Case of the Day: Lee v. Insurance Corp. of British Columbia
Posted on August 28, 2017
The case of the day is Lee v. Insurance Corp. of British Columbia (W.D. Wash. 2017). ICBC is owned by the British Columbia government, and it provides universal automobile insurance in British Columbia. It insured Mi Joo Tour and Travel Ltd., which operated tour buses. Lee was a passenger on a tour that began and ended in Washington.
The bus was involved in a serious crash. Lee brought a claim against Mi Joo in arbitration, and the case settled. ICBC was involved in the negotiations and paid Lee $10 million (Lee was an additional insured under the ICBC policy). Lee then sued ICBC for breach of contract, tortious breach of the implied covenant of good faith and fair dealing, and anticipated breach of the Washington Insurance Fair Conduct Act. ICBC moved to dismiss under the FSIA.
Since ICBC was an instrumentality of the British Columbia government, the question was whether an FSIA exception applied. The court held that the commercial activity did not apply because ICBC had not engaged in a commercial activity in the United States. In particular, it had not done business with Lee: Lee wasn’t an intended beneficiary of the policy, but merely an additional insured.
Lee also claimed that ICBC committed a tort by failing, in bad faith, to provide it with insurance benefits. The court rejected this argument on the grounds that ICBC had
made a choice on how to implement and issue policy benefits. That choice is a discretionary decision that does not abrogate sovereign immunity even if tortious. The nature of the conduct is grounded in social, economic, and political policy judgement of the foreign government by choosing who is insured under their national policy and who gets to collect on that insurance, especially with regards to individuals who were never named insureds in the policy and had no part in its formation.
This seems correct, but note that not every case in which the foreign sovereign makes a policy decision will be outside the commercial activity or non-commercial tort exceptions. The key, under the statute, is to identify what the claim is “based upon.” Here, the tort was failure to provide insurance benefits, so it makes sense to say that the claim is based upon the decision about what insurance benefits to provide. If the insurer had made a different choice, there would have been no claim. But take the following case: a foreign government employs someone in the United States, and the worker is injured on the job through the foreign sovereign employer’s negligence. There the gravemen of the claim is the negligence causing the injury. So if the employer fails to buy worker’s compensation insurance and the worker brings a claim under a statute allowing personal injury claims against uninsured employers notwithstanding the worker’s compensation law, the claim is based upon the negligence causing the personal injury, not the foreign sovereign’s decision not to purchase the insurance.