INTERPRETATION BULLETIN

Transcription

1 INTERPRETATION BULLETIN BULLETIN NUMBER: TITLE: ADVERSE CONTRACTUAL ACTIONS TAKEN IN RESPECT OF LICENSE STATUS DATE: October 2014 PURPOSE AND BACKGROUND The purpose of this interpretation bulletin is to remind insurance companies of the Alberta legislative requirements for taking adverse contractual action respecting private passenger automobile insurance based on an operator s license status. Since the implementation of the automobile insurance reforms in 2004, Alberta s legislation has restricted the circumstances under which insurance companies are permitted to cancel or non-renew existing private passenger automobile insurance policies or refuse to provide private passenger automobile insurance to new clients. Section 555 of the Insurance Act (Act) and the provisions of the Adverse Contractual Action Regulation (Regulation) prescribe the criteria under which an insurance company may take an adverse contractual action respecting private passenger automobile insurance in Alberta. Copies of section 555 of the Act and the Regulation are attached as Appendices 1 and 2. Some insurance companies continue to cancel existing private passenger automobile insurance policies or refuse to provide private passenger insurance to new clients for reasons other than those authorized under section 555 of the Act or under the provisions of the Regulation. A common reason cited by insurance companies when incorrectly taking an adverse contractual action is the operator s license status of the principal operator. For illustrative purposes only, this interpretation bulletin addresses three common circumstances respecting adverse contractual actions based on an operator s license status and the Superintendent s views with respect to each of these circumstances: 1. When an applicant for private passenger automobile insurance does not hold a valid operator s license to operate a private passenger vehicle in Canada; 2. When the operator s license of the only listed operator on an existing policy has been suspended, or otherwise rendered invalid; and 3. When an operator does not hold an Alberta operator s license but does hold a valid operator s license to operate a private passenger vehicle in Canada. Page 1 of 6

2 1. No Valid Operator s License to Operate a Private Passenger Vehicle in Canada Under section 2(h) of the Regulation, insurance companies may refuse to provide private passenger insurance if the applicant does not hold a valid driver s license to operate a private passenger vehicle in Canada. The Superintendent s office considers an applicant to be a person applying for automobile insurance. An applicant is not a person who is offered a renewal policy. 2. Suspension of Operator s License With respect to existing holders of private passenger automobile insurance policies, one of the most common reasons cited by insurance companies when incorrectly cancelling or refusing to renew existing clients policies is the suspension of the operator s license of the principal operator. Such suspension is not a prescribed reason for an insurance company to take an adverse contractual action under either section 555 of the Act or the provisions of the Regulation. As a result, insurance companies cannot cancel or refuse to renew existing automobile insurance policies when the principal operator has had their operator s license suspended, or otherwise rendered invalid. Where the principal operator does not have a valid operator s license the provisions of section 555(3) (b) of the Act would apply. Under this section, the insurance company may request that the policy holder advise them of the identity of the current principal operator. In the event the policy holder fails to advise the insurer of the identity of the principal operator within a reasonable period of time having regard to all relevant circumstances, the insurance company is authorized to take an adverse contractual action with respect to the policy. Please note, in order to take the adverse contractual action under section 555(3)(b) the request for the insured to identify the principal operator must come directly from the insurance company and cannot be delegated to an agent or any other third party. 3. Operator Not Holding an Alberta Operator s License Under Alberta insurance legislation there is no requirement for an operator to possess an Alberta operator s license. Under Alberta insurance legislation, an operator is only required to hold a valid operator s license to operate a private passenger vehicle in Canada. Therefore, an insurance company cannot take an adverse contractual action against an insured because an operator does not possess an Alberta operator s license. As previously stated herein, the preceding examples are for illustrative purposes only; the specifics of instances where insurance companies take adverse contractual actions vary greatly. Insurance companies are strongly encouraged to ensure that in each instance where an adverse contractual action is being considered, that the adverse contractual action is in compliance with Alberta legislation. Page 2 of 6

3 Non-compliance with the provisions of section 555 of the Act or the Regulation is taken very seriously by my office and each instance that comes to our attention will be investigated. Regulatory action, including either a prosecution or an administrative penalty of up to $25,000 for each violation, may be taken against insurers found not to be in compliance with the legislation. Should you have any questions with respect to this Bulletin please contact our office by telephone at or by to TBF.insurance@gov.ab.ca. [ORIGINAL SIGNED] Mark Prefontaine Superintendent of Insurance Superintendent of Insurance 402 Terrace Building Street Edmonton, AB T5K 2C3 Telephone: Facsimile: Page 3 of 6

