Financial Products and Services

In early 2022, the Autorité des marchés financiers (the “AMF”) conducted specific consultations on financial products offered on the Internet. Further to these consultations, the AMF published explanations on the Regulation respecting Alternative Distribution Methods (the “RADM”) in late December 2022.1 Here are some key points that the AMF has clarified: Definitions The AMF has elaborated on the meaning of certain terms and expressions included in the RADM, thereby clarifying the obligations incumbent on firms as concerns insurance products offered on the Internet: “Providing” or “presenting” information: This implies delivering, giving or handing over information to a client without them having to take any action. A client should not have to search for the information to find it. As such, making the information accessible or referring to a policy is not enough.2 “Making visible at all times”: The information should be visible to the client at all times, regardless of the page the client is on. A representative’s contact information is the only information that must be visible on the digital transactional space at all times. Websites that are accessible to people who are blind or use a voice assistant must also have means to present this information.3 “Making a representative available”: The AMF only requires that representatives be available during regular business hours.4 “Making information readily accessible”: A client must have the option of taking cognizance of the information and be able to easily find it. The information must be accessible in one or two clicks. Including a hyperlink or an icon, for example, are ways of making information accessible.5 Under this obligation, a hyperlink may be used to redirect a client to a website or document external to the digital space.6 External documents that are accessible through hyperlinks, such as sample insurance policies, must be up to date. Summary of the complaint processing policy The AMF specifies that the summary of the complaint processing policy referred to in the RADM must be that of the firm running the transactional website, not of a third party. Thus, a property and casualty insurance brokerage cannot refer to an insurer’s policy summary.7 Identification of the firm A firm may display partner logos on its digital space only if doing so does not cause confusion. A client must know which firm runs the space and must be able to distinguish it from partners that do not offer the products or services.8 Product coverage, exclusions and limitations Further to its supervisory activities, the AMF has confirmed that product coverage appears to be well presented in digital spaces. However, exclusions and sometimes limitations are not as well presented. Given that exclusions and limitations constitute information that is necessary for a client to make an informed decision, the AMF urges firms to pay attention to these and to select them based on a proper analysis.9 Suspension of transactions The AMF has clarified how to apply the criteria under section 14 of the RADM, more specifically paragraph 3 of this section, which provides that a firm must suspend a transaction initiated through a digital space when no representative can immediately intervene with a client who asks to deal with a representative and there is a risk that the client will not be able to make an informed decision. The AMF specifies that it is up to the firm to assess and manage its risk. In order to determine whether such a risk exists, the AMF has proposed the following solutions: The firm may caution the client as follows: “Do you wish to continue the process even though no representative is available at this time?” The firm could post its representatives’ availability. If a client decides to enter into a contract through a digital space, the firm could ensure that a representative contacts them within 24 hours. A transaction does not have to be suspended immediately; it can be done at the end of the transaction, before the contract is concluded. Moreover, stopping or temporarily suspending a transaction may also be necessary if a contradiction or irregularity in the information the client provides could lead to an error.10 The digital space must be set up to detect such a contradiction automatically. The AMF considers it preferable to discontinue a transaction if contradictions are detected. It can also be temporarily suspended while the client is informed of the consequences of making false statements and the importance of knowing their entire situation, for example, and to allow them to make corrections, if necessary.11 To better understand the obligations of the RADM, we invite you to consult our bulletin Bill 141: Checklist on insurance products offered via the internet and distribution without a representative. These are only available in French at this time; Regulation respecting Alternative Distribution Methods, CQLR, c. D-9.2, r. 16.1. Autorité des marchés financiers, Explications à l’égard du règlement – Le RMAD expliqué article par article (hereinafter the “Explanations”), ss. 7, 9, 11, 12 and 12.2. The terms “explaining information” or “providing information” under section 12.1 of the RADM should be interpreted in the same manner. Explanations, s. 8. Explanations, s. 8. Explanations, ss. 8 and 10. Explanations, ss. 8 and 10. A representative’s contact information does not have to appear on external documents and websites at all times. It is important to note that under section 9 of the RADM, a document that is to be “provided” or “presented” to a client cannot be located on an external website. Explanations, s. 8. Explanations, s. 8, para. 1. Explanations, s. 9. For example, a client declaring they have no children yet selecting insurance for their children constitutes a contradiction. Explanations, s. 14.

