Part A3 ACTEX Qs

Question 1

From the Landmark case of Whiten v. Pilot, describe five considerations of proportionality that the jury should review when determining the punitive damage award.

Answer 1

1. should be proportionate to the blameworthiness of the defendants conduct
2. should be proportionate to the degree of vulnerability of the plaintiff
3. should be proportionate to the need for deterrence
4. should be proportionate to the harm or potential harm directed specifically at the plaintiff.
5. proportionate after taking into account other penalties
6. the award should be proportionate to the advantage wrongfully gained by the defendant from the misconduct.

Question 2

Discuss one potential issue related to the duty to defend and relate it to a given court decision in Canada.

Answer 2

Landmark Legal:

1. Sansalone v. Wawanesa: court does not require an insurer to defend in cases involving intentional sexual acts since such incidents are excluded in the policy.
2. Nichols v. American Home Assurance: court rules that the duty to defend does not apply to claims for damages related to fraudulent acts or omissions as such are beyond the scope of the policy.
3. Alie v. Bertrand and Frere Construction Co: Insurers that issue excess and umbrella policies that follow the form of the underlying policy and those that let the excess insurer participate in the defines of a claim are seen as having a duty to defend and pay for defence costs.

Question 3

Describe the reason for implementing the Minor Injury Regulation in Alberta.

Answer 3

To reduce insurance premiums in response to what was perceived as an insurance crisis. Maintaing affordable mandatory automobile insurance was a pressing and substantial objective. (Morrow v. Zhang)

Question 4

Briefly describe why the Alberta Court of Queen’s Bench in 2008 deemed the Minor Injury Regulation discriminatory.

Answer 4

It held the evidence strongly suggested that minor injury victims, particularly those suffering from whiplash, are subjected to stereotyping and prejudice as that are often viewed as malingerers.

Question 5

Describe three insurance related activities for which UBIP should not be used, at least at this time.

Answer 5

Decline, cancel or refuse to renew
Confirm rating criteria currently used (ex. Garage location, distance driven, pleasure vs. Commute)
Claims related purposes at this time

Question 6

Describe two points related to UBIP and compliance with unfair and deceptive acts or practices regulation

Answer 6

An insurer must offer UBIP in all territories it does business
If one affiliate with a group has UBIP, that UBIP must be offered to all consumers in the group via the affiliate.

Question 7

What is OSFIs primary goal in supervising financial institutions?

Answer 7

Safeguard depositors and policyholders from loss.

OSFI supervisory framework

Question 8

According to OSFI supervisory framework, what is inherent risk?

Answer 8

The probability of a material loss due to exposure to, and uncertainty arising from current and potential future events.

Question 9

What are OSFIs six categories of inherent risk?

Answer 9

Credit risk
Market risk
Insurance risk
Operational risk
Regulatory compliance risk
Strategic risk

OSFI supervisory framework

Question 10

OSFI assesses the quality of risk management at two levels of control. What are these two levels? Briefly describe.

Answer 10

Operational management: for a given significant activity is primarily responsible for the controls used to manage all of the activity’s inherent risks on a day to day basis. Operational management ensures that there is clear understanding by FRFI line staff of the risks the activity faces and must manage, and that the policies, processes, and staff are sufficient and effective in managing these risks.
Oversight Functions: are responsible for providing independent, ENterprise wide oversight of operational management. There are seven oversight functions that may exist in an FRFI.

Question 11

List the 7 oversight functions that may exist in an FRFI

Answer 11

Financial
Compliance
Actuarial
Risk management
Internal Audit
Senior management
Board

Question 12

Define net risk according to OSFI

Answer 12

Inherent risk after mitigation by quality risk management.

Question 13

OSFI s core supervisory process is a three step iterative process. Briefly describe each step.

Answer 13

1. Planning Supervisory work
2. Executing supervisory work and updating the risk profile
3. Reporting and Intervention

Question 14

What are the four overall ratings that can be given to an oversight function?

Answer 14

Strong, acceptable, needs improvement, weak

Question 15

The supervisory process examines three different financial areas/measurements for all FRFIs and evaluates them. What are these three areas?

Answer 15

Earnings
Capital
Liquidity

Question 16

Describe three levels that OSFI monitors to determine emerging issues for an FRFI.

Answer 16

Environment
Industry
FRFI

Question 17

What is the primary means of communication between OSFI’s RM and an FRFI?

Answer 17

The supervisory letter

Question 18

What are the five intervention ratings in OSFI supervisory framework

Answer 18

0: normal
1: early warning
2: risk to financial viability or solvency
3: future financial viability in serious doubt
4: non-viable/insolvency imminent

Question 19

In a series of decisions rendered in 1978, commonly referred to as the Trilogy, the Supreme court of Canada established a cap on non-pecuniary damages.
Describe three justifications presented by the Court for establishing the cap.

Answer 19

1. The claim of a severely injured person for damages for non-pecuniary loss is virtually limitless. The fact that there is no objective yardstick for measuring such loss leaves this area open to inconsistent and widely extravagant awards.
2. Damages for non-pecuniary losses are not really ‘compensatory’ as no money can provide true restitution. Accordingly, such damages should be viewed as simply providing additional money to make life more endurable
3. Under the law, the plaintiff will be fully compensated for future loss of income and future care costs which are arguably more important for ensuring that the injured person is well cared for in the future
4. Exorbitant awards for general damages can lead to an excessive social burden

Question 20

In a series of decisions rendered in 1978, commonly referred to as the Trilogy, the Supreme court of Canada established a cap on non-pecuniary damages.
Describe how the cap affects the level of equity in compensation between people with temporary or less severe injuries and those with permanent and more sever injuries.

Answer 20

Relative to actual losses, the liability process tends to overcompensate people with temporary or less sever injuries and under compensate those with permanent and more sever injuries.

Question 21

Describe two exceptions in which Trilogy decisions were ruled not to apply, and why

Answer 21

Damages for sexual abuse, & defamation.

The cases and damages were deemed exceptional and unlikely to impact insurance prices, thus not a social burden.

Question 22

Identify the 3 purposes of punitive damages

Answer 22

Deterrence
Retribution
Denunciation