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  • “Peer-to-peer” insurance: a grassroots revolution?

    After the hospitality sector, transportation of passengers and corporate financing, insurance could be the next sector to see its business model influenced by the sharing economy. In the past few years, numerous start-up companies have launched businesses in “peer-to-peer” (“P2P”) insurance on risksharing platforms, claiming to reduce bureaucracy and costs, and insure risks not covered by the traditional markets. Below is a brief overview of this business model which, while still inconspicuous in Quebec, was the subject of a warning from the Autorité des marchés financiers (“AMF”). What is P2P insurance? The idea behind P2P insurance companies is simple: to form communities of users for the purpose of insuring similar goods or services. It is the users themselves who determine which risks associated with their goods are covered, and the community decides the eligibility of claims collectively. However, the idea is not so new. After all, this is in fact a return to its roots for the insurance industry. Already, between 1000 and 600 B.C., the Lex Rhodia — the precursor to contemporary maritime law — provided a mechanism for the indemnification of similar damages, whereby a group of merchants shipping their goods together each paid an amount prior to the voyage for purposes of indemnifying anyone whose cargo was cast off at sea during the passage in order to ensure the safe return of the ship — and remaining cargo — to port.1 While this principle still exists in maritime insurance, the business model for the property insurance and personal insurance industries has since taken a different direction. Two types of P2P businesses have emerged in the past few years: those acting as brokers for existing insurance companies, and those offering coverage independently of any other company. P2P companies claim that the simplified process they propose allows them to reduce the number of intermediaries between the user and insurance product, thereby reducing costs, particularly those associated with brokerage commissions, administrative overhead and adjusters’ fees. P2P companies also claim that they hand control over risks, claims and even indemnification back to the insureds. In this regard, some platforms have created “community courts” made up of volunteer “juries” drawn from the members who decide the merits of claims and the indemnification to be paid. In particular, this is how Besure,2 a Canadian P2P company, works. AMF warning Consumers should still be vigilant. In Quebec, the AMF recently issued a warning to potential users of these platforms,3 reminding them that the sale of insurance services or products is a regulated activity requiring a license. Furthermore, products must be offered in accordance with the requirements of the Act respecting the distribution of financial products and services. The AMF is still reviewing the similarities and differences between these platforms and the existing insurance companies. In the meantime, users are exposed to risks while they wait for the AMF to decide on the conformity of P2P platforms to Quebec regulations. For example, they could face potential losses if the indemnification fund collected by the users is not large enough to cover all their damages, or the community refuses to provide reasonable indemnification after a loss. The AMF also recommends that individuals verify whether the risk-sharing company does in fact have a license before transacting through it, since, in the event of the community’s insolvency, the insureds’ losses may not be covered by the Fonds d’indemnisation des services financiers (“financial services compensation fund”) administered by the AMF, which only protects consumers who have purchased insurance through a licensed representative. Some examples outside Quebec While the P2P insurance phenomenon is currently fashionable abroad, it is maintaining a low profile for the time being in Quebec. The Canadian platform, Besure,4 launched in January 2016, is still only a marginal player.5 This platform allows users to form small pools in order to purchase various kinds of insurance, and also benefit from a refund if there are few or no claims. Besure functions in a similar manner to Friendsurance,6 P2P enterprise in Germany. Like Inspeer7 in France and Guevara8 in England, it relies much less on actuarial data, using behavioral studies instead to set insurance premiums. Indeed, their concept is based on the theory of the deterrent effect of the community system, in which everyone benefits by acting in a prudent manner. Since the cost of the premium which is paid to join a pool depends on the conduct of its members, P2P companies claim that this discourages more risky behavior and fraudulent claims.9 While it is still early days for the P2P model, Lemonade,10 a P2P start-up company in damage insurance based in New York, was able to amass more than $13M over the past year, even before disclosing its business model.11 Further afield in China, the insureds of the company known as TongJuBao12 contribute to an indemnification fund and, following a loss, obtain an amount from the fund in accordance with the insurance they purchased. Conclusion P2P