The Insurance Reference Case
Hi,
I'm a bit confused by the ruling.
It says that the federal govt enacted the federal insurance act requiring all insurance companies, except those incorporated by a province and operating solely within the province of incorporation to obtain a license from the federal govt before operation.
The ruling says that this is ultra-vires and that this would mean that this means that federally incorporated insurers or provincially incorporated insurers with permission from other provinces can operate in more than one province.
But doesn't this mean the same thing as what the fed ins act proposed? fed ins act wanted federally incorporated insurers to get license from fed and provincially incorporated insurers to get license from provincial govt. no?
Comments
The way I read it is that the act would have required a federal license for an insurer operating in more than 1 province. Since the act was ruled ultra vires, insurers operating in more than 1 province can get either a federal or provincial license. (The difference is that if you have a federal license, you don't have to ask a province's permission to expand into that province. But if you only have a provincial license, then you do have to ask the other province's permission.)
The rules are different for foreign insurers, however. The federal government can require a federal license for a foreign insurer even if they are operating only in 1 province.
Hi,
May I know what the difference is between "Capacity" with "Right"?
Cause when reading the capacity, I can only recall how much premium I can write w.r.t. the my capital holding.
Thanks and Cheers,
Wilson
Another way of saying it is this:
A non-insurance example of the use of the term capacity might be:
In other words, capacity means you are capable of doing a certain thing whereas right means you are legally permitted to do it.
Thanks Graham!
I wanted to follow up on the idea that federally incorporated insurers have both capacity and right to operate in each province, whereas provincially incorporated insurers have the capacity, but not the right, to operate in other provinces.
When talking about why the licensing provisions of the Insurance Act of 1910 are ultra vires, the source also says they "trespasses upon the legislative authority of the provinces to make laws relating to civil rights in the province".
My confusion: doesn't this reasoning also imply that "federal = right to operate in all provinces" also trespasses on each province's right to regulate its insurers?
Might not be 100% understanding your question, but taking a step back, this is the thinking we should have. When we mean "right", I don't think it means automatic access or just guarantee to operate. As you mentioned above in the Insurance Act, it does trespass it and that should not be the case.
Case studies shows it only gives an insurer legal existence, not a guarantee to operate everywhere - provinces can still require their own licenses and impose their own rules.
As mentioned in the following case ->
Citizens Insurance Co. v. Parsons (1881)
Facts:
Ontario enacted statutory conditions for fire insurance policies (e.g., rules about proofs of loss, limitations, etc.). Insurers argued this was ultra vires because “insurance” was supposedly under federal trade and commerce power.
Ruling:
The federal government can legislate about insurance only to the extent it falls under “trade and commerce” in the national sense (e.g., incorporation, solvency regulation of federally-incorporated insurers).
The provinces have exclusive jurisdiction over contracts and civil rights in the province — which includes the terms of insurance policies issued there.
Takeaway:
Federal incorporation does not override provincial regulation of contracts. Provinces can control how insurance is done in their borders.
Hope the case example above makes it clear on what we mean by "right".
Thank you for your response.
I’m having trouble understanding the practical difference between a provincially incorporated insurer having “capacity but not right to operate” in another province, versus a federally incorporated insurer having “both capacity and right to operate” in another province.
If, in practice, a federally incorporated insurer must still comply with the licensing and regulatory requirements of each province, just as a provincially incorporated insurer would, then what is the actual difference between the two when it comes to “capacity” and “right to operate” in another province?
For Capacity, think of it like the following:
A provincial incorporation gives the insurer legal existence only within that province. If it wants to operate in another province, it must be “extra-provincially registered” there to extend its corporate powers.
-> From the two points, you can see that there is a different in capacity between the two. It's similar to what Graham said, federal corporation already has a passport so they can enter the US, however a provincial corporation has to start by getting a passport first.
For Right to Operate, think of it like the following:
Regardless of incorporation (doesn't matter federal or a provincial), the actual right to operate insurance business in a province depends on that province’s licensing laws. Provinces have authority to regulate market entry and insurance contracts. So, while a federal insurer can in theory operate anywhere (capacity), in practice it must still meet each province’s conditions (license, solvency deposits, etc.).
-> For the right to operate, think of it like the following, with a passport (so federal also has one, the provincial insurer, lets say you got a passport approved) you can enter the US, but they still have the right at the border to accept/decline you but also, once you enter, regardless of who you are, you have to follow the US laws.
Hope this clarifies!