Bill 96 – An Act respecting French, the official and common language of Québec (the “Act”) - was adopted on May 12, 2022 and assented to on June 1, 2022, its effective date. Certain provisions are already in force; for other provisions, a transitional period ranging from several months to three years will apply. This document provides an overview of the modifications included in the reform of the Charter of the French Language (the “Charter”) that will have an impact on various aspects relevant to insurance sector stakeholders doing business in Québec. Forming the centrepiece of the announced changes, the reform of the Charter includes strengthened oversight mechanisms governing the use of French as the language of commerce and business, as well as linguistic rights in the areas of employment and communications with agents of the State. Overseeing the language of commerce and business The reform of Section 55 of the Charter stipulates that contracts of adhesion and related documents must be drawn up in French. However, effective June 1, 2023, a French-language version of these contracts and documents must be provided to participants First Alinea of this amended section reads as follows: 55. Contracts pre-determined by one party and the related documents, must be drawn up in French. The parties to such a contract may be bound only by its version in a language other than French if, after its French version has been remitted to the adhering party, such is their express wish. The documents related to the contract may then be drawn up exclusively in that other language.1 Therefore, contractual clauses in which the parties simply indicate that they agree to be bound by a contract drawn up in a language other than French are no longer sufficient. The Civil Code of Québec stipulates that “A contract of adhesion is a contract in which the essential stipulations were imposed or drawn up by one of the parties, on his behalf or upon his instructions, and were not negotiable.”2 To qualify a contract, the importance of the negotiated terms and conditions and their connection with the contract must be analyzed. It is generally recognized that if the essential stipulations are not negotiable, the contract is a contract of adhesion, even though some less important terms and conditions may have been negotiated by the parties. This amendment codifies the interpretation adopted by the Office québecois de la langue française (“OQLF”) and the courts,3 particularly given that negotiated contracts were not covered by this provision. To remove any doubt concerning this interpretation, Bill 96 was amended so as not to extend the scope of this requirement to include contracts containing “printed standard clauses”. The insurance contract Since their essential stipulations are typically drawn up by the insurer, insurance contracts and their endorsements are contracts of adhesion, as a general rule. Therefore, the French-language version of all related documents — notices, letters, insurance product summaries — must be provided to clients before they can decide whether they will be bound by a version drawn up in another language. During the parliamentary debates, Minister Jolin-Barette commented that Section 55 of the Charter only referred to consumers and that contracts between two companies could be drawn up in the language of their choice if that was the express wish of both parties. The term “consumer”, however, is not defined in the Charter. Ambiguity remains as to whether the Minister’s comment only referred to contracts containing standard clauses or whether contracts of adhesion were included. We will have to wait for the publication of the interpretation bulletins and the annotated edition of the act to determine whether Section 55 of the Charter applies to commercial insurance policies. In the meantime, we are of the opinion that if Québec lawmakers had wanted to exclude commercial contracts of adhesion, they would have expressly done so by means of an amendment. Insurance contracts in effect before June 1, 2023 will not have to be translated, nor will insurance contracts renewed without modifications since under those circumstances, the contract would not be regarded as a new contract.4 However, if an existing insurance contract is renewed with significant modifications, it will be regarded as a new contract and the French-language version thereof must be provided to clients so they may validly express their wish to be bound by a contract drawn up in a language other than French. Given that in most cases, insurance contracts are sent out to policyholders by regular mail or email, effective June 1, 2023, insurers, agents or brokers, as applicable, will have to send both the French-language and English-language versions of the contract in the same mailing or simply send the French-language version thereof. It is important to note that the Act provides for an exception to the requirement to provide the French-language version if: The insurance policy has no equivalent in French in Québec; and The insurance policy is originates from outside Québec or is not widely available in Québec.5 [unofficial translation] In all likelihood, this exception will only apply to highly specialized insurance products and will be interpreted restrictively given the Act’s primary objective. Unlike insurance contracts and related documents, invoices, receipts, discharge notices and other similar documents may be sent out in English if the French-language version remains available on terms that are at least as favourable.6 Services and marketing in French The Act introduces the Charter’s new Section 50.2, which states that businesses must respect consumers’ fundamental linguistic right to be informed and served in French. The