companies promise a simplified system for users. However, P2P insurance still has its share of drawbacks, particularly the uncertainty over the sufficiency of funds to indemnify all potential claims, both small and large. After all, is not the primary objective of insurance to ensure indemnification of all covered losses? While this phenomenon remains marginal for the time being, and, to our knowledge, no P2P risk-sharing program has yet been approved by the Quebec regulatory authorities, the insurance market should ensure that it fully understands these new players and their business model. Hudson, N. Geoffrey. The York-Antwerp Rules – The Principles and Practice of General Average Adjustment, 2e Ed., 1996, London, pp.1-2. https://www.besure.com/Home/HowItWorks Autorité des marchés financiers, “AMF urges caution about peer-to-peer risk sharing platforms”, April 19, 2016. https://www.besure.com To our knowledge, the AMF has not yet issued a license to Besure. http://friendsurance.com https://www.inspeer.me https://heyguevara.com Zack Guzman, “The social(ist) revolution coming for insurance”, CNBC, 18 juillet 2015. http://lemonade.com Jacqueline Nelson, “Regulator eyes peer-to-peer insurance start-ups, warns of potential risk”, The Globe and Mail, 24 avril 2016. http://www.tongjubao.com/en

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  • For rent… but mind the risks! Home Insurance in the age of the sharing economy

    Many people could hardly imagine planning their vacations without considering online vacation rental community platforms. And those who have property available for use might find it just as difficult to resist the temptation to increase their revenues by advertising their room, apartment, house or country home on sites like Airbnb, Homeaway and Chaletsauquébec. Given that these sites sometimes offer lower prices than comparable hotels, and hold out the allure of feeling at home away from home, it’s not surprising that their users have been growing in number each year. However, the misalignment between residential insurance products available in Quebec and the realities of the sharing economy, plus the fact that hosts often do not understand the legal formalities associated with insurance, can result in some very unpleasant surprises for users of such online vacation rental community platforms. Disclosing risks The Civil Code of Québec provides that an insured must promptly inform his insurer of any circumstances likely to influence the insurer in setting the premium, appraising the risk or deciding whether to maintain a policy in force.1 If this is not done, the insurer could be entitled to reduce the indemnity, exclude the claim, or even cancel the policy. The Superior Court of Québec recently considered this question in a case involving a couple that had rented out their country home a few times without declaring it to their insurer.2 Although the loss did not occur during such a rental, the Court confirmed that the insurer should have been informed that the property was being rented out, because this aggravated the risk. The indemnity paid to the insured couple was therefore reduced in regards to the shortfall in relation to premium the couple should have paid. Given this landscape, hosts, and anyone interested in being a host, must not only consider the possible effects of their leasing activities on their home insurance coverage, but also ensure — since the law requires it — that they will indeed be covered for any damage that occurs while the property is being leased. Stricter regulation In April 2016, Quebec’s Regulation respecting tourist accommodation establishments was amended as a result of the coming into force of the Act mainly to improve the regulation of tourist accommodation and to define a new system of governance as regards international promotion. The change was intended to respond to new market realities, including the arrival of new sharing economy players. Quebec legislation now makes a distinction between occasional offerings for rent and regular offerings for rent. The first type does not require a permit. However, in order to be occasional, the offer must clearly be exceptional in nature, and if the offer is repeated, it will be considered regular. Hosts who regularly offer their residence via online residential rental community platforms must now comply with the rules for operating tourist accommodation establishments.3 According to the new regulations, they must, among other things, obtain a certificate from the Corporation de l’industrie touristique,4 and ensure that zoning by-laws authorize them to carry on that type of commercial activity.5 Furthermore, hosts must collect taxes from travellers and report their income. Lastly, it is now mandatory to obtain $2 million in civil liability insurance coverage for risks associated with the operation of the tourist accommodation establishment.6 Similar platforms, differing coverages Of the most popular platforms, only Airbnb offers protection “by default” to its hosts. The “Host Guarantee”, in effect since 2011, offers hosts up to $1 million in coverage in the event of property damage caused by travellers in their lodging, if the damage is not covered by the host’s personal insurance. But this “Host Guarantee” comes