance Corporation of British Columbia to perform the terms of the contract of insurance honestly, until now.
In the ground breaking case of Bhasin v. Hrynew, 2014 SCC 71 the Supreme Court of Canada has expanded the duty of good faith and fair dealing to include the duty of honesty in contractual performance. The Supreme Court seven member panel was unanimous in its creation of this new duty or “organizing principle” of good faith and fair dealing. Judge Cromwell did not mince words in stating,
Finding that there is a duty to perform contracts honestly will make the law more certain, more just and more in tune with reasonable commercial expectations.
This landmark decision may be the most important in contract law in two decades if it actually levels the playing field for vulnerable parties to an agreement. If left unused by trial judges it may only caution companies to limit what they will to disclose when signing and performing contracts in British Columbia.
Certainly the contract of insurance between ICBC and an insured is the type of agreement which as a matter of law requires good faith performance. These contracts are not balanced from their inception and the relationship places the injury claimant in a position of inherent and predictable vulnerability.
The Supreme Court of Canada has previously recognized the duty of good faith which requires an insurer such as ICBC to deal with its insured’s claim fairly, this is not new law. Good faith is expected both to the manner of investigation and the assessment of the claim. This duty of good faith is reciprocal in that ICBC must not act in bad faith when dealing with a claim, which is typically made by someone in a vulnerable situation, and the insured injury claimant must act in good faith by disclosing facts material to the insurance policy.
The Supreme Court did stress that this does not impose a duty of disclosure; it is a simple requirement not to lie or mislead the other party about one’s contractual performance.
However, because the duty of honesty in contractual performance is a general doctrine of contract law that applies to all contracts the parties are not free to exclude it from a contract. The Supreme Court has left it to the parties to essentially apply this new minimum standard of honest contractual performance.
Posted by Personal Injury Lawyer in Vancouver Mr. Renn A. Holness, B.A. LL.B.