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Good advice.

Good advice.

Why do BC Drivers Need Third Party Liability Coverage?

DBM Law Blog

The ICBC Website invites BC vehicle owners to purchase up to $5m “Extended Third Party Liability Coverage”. Why?

First, what is “Third Party Liability”?

An insurance contract has 2 parties. You, the purchaser, who becomes the “First Party” or the “insured”. The insurance company, ICBC, is the second party. As the insured, you have the right to sue to enforce the terms of the ICBC insurance contract if ICBC refuses to honour First Party claims such as collision coverage, treatment benefits and wage replacement payments if the purchaser can’t work due to an auto accident injury.

If the purchaser negligently damages the property of an innocent victim, the insured becomes liable for the damage caused to that victim, who is not a party to the insurance contract between the insured First Party and ICBC, the second party. That victim is the “Third Party”. Before the Enhanced Care Act was passed on May 1, 2021, most Third Party claims against insured drivers were bought by innocent injury victims, who had the right to sue for compensation for losses of life, enjoyment of life, past and future lost earnings and future care; potentially up to millions of dollars. However, the Enhanced Care Act abolished all those claims. Yet BC law still requires that vehicle owners purchase at least $200,000 in case their negligence causes damage to a Third Party up to that policy limit.

Why does ICBC’s Website say: “If you are responsible for the car accident, it could cost more than you think. Third Party Liability insurance protects you from the financial risk of at an at fault crash”, and “You can increase your coverage to a limit of $5m”. When would you ever need any Third Party coverage now that you can’t be sued if you injure someone?

Your Autoplan broker will tell you to get extended Third Party coverage in case you cause an accident outside BC, for example in the US. However, you can buy short term extended coverage for the duration of your driving trip, which will be much cheaper. Will you need more than $200,000? It is ironic that the mandatory minimum Third Party coverage in Washington State is…. $25,000.

The only other exposure to Third Party claims in BC arises from property damage caused by the insured. Now, if vehicle damage is caused by an accident, it is repaired under First Party coverage. However, if the insured drives into someone’s house, hits a power pole or runs over a pet, Third Party coverage pays the damage on behalf of the insured. It is hard to imagine how many such cases would give rise to a claim over $200,000. In fact, the question for ICBC, and the BC Government, is why can’t the mandatory $200,000 Third Party policy limit be reduced, perhaps to $25,000 as it is in Washington State.

In the meantime, I recommend you stick to a $200,000 third-party policy limit and decline any extended coverage above that amount.

Unsure about the right coverage for your needs? The team at DBM Law, with offices in Coquitlam and Vancouver, is here to help. Contact us today for expert legal advice on navigating ICBC insurance policies and ensuring you’re fully protected. 

Let’s safeguard what matters most—your peace of mind.

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