with several conditions and exclusions. For example, the host must first have tried to contact the traveller to seek payment for the loss prior to asking to be indemnified under the Guarantee.7 Since October 22, 2015, Canadian Airbnb hosts have also been covered by the “Host Insurance” program, designed to protect them in the event of legal actions commenced by third parties for bodily harm or property damage that occurred during a stay.8 In Canada, the limit is $1 million per occurrence, per year.9 This means that the coverage is not currently sufficient to meet the new Quebec legislative requirements applicable to “regular” hosts, since such hosts are now considered to be operating a tourist accommodation establishment. A market with some shortcomings Legal requirements applicable to the operation of tourist accommodation establishments are getting more onerous. On its own, the “Host Insurance” program offered by Airbnb is not sufficient to bring “regular” operators into compliance with the new Quebec requirements concerning tourist accommodation. Despite this, according to a recent survey conducted by the Léger polling firm for the Chambre d’assurance de dommages, 44% of Quebecers who take part in the sharing economy have not notified their insurance company of this fact.10 There could be an explanation for this reticence: While hosts who own their lodging will find it relatively simple to adjust their residential insurance policies to take their rental activities into account, it’s a lot more complicated for tenants. In fact, most insurance products offered to tenants provide no coverage for losses resulting from even occasional vacation subletting. Conclusion The residential insurance market is still not quite adapted to the new realities of the sharing economy. Although certain insurance companies in Quebec and elsewhere are offering innovative products that respond to the specific needs of occasional hosts (e.g. insurance coverage only for the dates on which the property is being rented out) the major industry players, at least in Canada, have barely acknowledge this new market. As for hosts, it is essential that they disclose any increase in risk and any change in the use of their lodging, especially since short-term regular vacation rental to tourists is considered a commercial activity in Quebec. Indeed, although certain platforms offer basic protection to their users, that protection could prove insufficient or event inapplicable in several situations. Art. 2408 CcQ. Leblanc v. Axa Assurances Inc., 2014 QCCS 4393. Establishments providing accommodation to tourists in return for payment. See section 1 of the Act respecting tourist accommodation establishments, and section 1 of the Regulation respecting tourist accommodation establishments. Section 6 of the Act respecting tourist accommodation establishments. In addition, see the Guide d’interprétation de la Loi et du Règlement sur les établissements d’hébergement touristique. Guide d’interprétation de la Loi et du Règlement sur les établissements d’hébergement touristique. Section 11.1 of the Regulation respecting tourist accommodation establishments. https://www.airbnb.ca/terms/host_guarantee?locale=en https://www.airbnb.ca/host-protection-insurance?locale=en Ibid. http://www.chad.ca/fr/membres/publications/actualites

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  • A pregnant worker’s right to benefits in the event of preventive withdrawal pursuant to section 36 of the AROHS does not apply to a business under federal jurisdiction: Éthier v. Commission des lésions professionnelles

    This decision of the Superior Court of Québec addresses a pregnant worker’s right to preventive withdrawal where said worker is employed by a business under federal jurisdiction.1 In this case, questions of constitutional jurisdiction were raised and the Superior Court confirmed that article 36 of the QuébecAct Respecting Occupational Health and Safety2 (the “Act”) is not applicable to businesses under federal jurisdiction. As a result, a worker who exercises her right to cease to perform a job pursuant to the Canada Labour Code (the “Code”)3 is not eligible to receive income replacement benefits, regardless of the fact that the federal scheme does not provide for the payment of such benefits.THE FACTSMs. Éthier works for the Canadian National Railway Company (“CN”), a business under federal jurisdiction. In August 2011, while she was pregnant, she filed an application with the Commission de la santé et de la sécurité du travail (“CSST”) under the “[TRANSLATION] For a Safe Maternity Experience Program”. Subsequently, due to her condition, a doctor recommended that she be assigned tasks posing no physical risk to her or, failing that, that she be preventively withdrawn as of the 20th week of her pregnancy. Her employer informed her that it could not modify her job and could not reassign her to other tasks. Consequently, Ms. Éthier availed herself of the preventive withdrawal option available to pregnant women under sections 132, 205 (a) and 205.1 of the Code. Subsequently, the CSST informed Ms. Éthier that she was not eligible for the preventive withdrawal program under the Act, since the program does not apply to businesses under federal jurisdiction. Therefore, the