same section reiterates this requirement with respect to “a public other than consumers” to whom are offered goods and services and who must henceforth be informed and served in French by businesses. Unlike consumers, however, clients who are businesses do not enjoy a fundamental linguistic right protected by the Charter. As regards marketing, the addition of the words “regardless of the medium used” to Section 52 of the Charter confirms that marketing documents in “hard copy” format must be in French, as must websites. If a version is available to the public in a language other than French, the French-language version must be available on terms that are at least as favourable. This provision took effect on June 1, 2022. Chat-type platforms or those facilitating direct communications with the insurer should make it possible for members of the public to communicate with the insurer’s representatives in French at all times. Communications with insurance agents and brokers Effective June 1, 2022, insurers are required to communicate in French with insurance agents and brokers who express the desire to do so.7 In addition, all information documents sent to insurance agents and brokers regarding underwriting or claims must be in French if they so wish. As regards contractual agreements between insurers,  insurance agents  and brokers, the need to provide a French-language version depends on the nature of the contract, i.e. whether it can be qualified as a contract of adhesion. French in the workplace Effective June 1, 2022, all companies doing business in Québec must comply with the following requirements in the area of employment rights: Respect employees’ right to work in French8; Use French in all written communications sent to employees; Ensure that all offers of employment, promotion or transfer; individual employment contracts; employment application forms; and documents concerning employment conditions and training sent to employees are drawn up in French;9 Take all reasonable means to avoid requiring employees to have knowledge  or a specific level of knowledge of a language other than French for employees to obtain employment or to maintain their position, including in particular:   Assess the actual needs associated with the duties to be performed; Make sure that the language knowledge already required from other staff members was insufficient for the performance of those duties; Restrict as much as possible the number of positions involving duties whose performance requires knowledge of or a specific level of acknowledge of a language other than French.10 It should be noted that individuals whose employment contracts are currently drawn up in English have until June 1, 2023, to ask their employer to translate their contract. Effective June 1, 2025, businesses with 25 employees or more in Québec must meet additional francization requirements for their Québec employees to obtain a francization certificate, including: Registering with the OQLF; Submitting an analysis of the status of the French language within the business; Putting in place a francization program within three months following an OQLF request to that effect. The above requirements were already in effect for businesses with more than 50 employees in Québec. French as the language of the civil administration The Act includes various modifications with respect to French as the language of the civil administration. The Québec government will be required to make exemplary and exclusive use of French, with certain exceptions. Effective June 1, 2023, all agents of the State and provincial government bodies will be required to communicate in French with all persons, including business representatives. All documents exchanged with the civil authorities, as well as all contracts and permits, must be drawn up in French. Insurance sector stakeholders outside Québec should expect to receive more communications in French from the Autorité des marchés financiers (“AMF”) given that the AMF is a body of the “civil administration”. Penalties It should be noted that new powers will be granted to the OQLF enabling it to conduct investigations and impose administrative and disciplinary penalties. As regards infractions of the Charter’s provisions, the Act provides for fines ranging from $3,000 to $30,000 for businesses and from $700 to $7,000 for individuals. These fines are doubled for a second offence and tripled for further offences. In addition, if an infraction continues for more than one day, each day constitutes a separate infraction. If an infraction is committed by a corporate director or officer, the Act provides for fines ranging from $1,400 to $14,000. Questions of interpretation Various provisions have raised questions of interpretation that are still difficult to resolve at the time of writing. Interpretation bulletins and an annotated edition of the act will be published by the provincial government with a view to guiding businesses in the application of the Act; they will also help to clarify certain provisions that remain ambiguous for the time being. For further information on changes concerning trademarks, please consult a recent publication by our colleagues specializing in intellectual property. Sec. 55, Para. 1 of the Charter. Civil Code of Québec, CQLR ch. CCQ-1991, Sec. 1379, Para. 1. Westboro Mortgage Investment vs. 9080-9013 Québec inc., 2018 Superior Court of Québec 1. Leave to appeal dismissed 2019 Court of Appeal of Québec 1599. Didier LLUELLES, Droit des assurances terrestres, 6th ed., Montréal, Éditions Thémis, 2017, Para. 186. Sec. 21.5 and Sec. 55 of the Charter. Sec. 57 of the Charter. Sec. 50.2 of the Charter. Sec. 5 and Sec. 50.2 of the Charter. Sec. 41 of the Charter. Sec. 46 of the Charter.

