The History

The common law of damages in British Columbia is, generally speaking, that a plaintiff injured by the wrongful conduct of a negligent party can only recover for his or her actual loss. Where the plaintiff has received medical care and services which were paid for by public as opposed to private insurance, he or she cannot claim for the cost of those services in the absence of an express statutory right as he or she has suffered no identifiable loss: see Wallace Estate v. Taylor; [1990] B.C.J. No. 2825 (S.C.) (Q.L.); varied [1992] B.C.J. No. 2154 (C.A.) (Q.L.) and Semenoff (Committee) v. Kokan, [1991] B.C.J. No. 2674 (C.A.) (Q.L.). If the plaintiff has no claim, then the government who provided the services has nothing to subrogate against.

In 1950, the Legislature created both a cause of action for injured plaintiffs and a right of subrogation for the provincial government in relation to hospital services and care when it passed section 34B of the Hospital Insurance Act (“HIA”), S.B.C. 1950, c. 29, s. 27. That section survived through various revisions of the HIA to eventually become section 25. The relevant parts of that section are as follows:

(1) If, as a result of the wrongful act or omission of another, a beneficiary suffers personal injuries for which the beneficiary receives hospital services paid for by the government, the beneficiary has the same right to recover the sum paid for the services against the person guilty of the wrongful act or omission as the beneficiary would have had, had the beneficiary been required to pay for the services personally.

(2) On the beneficiary recovering the sum or part of it under subsection (1), the beneficiary must pay it at once to the minister.

(4) The government is subrogated to the rights of the beneficiary to recover sums paid for hospital services by the government, and an action may be maintained by the government, either in its name or the name of the beneficiary, for the recovery of the sum paid for hospital services as provided in subsection (1).

(5) It is not a defence to an action brought by the government under subsection (4) that a claim for damages has been adjudicated on unless the claim included a claim for the sum paid for hospital services, and it is not a defence to an action brought by a beneficiary for damages for personal injuries that an action taken by the government under subsection (4) has been adjudicated on.

(6) No release or settlement of a claim or judgment based on a cause of action for damages for personal injuries in a case where the injured person has received hospital services paid for by the government is binding on the government unless the minister or a person designated by the minister has approved the settlement in writing.

Though section 25 remains part of the HIA to this day, it has never been pronounced in force.

It appears that section 25 was never declared in force because of a “gentlemen’s agreement” entered into between British Columbia and certain third party liability insurers who were members of the Insurance Bureau of Canada. In exchange for the province not enacting section 25, these insurers agreed to reimburse the province for hospital expenses in cases where the third party liability limits were not in issue. A similar type arrangement was also entered into between the province and the Insurance Corporation of British Columbia (“ICBC”), the monopoly provider of basic motor vehicle insurance coverage in the province.

According to a recent presentation by a representative of the Attorney General’s office, it appears the province’s recovery for hospital expenses under the “gentlemen’s agreement” had been falling in recent years. It is also worth noting that a number of other common law provinces in Canada, including Alberta (Hospitals Act, R.S.A. 2000, c. H-12, s. 62) and Ontario (Health Insurance Act, s. 30), have passed and enacted legislation similar to section 25 of the HIA. As a result, service providers in those jurisdictions expect to be reimbursed for services provided to an injured plaintiff who then commences an action against a wrongdoer.

In the 1980s and 1990s, the province had also passed legislation in an attempt to extend its possible rights for recovery of health care costs into the sphere of the Medical Services Plan: see section 4.06 of the Regulations under the Medical Service Act, R.S.B.C 1979, c. 255. In British Columbia, billing the Medical Services Plan is how doctors get paid for services provided to most patients in the Province. The section read, prior to its repeal in 1992, as follows:

Where payment is made under the plan for insured services rendered to an insured person who has a right of action against a third party for the amount or any part of the amount so paid, the commission shall be subrogated to the rights of the insured person to recover that amount or part thereof, and in the event that the insured person recovers the amount or part thereof, the amount recovered shall be a debt owing by him to the commission and shall be recoverable by action against him by the commission.

In Semenoff (Committee) v. Kokan, supra, the British Columbia Court of Appeal confirmed this section did not create an actual subrogated right of value for the government for the plaintiff had not suffered a compensable loss as he she was no legal obligation to ultimately pay for the services rendered.

Legislative Update and Highlights

On December 8, 2008, British Columbia declared the Health Care Costs Recovery Act (the “Act”), which had been passed earlier in the year as S.B.C. 2008, c. 27, in force as of April 1, 2009. Also coming into in force on that date is the Health Care Costs Recovery Regulation, B.C. Reg. No. 297/2008 (the “Regulation”). Essentially, the Act and Regulation permit the province to pursue third party tortfeasors for recovery of the cost of both the past and future health care services to be provided to a plaintiff for injuries that were the result of negligence or wrongdoing on the part of that third party. Many of its provisions appear to have been modeled on section 25 of the HIA discussed above.

The Act itself makes it clear its provisions do not apply to health care services that relate to personal injury or death arising out of a wrongdoer’s use or operation of a motor vehicle if the wrongdoer has coverage as defined in the Insurance (Vehicle) Act. Hence, British Columbia has followed the lead of many other Provinces in Canada in treating these claims differently. It must be cautioned, however, that the Insurance (Vehicle) Act only covers policies issued by ICBC under the universal compulsory vehicle scheme set up in Part 1 of the Act or excess insurers who compete in the British Columbia market for coverage above the ICBC minimums. Hence, personal injury claims involving as defendant vehicles owned and/or insured by extraprovincial entities arguably will not be exempted from the Act.