CSST notified her that she was not entitled to income replacement benefits under section 36 of the Act. Ms. Éthier sought review of this decision and, subsequently, appealed the decision rendered by the CSST’s Administrative Review Division before the Commission des lésions professionnelles (“CLP”). The two bodies having dismissed her requests, Ms. Éthier requested that the Superior Court review the decision rendered by the CLP.4THE SUPERIOR COURT DECISIONThe Superior Court must determine whether the compensation system provided for under the Act respecting industrial accidents and occupational diseases5 (“ARIAOD”) is, pursuant to section 131 of the Code, constitutionally applicable to a pregnant worker employed by a business under federal jurisdiction and who exercises a right of preventive withdrawal. Section 131 of the Code reads as follows:“131. [Compensation under other laws precluded] The fact that an employer or employee has complied with or failed to comply with any of the provisions of this Part may not be construed as affecting any right of an employee to compensation under any statute relating to compensation for employment injury or illness, or as affecting any liability or obligation of any employer or employee under any such statute.”Before the Superior Court, Ms. Éthier claimed that a pregnant employee working for a business under federal jurisdiction must be entitled to the same benefits as a pregnant employee working for a business under provincial jurisdiction and, therefore, must be able to receive an income replacement benefit allowing her to exercise her right of preventive withdrawal. She claimed that section 131 of the Code is an interjurisdictional reference to the provisions of the ARIAOD which entitle the employee of a business under federal jurisdiction to an income replacement benefit. The Superior Court confirmed the CLP’s decision and rejected Ms. Éthier’s appeal. Citing the Supreme Court of Canada’s decision in Bell Canada v. Québec (CSST),6 the Superior Court refused to depart from well-established jurisprudence according to which the Act does not apply to businesses under federal jurisdiction. Section 131 of the Code makes no reference to the ARIAOD or the Act. In order to be applicable, an interjurisdictional reference must be clearly defined. As well, the wording of section 132 of the Code, which provides for the right of a pregnant worker to cease performing her tasks if she believes that, due to her pregnancy or the fact that she is nursing, continuing any of her current tasks may pose a risk to her health or to that of the fetus or child, gives the worker a unilateral right to cease carrying out her tasks. At face value, this provision is inconsistent with any form of income replacement benefit under a provincial plan. Even on an expansive interpretation of section 131 of theCode, there is no clear interjurisdictional reference to the provisions of the ARIAOD which provide for the compensation of the pregnant employees of a federal business.OUR OBSERVATIONSDevelopments in this matter are still ongoing since the Court of Appeal of Québec granted Ms. Éthier leave to appeal the Superior Court’s decision on April 16, 2014. The Court of Appeal was seized of the following questions, which would be new and which had not previously been the subject of debate before either the Court of Appeal or the Supreme Court of Canada:a) Do the legislative amendments made to the Code since 1993 and the decisions of the Supreme Court of Canada in Canadian Western Bank v. Alberta,7 Tessier Ltée v. Québec (CSST),8 Québec (Attorney General) v. Canadian Owners and Pilots Association,9 Marine Services International v. Ryan10 and Martin v. Alberta (Worker’s Compensation Board)11 justify a review of the principle according to which sections 36, 40, 41 and 42 of the Act are not applicable to a federal business?b) Does section 131 of the Code constitute an interjurisdictional reference providing for the compensation of a pregnant or nursing worker pursuant to section 36 of the Act and the ARIAOD even if she is employed by a business under federal jurisdiction?These questions would be of “[TRANSLATION] general interest to all employees of businesses under federal jurisdiction.”12For their part, CN, the CSST and the Attorney General of Québec consider that the jurisprudence established by the Supreme Court in Bell Canada13 is still the authority and that sections 33, 36, 37 and 40 to 45 of the Act are not applicable to businesses under federal jurisdiction.Lavery will keep you informed of the result of this appeal._________________________________________1 2014 QCCS 1092 (“Éthier”) (application for leave to appeal granted) (C.A., 2014-04-16), 2014 QCCA 793). Note that as of July 16, 2014, no decision had been rendered in this case by the Court of Appeal.2 CQLR c. S-2.1 (the “Act”).3 RSC 1985, c. L-2 (the “Code”).4 Éthier v. Canadian National Railway, 2013 QCCLP 4672.5 CQLR c. A-3.001 (“ARIAOD”). This plan applies to preventive withdrawal by virtue of sections 36 and 42 of the Act.6 [1988] 1 S.C.R. 749, p. 801 (‘‘Bell Canada’’).7 2007 SCC 22.8 2012 SCC 23.9 2010 SCC 39.10 2003 SCC 44.11 2014 SCC 25.12 Éthier v. Compagnie de chemins de fer nationaux du Canada, 2014 QCCA 793, par. 2.13 Supra, note 6.

