Carscallen Blog

Barata v. Intact Insurance: Insurers breached duty of utmost good faith owed to client

Posted by Carscallen LLP on Jun 8, 2021 10:56:53 AM

Written by Urvil Thakor

The Court of Queen’s Bench of Alberta (the “Court”) recently released its decision in the case of Barata v. Intact Insurance[1], a decision from Justice G.S. Dunlop following a Special Chambers Application heard on March 17, 2021.

Agreed facts

Diana Barata was driving her vehicle with her fiancé, Daniel Barata, in the passenger seat. Ms. Barata struck and injured a pedestrian (the “Victim”), who later died from his injuries in hospital. Although the Baratas stopped and spoke to the Victim’s companions, they got back in their vehicle and left the scene without waiting for the police or an ambulance to arrive. Later that day, the police arrived at the Baratas’ home and arrested Mr. Barata on the assumption that he was driving when the vehicle hit the Victim. Mr. Barata was charged with failing to stop at the scene of the accident, among several other criminal offenses.

Ms. Barata reported the collision to her insurer, Intact Insurance (“Intact”), who then assigned an investigator to the file (the “Investigator”). Under the Insurance Act[2], Ms. Barata was obligated to cooperate with Intact’s investigation. During a compelled interview with the Investigator, she advised that she was actually the driver when the vehicle struck the Victim, not Mr. Barata. The Investigator provided that information to the police, who subsequently charged Ms. Barata with the same criminal offenses they charged Mr. Barata with. They were tried separately and were both acquitted. 

Ms. Barata then filed a claim against Intact alleging they breached their duties of confidentiality and good faith.

The duty owed by Intact to its client

The Court reached the following conclusions:

  1. Intact and the Investigator did not owe Ms. Barata a duty of confidentiality with respect to the information she provided to them, but they did owe her a duty of utmost good faith with respect to the investigation of her claim
    • They breached that duty by disclosing her compelled statement to the RCMP because that disclosure was not reasonably justified as part of Intact’s investigation of Ms. Barata’s insurance claim.
  2. The Personal Information Protection Act[3] does not authorize an insurer to disclose an insured’s compelled statement to the police in these circumstances, because doing so was a breach of Intact’s duty of utmost good faith, and because doing so undermined Ms. Barata’s right to remain silent.
  3. The disclosure did not result in any damages to Ms. Barata because the police did not rely on the information from the Investigator in charging Ms. Barata. The police charged Ms. Barata several months later relying on information provided by Mr. Barata.
  4. The Investigator acted in good faith so punitive damages were not warranted.
The Duty of Utmost Good Faith

The Court held that an insurer’s duty of utmost good faith requires the insurer to investigate an insured’s claim in utmost good faith, which includes what it does with the information it obtains during that investigation, and that it breaches that duty if it acts without reasonable justification.[4]

The Court found that it was unreasonable for the Investigator to give the information to the police. First, Intact had repeatedly asked Ms. Barata to authorize disclosure to the police and she declined, clearly indicating she did not want the information given to police. Further, the Investigator was not advancing Intact’s investigation by disclosing the information. Additionally, because Ms. Barata’s compelled statement would be inadmissible against her in criminal proceedings, it was unreasonable for the Investigator to provide it to the police. The Court referred to Justice Shelley’s comments in R v. Porter[5] where a similar issue was previously addressed:

If the insurer were at liberty to routinely provide such statements to the police, they would essentially be operating as agents for the police, collecting information relevant to and for use in the criminal investigation.  That would put the insured and insurer in an adversarial relationship.[6]

However, the Court recognized that there may be cases where an insurer would be reasonably justified in disclosing some or all of its insured’s compelled statement to the police, particularly if it is for the purpose of seeking information to assist the insurer’s investigation of an accident.  Whether such disclosure would be reasonable will depend on the facts and circumstances in each case.

Damages

The Court, in this case, did not award damages to Ms. Barata, as the disclosure did not cause her any loss; she was arrested based on information obtained from Mr. Barata, not from Intact. The Court also determined that punitive damages were not appropriate as there was no evidence of bad faith in the Investigator or Intact’s conduct. His desire to help police investigate a fatal accident was understandable. The Court specified that a breach of the duty of good faith does not necessarily mean a party acted in bad faith.

Conclusion 

While insurers do not owe their insureds a duty of confidentiality, they do owe them a duty to investigate claims in utmost good faith. This duty includes an obligation not to disclose compelled statements from their insureds to police unless that disclosure is necessary to obtain information to assist the Insurer’s investigation. Unjustified disclosure of an insured’s compelled statement to police would likely be a breach of the duty to act in good faith and could undermine the insured’s legal rights.

In this case, Intact was fortunate that the police obtained the relevant information from a source other than the Investigator. However, insurers must be cautious before disclosing such information and must not do so unless necessary for their investigation.

Carscallen LLP's Insurance and Tort Liability Expertise

Our team of insurance and tort liability lawyers has a range of experience in all types of negotiation, litigation, and mediation in the area of insurance and tort liability, including private and court-mandated mediation, and can bring an effective compromise to any dispute. Our team’s expertise in this area helps to ensure that claims and disputes are settled quickly, with fair and reasonable compensation. Our familiarity with the insurance industry allows us to assess the likelihood of bringing claims to resolution and to structure them in a way that streamlines their progress through to settlement. Where compromise is not possible, we have the experience necessary to successfully represent clients at all levels of court and before any administrative tribunal or mediator. Please contact any member of our insurance and tort liability group for any insurance law, personal injury or tort liability questions or matters you may have.

 

*This update is intended for general information only on the subject matter and is not to be taken as legal advice.

 

[1] Barata v Intact Insurance Company, 2021 ABQB 419 [Barata].

[2] Insurance Act, RSA 2000 c I-3.

[3] Personal Information Protection Act, SA 2003, c P-6.

[4] Barata at para 14.

[5] R v Porter2014 ABQB 359 aff’d 2015 ABCA 279 [Porter].

[6] Porter at para 110.

 

Topics: Insurance and Tort Liability

Subscribe to our blog to be notified when another blog is released.