McDonald - Insurance Law

Question 1

Section 91 (BNA Act): Identify FEDERAL areas of exclusive authority (not specific to insurance). (6)

Answer 1

• regulation of trade & commerce
• taxation
• banking
• bankruptcy, insolvency
• immigration
• criminal law

Question 2

Section 92 (BNA Act): Identify PROVINCIAL areas of exclusive authority (not specific to insurance). (4)

Answer 2

• provincial taxes
• civil property rights
• hiring & supervising of provincial employees
• operation of jails & hospitals

Question 3

Define ‘Intra Vires’ & ‘Ultra Vires’.

Answer 3

INTRA VIRES: WITHIN the powers of a particular government

ULTRA VIRES: BEYOND (outside) the powers of a particular government

Question 4

Matters under PROVINCIAL insurance legislation/regulation. (2)

Answer 4

• contract matters

- transaction matters

Question 5

List the areas under the CONTRACT MATTERS of provincial insurance legislation/regulation. (6)

Answer 5

• policy contents
• policy terms
• premium payment
• insurable interest
• reinstatement
• designation of beneficiaries

Question 6

List the areas under the TRANSACTION MATTERS of provincial insurance legislation/regulation. (3)

Answer 6

• agent licensing
• unfair practices
• claims handling

Question 7

Citizens Insurance v Parsons (1881): Facts

Answer 7

insurer disputes ON’s Fire Insurance Act

- the Act required certain statutory conditions for fire policies in ON

Question 8

Citizens Insurance v Parsons (1881): Main Issues (recall: Citizen’s ultra)

Answer 8

1) Is the ON Fire Act ultra vires? (relates to regulation of trade, which is federal)
2) The insurer claims that the province can’t legislate to deprive federally incorporated insurer of status and capacity (violate rights of a federally incorporated company)

Question 9

Citizens Insurance v Parsons (1881): JCPC Ruling on Issue #1

Answer 9

The ON Fire Act IS intra vires.
Reason:
- federal government can’t regulate an insurer operating in a single province
- trade means INTER-provincial (not INTRA-provincial)

Question 10

Citizens Insurance v Parsons (1881): JCPC Ruling on Issue #2

Answer 10

• status & capacity of a federally incorporated insurer is UNAFFECTED
• insurers are all treated equally, regardless of where they were incorporated

Question 11

Insurance Reference Case - AG(CAN) vs AG(AB) (1916): Facts

Answer 11

(1910) The Federal Insurance Act required that all insurers have a Federal license
EXCEPT IF
the insurer was incorporated by the province and was operating solely in that province

Question 12

Insurance Reference Case - AG(CAN) vs AG(AB) (1916): Main Issues

Answer 12

Is this version of the Federal Insurance Act INTRA VIRES?

Question 13

Insurance Reference Case - AG(CAN) vs AG(AB) (1916): Ruling JCPC

Answer 13

Licensing provision are ULTRA VIRES:

• regulation of trade & commerce didn’t extend to a licensing system of a particular trade
• it interferes on the provinces’ authority in civil rights (civil rights are not covered by federal power to legislate for peace, order & good government)

Question 14

Insurance Reference Case - AG(CAN) vs AG(AB) (1916): Implication for Canadian insurers: provide the 2 scenarios where an insurance company can operate in more than 1 province.

Answer 14

1) A provincially incorporated insurer (which has the capacity, BUT not the right to operate in another province), can operate in another province IF they have the permission from that other province
2) Being a federally incorporated insurer, which has the capacity, AND the right , to operate in another province.

Question 15

Insurance Reference Case - AG(CAN) vs AG(AB) (1916): Implication for foreign insurers.

Answer 15

The federal government can require a federal license for a foreign insurer, EVEN IF the foreign insurer is operating in only 1 province.

Question 16

BC Public Auto - CIC v AG(BC): Facts

Answer 16

• BC legislature establishes a compulsory public auto insurance plan
• the legislature then refused to renew the licenses for private insurers
• the insurers decided to sue

Question 17

BC Public Auto - CIC v AG(BC): Arguments

Answer 17

Insurers claim that the BC legislation is ULTRA VIRES:

• it relates to regulation of trade, which is under federal authority
• province can’t legislate to deprive federally incorporated insurers of status and capacity

Question 18

BC Public Auto - CIC v AG(BC): Rulings - Supreme Court

Answer 18

BC legislature acted within its power (legislation is INTRA VIRES)

Question 19

Areas under federal insurance legislation/regulation (similar to CIRCA-F). (5)

Answer 19

• CONDITIONS for entering business
• INVESTMENTS
• regular REPORTING
• CALCULATION of assets & reserves
• PROTECT policy holders

Question 20

Identify reasons for insurance regulation in Canada. (3)

Answer 20

• Prevent insolvencies
• Prevent undesirable business practices
• Consider economic impact on Canada

Question 21

AG(ON) v Reciprocal Insurers (1924): Facts

Answer 21

(1917) Parliament amended the Federal Insurance Act so that it became a criminal act to accept risk without a Federal license.

Question 22

AG(ON) v Reciprocal Insurers (1924): Main Issues

Answer 22

Were Parliament’s 1917 amendments to the criminal code valid?

Question 23

AG(ON) v Reciprocal Insurers (1924): Ruling - JCPC

Answer 23

NO, JCPC invalidated the 1917 amendments to the Federal Insurance Act
- the Federal government does not have the power to regulate insurance contracts

Question 24

OSFI Licensing requirements for domestic insurers (for Minister of Finance to approve letters patent). (6)

Answer 24

• financial resources must be sufficient
• have a detailed and realistic business plan
• business record of applicants (check for past insolvencies or legal action)
• character, competence, and experience of management
• positive impact on Canadian financial system (growth of GDP, jobs, etc.)
• if owned by a foreign parent, OSFI must be satisfied that the subsidiary will be treated fairly