With Ottawa police now making arrests of Freedom Convoy protestors, the speaker of the House of Commons Friday delayed Parliamentary debate on the Emergencies Act, which would require insurers to suspend auto insurance to those involved in the protests.
The national associations of both insurers and brokers are discussing with the federal government how the Emergencies Act would be enacted. At the time of writing, it remains unclear if the passage of the act would be required to end the protests, given the current police action.
The federal government’s Emergencies Act requires insurance companies to “immediately cease” auto insurance coverage to Freedom Convoy protestors. But the act is noticeably silent on whose insurance should be suspended or how it should be done. All that is known at the moment is that the Emergencies Act trumps notice of cancellation requirements established in provincial law.
How the Emergencies Act is to be enacted is a hot topic in the Canadian P&C industry.
One insurance expert says the act could cause “long-tail financial” effects for both insurers and insureds.
“This Emergencies measure takes away a provincially-regulated financial product, and is addressing it from a federal mandate,” says Kadey B.J. Schultz, insurance defence lawyer and partner at Schultz Frost LLP. “That is part of why this is such an exceptional circumstance.”
Normally, an insurer would have to advise a policyholder that coverage is being cancelled by registered mail, and with a certain notice period. “While compliance with the order, of course, is essential and required, there’s also the insurer’s duty to get it right,” Schultz says.
Schultz questions whether this will impact how underwriters write auto risks moving forward.
“I think, from a business perspective, several insurers are going to be concerned about high-risk vehicle use, and I would go so far [as to say]…aberrant use of the vehicle. The question then is, if [insurance] is suspended, does an insurer then get to decide about whether they wish to write this risk going forward? Does this position an insurer to say that this is an unattractive risk?”
Schultz also suggests that accident benefits could be “tested.”
“Did you suffer an injury or impairment as a direct result of the regular use and operation of a motor vehicle? That is what I think is going to get tested too,” she says.
Schultz questions how insurers will respond if vehicle operators claim injuries. “The investigations are going to have to be extremely thorough, which is time-consuming and end-to-end expensive.
“If the insurer takes the position that this was not a direct result of the use and operation of a motor vehicle…if the insured wants to dispute that denial, they have to apply to the Licence Appeal Tribunal, which is the only entity in Ontario that has the jurisdiction to deal with an accident benefits dispute.”
“Can you imagine the next six months, all these investigations being run for claims that are being submitted?” she says. “We’re not going to have decisions [from the LAT] until 2024 regarding accident benefits coverage.”
So, while insurers will be dealing with long-term impacts of the Emergencies Act, should a vehicle operator cause an accident, it could also result in notable financial consequences for them.
“If the vehicle has been used to intentionally injure someone, another person or property, it’s possible that an insurer might take a completely off-coverage position,” Schultz says.
“If the insurance company doesn’t have to cover those damages under the policy, and the owner or driver of that vehicle does, their personal assets — or their company assets if it’s a company vehicle — become exposed.”
“So, I think the long-tail financial of this on the liability cases could be very significant,” she says.
But the industry is still awaiting instruction from the federal government on how best to approach this situation.
“IBC and its members are currently working with the federal government to obtain further clarity of the Order. We cannot say more as we do not want to risk jeopardizing the effectiveness of law enforcement investigations. However, if you’re participating in this protest, there will be insurance implications,” says Insurance Bureau of Canada.
“Like many organizations, we are still in the process of clarifying how the process for suspending insurance will work,” Insurance Brokers Association of Canada also says. “We are in discussions with the federal government and our partners in the industry.”