On October 31, 2017, Québec’s Finance Minister, Carlos J. Leitão, introduced Bill 150, An Act respecting mainly the implementation of certain provisions of the Budget Speeches of 17 March 2016 and 28 March 2017 (“Bill 150”). In this newsletter we will discuss the changes made to the Civil Code of Québec (“CCQ”), the Act respecting insurance, c. A-32 and the Act respecting the distribution of financial products and services, c. D-9.2 (“Distribution Act”) affecting the offer and distribution of insurance products. According to the Minister’s speech upon introduction of Bill 150, the main amendment that would affect products themselves would be to permit group damage insurance contracts. Other proposed amendments affect the offer and distribution of group insurance products. Civil Code of Québec The proposed changes to the CCQ relating to damage insurance are significant since they formally introduce the concept of group damage insurance. Until now, the CCQ provided that insurance of persons was either individual or group. The lack of a similar provision for damage insurance, along with the lack of a clear provision allowing this type of insurance, led to the conclusion that group damage insurance was not permitted in Québec. Bill 150 codifies this concept, making the following changes: Non-marine insurance may henceforth be either individual insurance or group insurance; The concept of a group damage insurance policy is introduced in article 2395 CCQ; The CCQ no longer indicates that insurance of persons is individual insurance or group insurance, which removes any ambiguity about whether group damage insurance is permitted. Act respecting the distribution of financial products and services With the repeal and amendment of several sections of the Distribution Act and the removal of the concept of adhesion, which is specific to group insurance, distribution without a representative, through a distributor, would now cover individual insurance products. In fact, Bill 150 maintains the possibility of an insurer to offer an insurance product through a distributor, namely a person who, in pursuing activities in a field other than insurance, offers, as an accessory, for an insurer, an insurance product which relates solely to goods sold by the person.1 Products deemed to be insurance products which relate solely to goods but which are not affected by Bill 150 are: travel insurance, vehicle rental insurance where the rental period is less than four months, credit card and debit card insurance, and vehicle replacement insurance as defined in the Distribution Act.2 The section of the Distribution Act3 that provides that debtor life, health and employment insurance and investor life, health and employment insurance are deemed to be an insurance product which relates solely to goods and to which clients adhere is repealed. Such changes suggest that participation in group insurance products offered by insurers, whether in damage insurance or insurance of persons, is no longer covered by the rule respecting distribution other than through a representative.4 The changes made by Bill 150 relating to the definition of representative in insurance of persons5 also indicate that participation in a group insurance contract would no longer be reserved for representatives in insurance of persons, meaning that group insurance contracts could henceforth be offered directly. Act respecting insurance Along with the changes made to the Distribution Act, the Act respecting insurance is amended to provide that an insurer who enters into a group insurance contract must deliver to the client a document intended for participants, in respect of the sound and prudent management practices and commercial practices insurers must adhere to.6 The information set forth in this document is intended to disclose to participants, in a timely manner, information relevant for making an enlightened decision and for the performance of the contract. The information from this document is somehow similar to what must be included in the distribution guide for insurance products distributed without a representative: 1) the scope of the coverage considered and any exclusions; 2) the time limits, in conformity with the Civil Code, within which the insurer must be notified of a loss and the time limits within which the insurer is required to pay the insured sums or the indemnity provided for; 3) the information necessary for filing a complaint with the insurer referred to in section 285.29 of the Act respecting insurance, which provides for the policy in respect of the examination of complaints and resolution of disputes every insurer must establish in order to provide equitable resolution of complaints. Since the documentation prescribed by article 2401 CCQ remains the same, insurers must also give the client the insurance certificates which the client must distribute to participants, and issues the group insurance policy to the client, who must make it available to participants and beneficiaries wishing to examine or make copies of it. Finally, the proposed changes also introduce an increased level of liability for an insurer entering into a group insurance contract with a client that is affiliated with the insurer or that belongs to the insurer’s group, such as a federation and the mutual insurance associations that are members of it.7 Not only must the insurer deliver an explanatory document to participants, it must also ensure that the client delivers it to participants. The insurer is liable for the acts performed by or on behalf of the client toward enrolling participants under the group insurance contract.8 The amendments proposed by Bill 150 are in addition to those set out in Bill 141,9 which reforms, extensively, Québec’s financial sector. Lavery’s experts can help you position yourself competitively and seize new strategic opportunities resulting from these fundamental changes in the financial sector.   Section 408 of the Distribution Act. Section 424(5) of the Distribution Act. Section 426 of the Distribution Act. Title VIII of the Distribution Act. Section 238 of Bill 150 and section 3 of the Distribution Act. Sections 222.1 and 222.2 of the Act respecting insurance, c. A-32. Section 1.5 of the Act respecting insurance, c. A-32. See section 235 of Bill 150. See Lavery’s October 5, 2017 newsletter entitled “Comprehensive reform of the rules governing the regulation and operations in the Québec financial sector”.

