On December 13, 2019, the Regulation respecting damage insurance brokerage (the “Regulation”), adopted under the Act respecting the distribution of financial products and services (“ARDFPS”), came into force. The Regulation includes the following changes: New titles for firms and qualification requirements; New obligations for damage insurance brokers; and New disclosure requirements New titles for firms and qualification requirements The Regulation amends the Regulation respecting the registration of firms, representatives and independent partnerships by creating two new titles, namely “damage insurance brokerage firm” (hereinafter “Brokerage Firm”) and “damage insurance agency” (hereinafter “Agency”). To qualify as a Brokerage Firm, a firm must meet the following conditions: It must not be an insurer; and Its capital must comply with section 150 of the ARDFPS, which stipulates that no financial institution, financial group or related legal person may hold an interest allowing it to exercise more than 20% of the voting rights attached to the shares issued by the firm in question or an interest representing more than 50% of the value of the firm’s equity capital. To qualify as an Agency, a firm must meet the following conditions: It must be bound by an exclusive contract with a single insurer; and The natural persons through whom it pursues activities, if any, must be damage insurance agents. It should be noted that neither an independent representative nor an independent partnership may act as an Agency. As for a firm that does not meet the conditions to qualify as a Brokerage Firm, it must register as an Agency and abide by the conditions that apply to Agencies. Firms registered in damage insurance have until March1, 2020, to submit a qualification form to the Autorité des marchés financiers (“AMF”). The AMF has confirmed that it will send one of the following notices to all registrants by mid-March 2020: A notice confirming registration as an Agency or Brokerage Firm; or A notice of change giving the firm in question ninety (90) days to comply as an Agency. When the 90-day period expires, if applicable, the firm will be registered as an Agency, and the title of its representatives will be changed to “agent,” unless they are attached to another Brokerage Firm. Such representatives will not be allowed to hold the titles of “agent” and “broker” at the same time. New obligations for damage insurance brokers Section 38 of the ARDFPS provides that a damage insurance broker offering insurance products directly to the public must be able to demonstrate the ability to obtain quotes from at least three (3) insurers that are not part of the same financial group. Section 1 of the Regulation specifies that this obligation applies to brokers offering automobile or home insurance products (property and civil liability insurance on a principal residence that an insured owns or rents). This means that commercial insurance brokers are not subject to this obligation. New disclosure requirements A damage insurance broker who directly offers automobile or home insurance products, as described above, to the public, is now subject to a disclosure obligation. According to section 2 of the Regulation, before inquiring into a client’s needs in accordance with the obligation set out in section 27 of the ARDFPS, a broker must disclose to the client the name of the insurer to which the broker, as an independent representative, or the firm or independent partnership on behalf of which the broker is acting pays 60% or more of the personal-lines damage insurance premiums. This requirement exempts a broker from disclosing the names of insurers with which the broker or the firm or independent partnership on behalf of which the broker is acting has a business relationship, and from the obligation to confirm said disclosure in writing (obligations set out in sections 4.8, 4.10(2) and 4.13 of the Regulation respecting information to be provided to consumers). Summary The amendments regarding firm qualification and disclosure requirements are intended to ensure transparency with respect to business relationships between registrants and insurers. The draft version and current version of the Regulation differ significantly in relation to the way in which these two components are set out. Following consultation sessions and various publications, the disclosure obligation was eased and the concept of hybrid agency was removed. Although the change in qualification only directly affects firms, the form issued by the AMF must be completed by all registrants, including independent partnerships and independent representatives, to confirm that they comply with the requirements that apply to them. All damage insurance registrants should thus take note of and set aside time for the AMF online qualification form, which must be completed by March 1, 2020, at the latest.
- Québec, 2013
Sophie Roy is part of the firm’s Litigation group. She practises primarily insurance, product liability, and professional liability law. She is responsible for a number of different files in which she acts for both the plaintiff and the defendant.
Called to the Bar in 2013, Me Roy began her practice in the legal department of an insurance company, following which she worked at a civil and commercial litigation boutique law firm, and joined Lavery’s Litigation group in 2017. She provides legal opinions on a variety of issues, in particular related to insurance coverage.
