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An offer to settle does not create a debt between a defendant’s insurer and a plaintiff

The BC Supreme Court recently confirmed that there is no legal relationship between a plaintiff and a defendant’s insurer. In Loft v. Nat 2015 BCSC 198 the defendants sought double costs on the basis that they had made two formal offers to settle that were significantly more than the award. However, those offers contained an unusual clause stating that ICBC (the defendant’s insurer) would satisfy the plaintiff’s obligation to the Family Maintenance Enforcement Program (FMEP) before paying any settlement monies to the plaintiff. The plaintiff argued that this clause made it impractical for him to accept either of the offers.

The court agreed with the plaintiff’s position. The court stated that any reference to ICBC in the offer was inappropriate because ICBC was not a party to the action, the offer was made by the defendants and not ICBC, and ICBC’s obligations were only to the defendants and not the plaintiff. The court concluded that an offer to settle can never create a debt between a defendant’s insurer and a plaintiff.

When drafting an offer to settle, it is important to remember that the offer is made by the named defendant and not the insurer, and that if the offer is accepted it creates an obligation between the defendant and the plaintiff.

Case law update by: Trevor Morley