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  • Right to refuse to work and preventive withdrawal: the Dionne v. Commission scolaire des Patriotes case

    In Québec, the objective of the Act Respecting Occupational Health and Safety1 (the “Act”) is the elimination, at the source, of dangers to the health, safety and physical well-being of workers. Recently, the Supreme Court of Canada rendered a decision in the Dionne v. Commission scolaire des Patriotes2 case concerning the right that the Act confers on a worker to refuse to work if he3 has reasonable grounds to believe that it could expose him to a threat to his health, safety, or physical well-being or would expose another person to a similar danger4. This unanimous decision of the judges of the Supreme Court of Canada clarifies the scope of the right of a pregnant woman to refuse to work where she faces job insecurity, in this case, given her status as a part-time supply teacher. A PREGNANT WOMAN TO REFUSE TO WORK WHERE SHE FACES JOB INSECURITY, IN THIS CASE, GIVEN HER STATUS AS A PART-TIME SUPPLY TEACHER. A PREGNANT WORKER’S RIGHT TO REFUSE TO WORK AND PREVENTIVE WITHDRAWAL: LEGAL CONCEPTS In the more specific example of a pregnant worker, the Act provides for the option of a preventive withdrawal where said worker provides her employer with a certificate attesting to the fact that her working conditions may be physically dangerous to her unborn child or to herself due to her pregnancy.5 In this particular case, the pregnant worker may request to be reassigned to other duties involving no such danger and that she is reasonably capable of performing. If the employer does not or cannot comply with the request, the pregnant worker may exercise her right of refusal to work until she is reassigned to duties that are compatible with her condition or until the date of delivery.6 A worker on preventive withdrawal is deemed to be at work and retains all the benefits attached to her regular position prior to her reassignment to other duties or her work stoppage.7 She is also entitled to full compensation for the first five working days of her work stoppage and, subsequently, receives 90% of her net salary for days where she would normally have worked, had she not been in preventive withdrawal.8 In these situations, income replacement benefits are provided to workers by the Commission de la santé et de la sécurité du travail (the “CSST”). THE FACTS In 2006, Ms. Maryline Dionne was a supply teacher who was added to the Commission scolaire des Patriotes’ (the “School Board”) list of supply teachers. A collective agreement requires the School Board to use the teachers on this list when replacement teachers are needed, leaving the selection of said replacements to the School Board’s discretion. Once on the list, Ms. Dionne worked frequently such that in 2006, she worked nearly full-time. In September 2006, she learned she was pregnant. Shortly thereafter, her doctor informed her that she was vulnerable to catching a contagious virus which could harm her fetus. As this virus can be spread by groups of children, her doctor completed two certificates prescribing preventive withdrawal and reassignment, confirming that her workplace also posed a risk to her health. Ms. Dionne forwarded the certificates to the CSST, which informed her that she would be eligible for preventive withdrawal on the day when she would be “called to work by [her] employer to carry out a contract”.9 Ms. Dionne received several offers from the School Board to substitute teach in November 2006, all of which she accepted. She was never reassigned to any other tasks. The CSST rendered a decision declaring that Ms. Dionne was entitled to receive income benefits related to her preventive withdrawal. This decision was appealed by the School Board to the Commission des lésions professionnelles (“CLP”), with the CLP setting aside the decision rendered by the CSST.10 In its decision, the CLP held that since Ms. Dionne was unable to enter the school due to the risks it posed to her health, she was incapable of performing the supply teaching work and no contract of employment could be formed. More specifically, the CLP held that Ms. Dionne’s condition prevented her from performing the tasks necessary to form a contract of employment within the meaning of the Civil Code of Québec (“CCQ”).11 Consequently, she could not be considered to be “a worker” within the scope of the Act nor was she entitled to preventive withdrawal and the resulting benefits. The Superior Court confirmed the decision of the CLP.12 The Court of Appeal upheld this decision, although there was a dissent.13 THE DECISION OF THE SUPREME COURT OF CANADA Basing itself on the objectives and the context of the Act, the Supreme Court of