Ont court rules banks promoting or selling insurance not immune to provincial legislation

Ontario banks that promote or accept applications for insurance products are subject to the provincial Insurance Act, Ontario’s Superior Court of Justice has ruled.
In Royal Bank of Canada v. Salih and Mirsada Mujagic, Salih and Mirsada Mujagic alleged that RBC made “negligence misrepresentations as to the nature and quality of the insurance promoted at the plaintiff’s branch.”
They made a further claim of “non-feasance in the failure to advise the defendants of other insurance available to them in the marketplace under a duty to do so.”
They also alleged that RBC was engaged in “deliberate and persistent violation of the law with regard to the providing and promoting of insurance products…”
The court noted that RBC did not fully respond to the allegations. Instead, the bank relied on the law governing mortgages and the federal regulation of banks, essentially taking the position that the provincial Insurance Act did not have jurisdiction in this case.
An RBC employee accepted an application electronically from Mr. Mujagic for disability insurance coverage.
“The evidence indicates that RBC Insurance Company administers a database of insured persons under the subject group policy,” Ontario Superior Court Justice David Crane wrote. “The evidence is that it had the responsibility to answer the questions from an insured and provide information about the insurance promoted, namely ‘HomeProtector Disability Insurance.’”
Crane also noted that upon Mujagic being recorded as insured, Standard Life submitted a credit to the plaintiff’s branch.
RBC then gave the Mujagics a brochure.
“The evidence is that this document is a policy of insurance,” Crane wrote. “The brochure is printed with the logo and the name Royal Bank on the front cover and the back cover. The brochure, in the body of its contents and on the back cover, identifies RBC Insurance Services Inc. as the person who provides information and answers questions.”
Justice Crane relied upon the Supreme Court of Canada’s 2007 decision in Canadian Western Bank v. Alberta in his reasoning.
In that case, eight major banks argued that if promoting creditor insurance is essential to what banks do, then this “banking” activity should be regulated by the federal government (which regulates banks) and not the province (which regulates insurance).
The Supreme Court of Canada ruled that promoting insurance is not a core function of banking, so provincial legislation that regulates insurance agents also applies to federally regulated banks when it comes to promoting creditors’ insurance.
“I am satisfied that the wording of the brochure raises factual issues of the breach of the Ontario insurance scheme by each of the applicants so as to raise triable issues for trial,” Justice Crane wrote.