The Act also does not apply to health care services arising out of personal injuries or death arising from either a tobacco related wrong as defined in the Tobacco Damages and Health Care Costs Recovery Act or health care services arising out of and in the course of the beneficiary’s employment if compensation is payable by the Workers’ Compensation Board under the Workers Compensation Act.

The Act and Regulation define health care services very broadly and seemingly aim to capture all government funded medical services (specifically including emergency services, Medical Services Plan payments, hospital expenses, continuing care costs and prescription drugs).

Section 2 of the Act grants the plaintiff a statutory right to recover from the wrongdoer the costs of health care services he or she receives as a result of injuries or death caused by the negligence of the tortfeasor. This section essentially addresses the traditional common law position discussed above. Section 3 goes further and imposes on the plaintiff an obligation to include in any legal proceedings a claim for the costs of past and future health care services.

Sections 7, 8, 9, and 20 grant the government broad subrogated (covered by section 7) and independent (covered by section 8) rights to recover past and future health care services from the wrongdoer in relation to the injuries caused by the negligence. Section 8(6) permits the government to bring its own action to recover the costs of the health care services even if the applicable limitation period has expired in circumstances set out in the Act. Section 9 makes it clear both that the permission of the injured party is not required for the government to assert its rights and a settlement or adjudication of the injured party’s claims is not a bar to the government actions unless the settlement or adjudication expressly involved a claim for health care services which the government was aware of.

The Act sets up a notice procedure which should ensure that no claim is missed. Before litigation is started, section 10 of the Act requires an insurer to notify the government within 60 days of becoming aware of an act or omission.

While it is not clear what will happen in cases involving self-insured corporate defendants, prudence suggests that such entities may be best to treat themselves as being captured by this notice provision.

Once litigation is commenced, the plaintiff must notify the government of the claim within 21 days after filing the writ of summons commencing the action under section 4. Section 6 grants the government the power to intervene in any proceeding or assume conduct of the health care services claim following receipt of such notice.

Section 12 requires the plaintiff to notify the government at least 21 days before entering into a settlement of his or her claim. Once terms of settlement are reached, the insurer or self-insured defendant must give the government notice of the proposed terms of settlement under section 13. The settlement documents are not binding until the government consents in writing to the proposed terms. The insurer or self-insured defendant must then pay to the government the health care costs within 60 days of the government’s consent to the settlement.

It should also be noted that the Act provides the government with broad powers to request documents or information which would assist it with quantifying or pursuing its claim for health care costs: see section 14. These powers are in addition to the obligation imposed on the plaintiff to cooperate with the government by section 11.

No legal action involving a claim caught by the Act and Regulation may be finally disposed of unless the consent of the government is filed with the court or the court is satisfied that the government has been given the required notice and a reasonable opportunity to appear to deal with its claim for health care services: see section 5.

Finally, it must be noted the actions brought under the Class Proceedings Act are expressly captured under the Act and dealt with. Sections 3, 4, 5, 6, 19 and 21 all have specific directions for the handling of health care claims in such actions.

While the Act purports to apply to any personal injury suffered by a resident at any time, it clearly states that the requirements imposed on a plaintiff to include a claim for health care and notify the government of his claim as well as the limitations on the court’s disposing of personal injury actions do not apply to legal proceedings commenced prior to April 1, 2009. It is currently unclear whether the government’s independent power to commence an action outside the limitation period could be applied to claims disposed of in proceedings commenced before that date. Hence, the transition provisions in the Act are in need of further clarity.

According to the Regulation, it will also not apply to legal proceedings brought in Provincial Court under the Small Claims Act (which handles claims worth less than $25,000).

Practical Effect

The great majority of the personal injury claims brought in British Columbia that do not involve motor vehicles (and some motor vehicle claims involving non-ICBC insured defendants) will be captured by the scheme created by the Act and Regulation. The statutory scheme has several important ramifications for insurers or self-insured corporate defendants dealing with such claims. First and most important, insurers or self-insured corporate defendants dealing with these claims will now have to include estimates of the costs associated with the plaintiff’s government funded health care in their assessment of the value of the claims.

As we have seen, these expenses were not relevant in the past given the previous state of the law. Regrettably for insurers and self-insured defendants and tortfeasors, each and every personal injury claim captured by the Act and Regulation has just become more expensive than it would have been in the past.

Second, the Act and Regulation take the additional step of requiring insurers dealing with such claims to notify the government of claims which may give rise to a duty to reimburse. This duty to notify was not present in the past. Hence, insurers and self-insured defendants will have to develop processes for ensuring that the requisite notice is provided to government once a new claim comes in after April 1, 2009.

Finally, settling claims caught by the Act will be much more complicated and less certain than in the past given the requirement for government approval of the settlement. It is unclear, for example, how parties could finally settle any claim at mediation given the notice requirements imposed on the plaintiff before settlement and the insurer or self-insured defendant afterwards in light of the need for government consent to the terms of settlement. It appears that the government may need to become actively involved in any settlement discussions which might involve splits in liability or potential limits concerns.