Law Times

Law Times • January 11, 2010 FOCUS PAGE 9 Ontario case addresses laws for bankers 'If they're not licensed to sell insurance, then the consumer is not protected' BY DARYL-LYNN CARLSON For Law Times he Ontario Superior Court has affirmed that financial institutions sell- ing insurance to their customers must comply with the province's Insurance Act. The ruling by Justice David T Crane, delivered as a summary judgment in November in the case of Royal Bank of Canada v. Mujagic, also gave the green light for the case to proceed to trial on its facts. RBC pursued the summary judgment on a mortgage de- fault after it also sold disability insurance to plaintiffs Salih and Mirsada Mujagic, who became unable to pay their mortgage when the household's main breadwinner suffered a disabling workplace injury. In delivering his decision, Crane referenced the Supreme Court of Canada's 2007 deci- sion in Canadian Western Bank v. Alberta, in which eight banks argued unsuccessfully that insur- ance is a core service in covering their customers that therefore should come under federal regu- lation rather than within each province's respective insurance laws. Hamilton lawyer Lou Fer- ro represented the Mujagics along with Domenic Nicassio. Ferro says the judgment serves as clarification that banks are indeed subject to Ontario laws that require agents to be schooled and licensed. "The problem is when you go in to a mortgage adviser, that ad- viser doesn't know much about insurance," says Ferro. "In many cases, it's treated like an applica- tion for a credit card." Ferro says when his client pur- chased his HomeProtector dis- ability insurance policy, the mort- gage officer wasn't able to answer questions he had about it, includ- ing details of coverage or any alternative products that might have suited his needs better. The plaintiffs' lawyers al- leged from the outset that RBC had breached provincial insur- ance legislation "in a deliberate and persistent violation of the law with regard to the provid- ing and promoting of insur- ance products." Crane agreed, noting that once Mujagic was insured, all he got was a brochure that ex- plained his policy. Under pro- vincial insurance regulations, the bank "had the responsibility to answer the questions from an insured and provide information about the insurance promoted, namely HomeProtector disabil- ity insurance," Crane wrote. "I am satisfied that the word- ing of the brochure raises factual issues of the breach of the On- tario insurance scheme by each of the applicants so as to raise triable issues for trial." Ferro, whose firm specializes in insurance-related claims, says the judgment should serve as a Untitled-4 1 Billions of dollars invested, not a penny lost. The McKellar Structured Settlement™ McKellar introduced the concept of structured settlements in Canada in 1979. With almost 40 people at your disposal, we continue to set the standard today, providing safe, reliable, tax-free investment options for injured parties, while lowering claims costs. McKellar. Now you're sure. helpful tool to ensure consum- ers purchasing insurance policies through a financial institution receive proper information. "The Mujagic case says if you are a bank and have mortgage advisers or tellers selling insur- ance, you are in violation of the Insurance Act of Ontario because they're not licensed to sell insur- ance," Ferro says. "If they're not licensed to sell insurance, then the consumer is not protected." He notes that as an insur- ance law firm, he has many clients coming to him seeking advice on policies they've pur- chased through banks rather than brokers or companies that he contends are generally better equipped to provide a variety of options for prospective clients based on their specific needs. "This case says that in each situation, you may not be getting the right advice," Ferro says. "If the bank assumes the duty, do they then have an obligation to say, 'Our insurance is costly. It's not very good, so you should go and look around at some other policies?' So, there are all kinds of consumer-advice issues that are raised in this case, and that's why we have the Insurance Act," says Ferro. He also says that for his firm, the summary judgment will af- fect many cases. "I realized that many of our clients, who are in car accidents many times, have disability in- surance or have received insur- ance by some disability product through their mortgage pay- ments," says Ferro. "But there's a whole mortgage payment and disability insur- ance industry that's grown up in the last seven or eight years" that needs judicial review, he adds. Peter Gutelius, RBC's assis- tant general counsel, responded to Law Times' inquiry about the case by e-mail: "First, RBC does need to comply with provincial 'The problem is when you go in to a mortgage adviser, that adviser doesn't know much about insur- ance,' says Lou Ferro. insurance regulations in the dis- tribution of insurance products it is authorized to offer under the Bank Act. "Second, RBC fully com- plies with the licensing regime for insurance in Ontario. In Ontario, enrolling persons un- der group coverage does not require an insurance agent li- cence. People commonly enrol for group coverage through their employment, at their re- tail store or in a bank branch without the involvement of a licensed insurance agent be- cause it is a cost-effective sys- tem for offering relevant insur- ance coverage," Gutelius wrote. "This is a position of the insur- ance industry at large that is long-standing and well known to and permitted by the On- tario insurance regulator." Gutelius added: "RBC does not believe this decision has any impact. It is an interlocutory de- cision, merely a dismissal of our motion for summary judgment of our mortgage enforcement proceeding. No other determi- nation was made." The case is now to go to trial at a date yet to be announced. LT www.mckellar.com GUELPH 1-800-265-8381 McKELLAR STRUCTURED SETTLEMENTS INC. HALIFAX 1-800-565-0695 www.lawtimesnews.com EDMONTON 780-420-0897 USA 1-800-265-2789 1/4/10 12:12:49 PM

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