4 Appendix 1, Section 555 of the Insurance Act of Alberta Adverse contractual action 555(1) In this section, adverse contractual action means (a) (b) (c) (d) (e) (f) (g) (h) (i) refusing to provide a premium quotation within a reasonable time; refusing to process an application for automobile insurance; refusing to issue a contract; refusing to renew a contract; terminating a contract; cancelling a contract; refusing to provide any coverage or endorsement; refusing to continue any coverage or endorsement; any action respecting a contract not referred to in clauses (a) to(h) that is prescribed or otherwise described by regulation as adverse contractual action. (2) This section applies only to adverse contractual action taken in respect of basic coverage on private passenger vehicles. (3) An insurer, insurance agent or insurance broker shall not, directly or indirectly, take any adverse contractual action with respect to an insured or an applicant for a contract except for one or more of the following reasons: (4) Where (a) the non-payment of a premium or any portion of a premium; (b) the failure of the insured or the applicant for a contract to inform the insurer or to keep the insurer informed, where requested to do so by the insurer, as to who is the principal driver of the automobile for which the insurance coverage is or is to be issued; (c) in the case of an insurer that is a provincial or extra-provincial company, the insurer is required to cease to undertake or to offer to undertake insurance in Alberta pursuant to section 25(2); (d) the insurer s licence is suspended or cancelled under section 54, 55, 819 or 819.1; (e) in the case of an insurer that is a federally authorized company, the federal Superintendent of Financial Institutions has ordered or otherwise directed the insurer to cease carrying on business or insuring risks in Canada; (f) the insurer has filed notice under section 611(3) that the insurer intends to withdraw from the business of automobile insurance; (g) where permitted by regulation, any reasons not referred to in clauses (a) to (f) that are prescribed or otherwise described by regulation. (a) a premium or any portion of a premium that is owing in respect of a contract is in arrears, Page 4 of 6

5 (b) the insurer takes adverse contractual action because those arrears have not been paid, and (c) the person liable for those arrears applies to the insurer to renew or issue a contract or to any other insurer to issue a contract, the insurer may refuse to renew or issue a contract to that person, as the case may be, until those arrears are paid to the insurer to which the arrears are owing. (5) The Lieutenant Governor in Council may make regulations (a) permitting adverse contractual action to be taken other than under subsection (3)(a) to (f) and prescribing or otherwise describing any reasons not referred to in subsection (3)(a) to (f) for which adverse contractual action may be taken; (b) prescribing or otherwise describing any action not referred to in subsection (1)(a) to (h) as adverse contractual action; (c) governing the taking of adverse contractual action; (d) governing the issuing or renewing of contracts; (e) governing any transitional matter concerning the application of this section in respect of matters dealt with under this section; (f) providing for any matter that the Lieutenant Governor in Council considers advisable for carrying out the purpose and intent of this section. (6) This section applies despite any other Act c19 s29 Page 5 of 6

6 Appendix 2, Subsections 2&3 of the Adverse Contractual Action Regulation (2) In addition to the reasons set out in section 555(3)(a) to (f) of the Act, the following are reasons under which adverse contractual action may be taken: (a) the insured or the applicant i. fails to complete the approved application form, ii. provides false information on the approved application form, iii. makes any misrepresentation on the application form, or iv. fails to submit any required information required in the approved application form; (b) subject to subsection (3), the insured or the applicant refuses to provide, within the time provided by the insurer, a completed approved vehicle inspection report for a private passenger vehicle that is at least 12 model years old; (c) the insured or an applicant, after having the vehicle report completed, refuses, within 30 days of the report being completed, to repair a component of the vehicle that has been identified in the inspection report as being unsafe; (d) the insurer only insures vehicles that are not private passenger vehicles; (e) in the opinion of the Superintendent, on October 1, 2004, 80% of the policy holders of the insurer are high-risk drivers; (f) the applicant is applying for a contract or a renewal of a contract in respect of a vehicle that is not a private passenger vehicle; (g) the applicant is applying for coverage or an endorsement in respect of a vehicle that is not a private passenger vehicle; (h) the applicant does not hold a valid operator s licence to operate a private passenger vehicle in Canada. (3) An insurer may require a policy holder to complete a vehicle inspection report for each vehicle that is 12 model years or older only once every 3 years. AR 98/2005 s1;62/2013 Page 6 of 6