Law Times

Law Times • OcTOber 17, 2016 Page 11 www.lawtimesnews.com Legal cost agreements fall foul of regulators BY JUDY VAN RHIJN For Law Times A fter being blocked by regulators in Ontario and British Columbia from selling, Bridge- point Indemnity Company (Canada) Inc will now be able to partner with an insurance company to sell their legal cost protection products in two key Canadian markets. e move comes aer regu- lators in the provinces deemed Bridgepoint's products as insur- ance provided by an unlicensed entity. e agreement will allow plaintiffs' lawyers to have con- fidence in their clients' exist- ing contracts and to access new products, says the man who heads the company. BICO's problems started on June 30, when the Financial In- stitutions Commission issued a cease and desist order in relation to its British Columbian oper- ations, closely followed by a sim- ilar order from the Financial Se- curities Commission of Ontario on July 7. e BICO product in ques- tion indemnifies parties to legal proceedings from legal expens- es, adverse costs and disburse- ments. BICO compares it to a Class Proceedings Fund that is exempt from regulation, but the FICOM and FSCO classified it as an insurance product that needs to comply with the regu- latory framework. "We disagreed with that char- acterization," says John Rossos, principal and chief executive of- ficer of BICO. "If we had fought, we believe we would have been successful, but the interests of our clients are always first and foremost. It was better to meet the request. We are the leading provider of the product in the country. ere would have been com- mercial issues if we had not been able to restart quickly." On Sept. 23, BICO announced that it had reached agreement with FSCO and FICOM and was able to resume operations im- mediately. "e undertakings basically cover both B.C. and Ontario," confirms Rossos. "It is a plan in which we will be compliant and offer a regulated insurance product in 90 days." e mechanics of the solution involve a partnership with a li- censed Canadian insurer and an insurance brokerage. "We have agreements in prin- ciple, and we're papering them now," advises Rossos. "I think the regulators acted in a very reasonable way, once they had a better sense of our business. We complied with the terms quickly. It's a sign of the quality of our business that we were able to attract partnership support quickly." Rossos points out that the complaints to the regulators came from a competitor, not from clients. "When we formed the com- pany, we had significant capital protection in place and institut- ed a risk management process," he says. Darryl Singer of Singer Liti- gation Counsel says he's ar- ranged BICO protection for many of his clients. "It's a perfectly fine product that benefits us and benefits the client," he says. "However Bridgepoint has restructured internally to meet the regulatory requirements is not my concern. ey've come through the other side of the problem and they're back on track." e agreement will now re- solve the confusion that has reigned regarding the nature of the product. e Ontario courts have referred to BICO's legal costs protection products as "in- surance" in several cases. "ey will be legitimate going forward," claims Nick Robson, manager of DAS Canada, a legal expense insurance company. "ey have been grand- fathered into a legal insurance company. At the end of the day, we are pleased to see that they've been forced to go legitimate. It's exactly what we have been saying all these years." Robson raises the possibil- ity that there may be penalties owing to provincial treasuries in relation to the existing contracts. "People have two choices — use either a regulated insurance company or an offshore un- licensed provider," he says. "e latter don't have pro- tections so the provincial legis- lature applies penalty taxes to the premiums. e issue is who is responsible? Is it the lawyer who arranged the cover, did the administration and paid the premium to BICO on behalf of the client? Or is it the client who could bring actions against the lawyers for not warning them of the danger of using unregulated paper? It's a grey area." While there have been no decisions announced by the Ministry of Finance regarding possible penalty charges, FSCO spokesman Malon Edwards ad- dresses the issue of enforcement by the regulator. "As stated in the Minutes of Settlement, BICO has until Dec. 31, 2016 to implement the proposed long-term regulatory compliant solution. Any con- travention or non-compliance with the terms of the Minutes of Settlement may result in enforce- ment proceedings pursuant to sections 447(2)(c) and 448(1)(b) of the Insurance Act. FSCO typi- cally does not take enforcement action against the customers or clients of businesses in the sectors it regulates," says Edwards. Rossos refers to the terms of the agreement. "You can see in the Minutes of Settlement there is no mention of penalties. If we're going to be- come compliant in 90 days across the country, there's no need for any more orders," he says. Singer, for one, is not con- cerned about past or future pen- alties. "If there are any penalties my understanding is that they would not be borne by me or my client," he says. "I don't personally have any concerns that I or my clients would absorb the cost of that." LT FOCUS Darryl Singer says he's arranged BICO pro- tection for many of his clients. CANADA & USA 1.800.265.8381 | EMAIL info@mckellar.com | www.mckellar.com The reason why we are Canada's largest and most comprehensive structured settlement firm has everything to do with our passion for service and performance — without exaggeration, we make life easier for you. Almost as fast as McKellar. Light travels at a speed of approximately 186,282.397 miles per second. Untitled-1 1 2016-10-13 8:24 AM

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