Insurance carriers, brokers should ensure signature systems designed with ‘evidentiary concerns’ in mind

The Centre for Study of Insurance Operations (CSIO) has released an advisory report that reviews Canadian laws on electronic signatures and gives advice on how to implement such systems.

“Electronic commerce legislation does not oblige anyone to use electronic means to conduct business,” according to the report, prepared by Fasken Martineau DuMoulin LLP and commissioned by CSIO.

“Indeed, those laws provide that no one can be compelled to use, provide or accept information or a document in an electronic form — consent is required.”

The report is not intended as legal or professional advice, and Fasken Martineau DuMoulin suggests carriers and brokers should consult with legal counsel and technology experts before implementing an electronic signature system.

The report also noted that certain notices and declarations — such as a notice of cancellation of a contract of insurance, including for non-payment of premium — are not permitted to be effected by electronic means or electronic notice.

As well, according to the report, certain alterations to a policy by an insurer are also not permitted to be effected by electronic notice.

In the report, Fasken Martineau DuMoulin lawyer Daniel Fabiano advises carriers and brokers to ensure that electronic documents, electronic signatures and electronic records management systems “be designed with evidentiary concerns in mind.”

Carriers and brokers are advised that when obtaining electronic signatures, they should require the signers to access and open the documents before they can be signed.

“This helps to evidence that the signer had an opportunity to read and understand the document before signing it,” according to the report.

“For audit trail purposes, consider how each electronic document can be tracked so that important audit trail information is recorded and associated with the record. For example, technological means can be employed so that the document is electronically stamped with the time and date through all steps in the process.”

Electronic signatures “are generally permitted by Canadian electronic commerce laws,” according to the report. “Canadian electronic commerce laws generally define an ‘electronic signature’ as electronic information that a person creates or adopts in order to sign a document and that is in, attached to or associated with the document.”

In a footnote, Fasken Martineau DuMoulin noted that in considering compliance with electronic commerce legislation, “a distinction could be drawn” between “the sufficiency of an electronic signature to validate” a form or contract, and the delivery of electronic notices “where such notices have traditionally occurred in person, by regular mail, or by registered mail.”

Fasken Martineau DuMoulin advises carriers and brokers to consider the risk that recipients will repudiate their signatures.

“When determining whether an individual signed a document, one generally relies on the individual’s signature as evidence of his or her agreement to the document’s contents,” according to the report.

“At one extreme, an original handwritten signature can be difficult to replicate. Even more difficult to replicate (and at the other technological extreme) is a digital signature (i.e., involving public / private key encryption). Between these two extremes are a range of electronic signature options which are more or less reliable, depending on the circumstances.”