On October 31, 2017, Québec’s Finance Minister, Carlos J. Leitão, introduced Bill 150, An Act respecting mainly the implementation of certain provisions of the Budget Speeches of 17 March 2016 and 28 March 2017 (“Bill 150”). In this article, we will discuss the changes made to the Act respecting the distribution of financial products and services (the “Act”) relating to damage insurance brokerage. The following is a summary of the main changes to the Act involving damage insurance brokerage based on Minister Leitão’s speech introducing Bill 150. New rules for products’ offering, firm registration and disclosure Damage insurance brokers will be required to offer clients products from at least four insurers that do not belong to the same financial group, namely insurers who are not affiliated with the firm. It will be interesting to hear comments from damage insurance brokers about the implementation of this new rule, which benefits consumers and will increase transparency. Note that a broker who is unable to offer clients insurance products from at least four insurers may nonetheless continue offering insurance products but must make every effort to comply with this rule and keep on file any information proving these efforts were made. The Autorité des marchés financiers (the “AMF”) may verify compliance with this provision during an inspection and require that a firm and its representatives change their registration to that of an agency if the broker’s “efforts” are considered insufficient. This exception to the new obligation to offer products from at least four insurers seems to require that brokers be able to prove to the AMF that they have made the required efforts to offer a client an insurance proposal from at least four insurers. Registration of a damage insurance firm will be made based on its representatives’ registration categories: a firm will be a damage insurance agency if it acts through damage insurance agents; a firm will be a damage insurance brokerage firm if its acts through damage insurance brokers. A damage insurance agent offers damage insurance products to the public on behalf of a firm that is an insurer or is bound by an exclusive contract with a single insurer. A damage insurance broker offers a range of damage insurance products directly to the public from several insurers and, under Bill 150, from at least four insurers, by client proposal. Firms will be subject to new disclosure requirements on their website and in their communications with clients: a damage insurance agency will be required to disclose the name of the insurers with which it is bound by an exclusive contract and which products are included in such contract; and a damage insurance brokerage firm will be required to disclose the name of the insurers for which it offers insurance products. Ownership of damage insurance brokerage firms The 20% rule is maintained but in a different form. Consultations pertaining to the 20% rule were held in the spring of 2017.1 During these consultations, the industry was asked to comment on the need to maintain this rule and on possible alternatives for managing conflicts of interest between damage insurance brokerage firms and insurers. According to the changes proposed in Bill 150, registration as a damage insurance brokerage firm is prohibited if a financial institution, financial group or legal person affiliated with them has a significant interest in the firm’s decisions or equity. “Significant interest” means: with respect to a firm’s decisions, the power to exercise 20% or more of the voting rights attached to the shares issued by the firm; and with respect to a firm’s equity, holding shares issued by the firm that represent 20% or more of its equity capital. Section 148 of the Act, which prohibited a financial institution, financial group or a legal person affiliated with them from holding more than 20% of the voting rights or shares of a damage insurance firm acting through a damage insurance broker, is repealed. The legislator specifies that the 20% rule under Bill 150 does not prohibit any financing agreement or any service contract between a financial institution and a firm. Recall that in 2007, the AMF published a staff notice2 concerning the ownership of damage insurance brokerage firms which said that, to ensure that firms remained independent, a financial institution could not sign a financing agreement with a firm unless the terms of such agreement were those that would be agreed to by a lender at arm’s length. The changes proposed by Bill 150 are in addition to those set out in Bill 1413, which proposes an extensive reform of the laws governing Québec’s financial sector. Our financial products and services team can help you take a strategic position to benefit from new business opportunities that will result from the new rules and answer any questions you may have about these changes.   See Need to know newsletter of April 18, 2017 entitled “Consultation on the 20% Rule”. Avis du personnel relatif à la propriété des cabinets en assurance de dommages [staff notice regarding the ownership of damage insurance firms] (in French only), AMF Bulletin: 2007-02-16, Vol. 4 No. 07. See Lavery’s October 5, 2017 bulletin entitled “Comprehensive reform of the rules governing the regulation and operations in the Québec financial sector”.