Canada allowed Ms. Dionne’s appeal. In its decision, the Court reiterated that the objective of the Act is the elimination, at the source, of dangers to the health, safety and physical well-being of workers.14 After reviewing the principles applicable to the right of refusal set out in the Act, the Court indicated that the right to refuse to perform dangerous work must not be considered to be a refusal to fulfil an employment contract but, rather, as “the exercise of legislative protection”.15 The Act being of a law of public order, this right to refuse to perform work is automatically incorporated into any contract of employment.16 The Act therefore protects pregnant women in two significant ways: it protects their health by substituting safe tasks for dangerous ones, and it protects their employment by providing financial and job security.17 The Court recognizes that in order to qualify as a ‘‘worker” within the meaning of the Act, there must be a “contract of employment”. Since this concept is not defined in the Act, the Court refers to the definition of a contract of employment provided for at article 2085 of the CCQ. In the case of Ms. Dionne, does the presence of a health risk in the workplace constitute an obstacle to the formation of an employment contract? The CLP was of the view that since Ms. Dionne could not enter the workplace to teach, the essential element of the performance of the contract was missing and, as a result, no contract of employment could be formed. According to the Supreme Court, this decision is unreasonable. The concept of “worker” set out in the Act must be distinguished from the concept of a “contract of employment” as set out in the CCQ. There are several indications of the legislative intention to reach a much broader group of workers than that contemplated by the “employee” of the CCQ. The requirement of the performance of work must be interpreted in order to give meaning to the right of refusal provided for by the Act. According to the Court, this requirement shall be respected even if, following the formation of the contract, the worker withdraws from the workplace for health and safety reasons; at that point, the Act deems the employee to be “working”.18 Consequently, when Ms. Dionne accepted the School Board’s offer to work as a supply teacher, an employment contract was formed and she became a worker in accordance with the definition of that term in the Act. It was not her pregnancy but rather the dangerous workplace that prevented her from carrying out her work, and that in turn triggered her statutory right to substitute that work with a safe task or to withdraw.19 The refusal to perform a dangerous task is not a refusal to fulfil the employment contract; it is the exercise of a statutory right under the Act. Protective reassignment is not an obstacle to the formation of an employment contract. The CLP’s decision had the “anomalous” effect of putting certain women in the untenable position of having to choose between entering into an employment contract and protecting their health and safety or the health and safety of their fetus. OUR OBSERVATIONS This decision will likely have major repercussions on workers who have casual status and employers in Quebec’s education sector. The expansive and liberal interpretation given by the Supreme Court of Canada to the rights and protections set out in the Act has the effect, notably, of extending the grounds for workers’ right of refusal compensation to which such workers are entitled when they are offered a job, regardless of whether or not these workers can in fact perform the work. Therefore, when an employer makes a job offer, the worker may accept it and then refuse to perform the work, citing a risk to her health, safety and well-being. _________________________________________ 1 CQLR c. S-2.1 (the “Act”). 2 2014 SCC 33 (‘‘Dionne’’). 3 For the purposes of convenience, in this text, the masculine is used to refer to both men and women. 4 The Act, section 12. 5 Id., section 40. See also Regulation respecting the certificate issued for the preventive withdrawal and re-assignment of a pregnant or breast-feeding worker, CQLR c. S-2.1, r. 3. 6 The Act, section 41. 7 Id., section 14 and 43. 8 Id., section 36. 9 Id., par. 10. 10 Commission scolaire des Patriotes v. Dionne, 2008 QCCLP 3215. 11 LRQ, c C-1991, article 2085 (‘‘CCQ’’). 12 Dionne v. Commission des lésions professionnelles, 2010 QCCS 1550. 13 Dionne v. Commission scolaire des Patriotes, 2012 QCCA 609. 14 The Act, section 2. 15 Dionne, supra, note 2, par. 22, citing Bell Canada v. Québec (CSST), [1988] 1 S.C.R. 749, p. 801. 16 The Act, section 4. 17 Dionne, supra, note 2, par. 30. 18 Id., par. 38. 19 Id., par. 43.

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