The Health Care Costs Recovery Act: A Significant Change For Insurers

Insurers in British Columbia face potentially significant increased cost exposure as a result of new legislation passed on May 26, 2008. Bill 22 – 2008, the Health Care Costs Recovery Act (the “Act”) has passed Third Reading and will go into effect at some future date by Regulation, after which the B.C. Government will be enabled to pursue subrogated claims to recover past and future health care costs from insurers.

Currently, recovery of health care costs in B.C. is governed by an informal agreement signed decades ago by many of the insurers operating in B.C. at the time. Since then, most insurers have abided by this agreement, thereby resolving the Government’s claims for recovery of health care costs without having to resort to litigation.

Until now, B.C. had been the only province without legislation that would allow the Government to recover health care costs associated with personal injuries that result from negligence or wrongdoing of a third party. B.C. has made up for this lost time by enacting an Act that has a much broader scope than in most other provinces. The legislation in other provinces mostly limits recovery to hospitalization. However, the B.C. Act defines recoverable “health care services” much more broadly and permits the Government to recover health care costs related to past and future medical care, hospital care, continuing care and other treatments or services funded directly or indirectly by the B.C. Government.

The Act defines a recipient of health care services as a “Beneficiary” (i.e. the Plaintiff). A Beneficiary is required to include a claim for health care services when a legal proceeding is commenced by a Beneficiary for personal injury or death. Further, the Act requires the Beneficiary to provide written notice of the legal proceeding to the Government within 21 days after commencement of the legal proceeding. The Beneficiary owes a duty to co-operate with the Government. For example, the Act specifies that the Beneficiary must provide extensive information about the Beneficiary’s injury throughout the course of the action.

The Act also requires insurers to comply with notice and document disclosure requirements. Firstly, insurers must notify the Government within 60 days of the date on which the insurer learns that an insured has or may have caused or contributed to the personal injury or death of a Beneficiary. In addition, insurers must upon request produce a copy of the insurance policy, police report (if any) and/or the pleadings (if any).

The Government may pursue recovery either by using a claim in which it is subrogated to the rights of the Beneficiary making the claim or by bringing its own independent cause of action against a third party wrongdoer, with or without the permission of the Beneficiary. Of particular interest is the fact that the Government’s claim arises “whether or not the personal injury was caused in whole or in part by the wrongdoer.”

The Act will allow the Government to request and obtain information required to quantify past and future health care costs associated with the injury. Previously, the Government would only be reimbursed by the insurer for past health care costs. However, the Act permits the Government to claim future health care costs. The Government must approve settlements involving a claim for health care costs and the Government will participate in class action settlements.

The Act does not apply in relation to health care services that are provided to a Beneficiary in relation to personal injury or death:
1. arising from motor vehicle accidents provided that the wrongdoer has
insurance coverage under the Insurance (Vehicle) Act.;
2. arising out of a tobacco related wrong; or
3. arising from a Workers’ Compensation Board claim.

The Act operates to create an additional head of damages in actions involving personal injury or death. For example, the Act will apply to product liability and occupiers liability claims. Insurers will face increased exposure especially in cases where there is a cost of future care issue.

Prepared by former associate, William Glover.