This summary does not constitute a legal opinion. The information it contains may not reflect the current state of the law.
By Carole Chauvin, A.I.B., C. Adm., Syndic (January 2014)
The insured, a start-up company specializing in the transportation of animals, makes a claim to its insurer for the value of a client’s cow that died after being transported. The insured company learns that it is not covered for this type of loss and files a complaint against the agent who had sold it its insurance contract a few months earlier.
The ethics investigation of the agent confirmed that:
1. The commercial lines insurance contract covered neither the transportation of animals nor the civil liability related to such transportation, though the insured had declared that this was its main business activity.
2. The underwriter the agent had consulted regarding the risk did not tell him that civil liability coverage for transporting animals was not available; nor did he request that the agent make sure the insured obtained such coverage from another insurer.
3. The insured had not been informed that its contract lacked such coverage.
The Formal Complaints
I was responsible for filing two formal complaints before the discipline committee.
a) One complaint against the damage insurance agent who had sold the insurance contract. The main charge read as follows:1
… when presenting a commercial lines insurance quote, did not gather the information necessary to assess the needs of the insured, Transport A.C., in order to propose the insurance product that best met those needs and/or, before the making of the insurance contract, did not describe the proposed product to the insured in relation to the insured’s needs, did not specify the nature of the coverage offered, failing to include civil liability coverage for the transportation of animals and offering coverage that excluded the transportation of animals belonging to a third party, all of which violated sections 16, 27 and 28 of the Act respecting the distribution of financial products and services and sections 37(1) and 37(6) of the Code of Ethics of damage insurance representatives.
b) Another complaint against the damage insurance agent who was acting as a risk analyst (commonly known as an “underwriter”), included the following charge:2
… in his role as a commercial lines insurance risk analyst, when presenting the insurance quote, failed to act with competence and professional integrity with respect to the file of the insured, Transport A.C., by not attempting to find out whether the insured would obtain civil liability insurance coverage and by not communicating to the insured’s agent that the insurer did not offer civil liability insurance coverage, in particular with respect to the transportation of animals belonging to third parties, all of which violated sections 16 and 28 of the Act respecting the distribution of financial products and services and sections 37(1) and 37(6) of the Code of Ethics of damage insurance representatives.
The Disciplinary Decisions
Both professionals pled guilty to these charges. The Discipline Committee of the ChAD summarized its analysis as follows:
In short, protecting the public requires of the agent and the broker that they not limit their role to that of a “simple” insurance “salesperson.”
The obligation to personally gather all relevant information is closely tied to the obligation to advise the client on the insurance product that best meets his needs.
You must respect the obligation to act as a conscientious advisor during the performance of your professional duties, no matter which position you hold within the firm that employs you. As the Quebec Court of Appeal3 indicated in a disciplinary case involving an engineer, your code of ethics is an integral part of your employment contract: “Ethical obligations […] cannot simply be limited to the contractual sphere; they both precede and transcend it.”
3 Tremblay v. Dionne, 2006 QCCA 1441.