She often appears before the Superior Court and the Court of Québec and has also participated in several successful settlement conferences.
- LL.B., Université de Sherbrooke, 2011
Boards and Professional Affiliations
- Young Bar Association of Montréal
On September 8, 2017, in the case of El-Ferekh c. Intact, compagnie d’assurance, 1 the Superior Court of Québec ruled on the insurable interest of someone who acted as a nominee in the context of the deeds pertaining to the acquisition of an immovable property covered by an insurance policy. The insurer had denied coverage on several grounds, namely, the absence of insurable interest, the misleading representations at the time of the underwriting of the policy and an increase of risk. The facts The plaintiff, Robbie El-Ferekh (“Robbie”), instituted proceedings against Intact compagnie d’assurance (“Intact”), claiming $296,941.38 for damages caused to a property which Intact insured. At the time the mortgage was purchased, Steven El-Ferekh (“Steven”) had asked Robbie to act as a nominee in the context of the sale for tax and financing reasons. The deeds of mortgage and sale were both made in Robbie’s name even if, in fact, Steven was assuming the payment of the mortgage and all expenses related to the property. When purchasing the insurance policy on the property, Steven posed as his brother as he answered the questions of the insurance broker. Since Steven declared that he would live in the property, a homeowner policy was issued by Intact. Prior to the closing of the sale of the property and purchasing the insurance policy, and contrary to his representations to the insurance broker, Steven rented the property to a third party. The tenant occupied the property for more than three years. Several months after the tenant left, a fire, the cause of which remains undetermined, entirely destroyed the property. Robbie filed a claim with Intact. Intact denied coverage on the grounds that the policy was null ab initio for lack of insurable interest and because of the false and misleading representations of the El-Ferekh brothers. The judgment The Court first confirmed that an insured had to demonstrate that he suffered financial harm as a result of the loss of the property to justifying an insurable interest. Accordingly, a nominee has no insurable interest since he cannot suffer direct and immediate harm as a result of the loss of such property. Robbie first alleged that an implicit partnership existed between himself and his brother and that their patrimonies were merged. This argument was rejected by the Court since a private arrangement cannot be effective against third parties. Secondly, Robbie alleged that he had an insurable interest as a mortgage debtor. However, the evidence demonstrated that Steven assumed all expenses on the property and that, accordingly, Robbie was not exposed to any financial loss as a result of the fire. The Court thus ruled that the policy was void ab initio because of the lack of insurable interest. Although this conclusion was enough to dismiss the action, the Superior Court nevertheless ruled on the other grounds for denial raised by Intact. The Court confirmed that Intact was justified in invoking the nullity of the policy taking into account the bad faith of the insured and the false statements made respecting the occupation of the property. On the one hand, it was proved that Robbie never lived in the property and that a homeowner policy has issued. On the other hand, although Intact Créneaux, a division of Intact, could have accepted to cover the property as leased property, it is a separate entity from Intact. Therefore, the Court concluded that the insured acted in bad faith when he purchased the insurance, which also justified the ab initio nullity of the policy. As for the risk increase, the evidence demonstrated many aggravating circumstances during the coverage period, namely: criminal activities on the property (the culture of cannabis), police interventions, a change of the electrical system, failure to supply the property with electricity and a situation where the property was left vacant. The Court determined that Intact was well-founded in denying coverage for that reason. Conclusion In brief, the Superior Court concluded: that the simple fact that someone is a mortgage debtor does not constitute evidence of insurable interest in the property; that a nominee has no insurable interest since he cannot suffer any direct and immediate harm resulting from the loss of such property. In other words, in the absence of an exposure to financial loss, a nominee cannot demonstrate an insurable interest in a property. 2017 QCCS 4077 (Judge Guylène Beaugé).
Lavery is pleased to announce the arrival of two new lawyers, Sophie Roy and Isabel Valenta. Sophie Roy is joining the Litigation and Dispute Resolution group. Her practice focuses on insurance law, product liability, and professional liability. Isabel Valenta is joining the Business Law group. Her practice focuses on corporate financing, reorganizations and mergers and acquisitions. Isabel has experience representing start-ups and works closely with companies from the technology, e-commerce, renewable energy, manufacturing and textile industries.