The Products

• Author: Denis Boivin
• Pages: 25-54

25

CHAPTER 2

THE PRODUCTS

A. INTRODUCTION

One thread unites all participants in the Canadian insurance indus-

try: the insurance contract. Whether one is an insurance provider,

an insurance consumer, or an intermediary, there is no escaping the

contract. At any point in time, millions of Canadians are involved in

a contractual relationship with an insurer and millions benef‌it from

an insurance contract without being privy to the agreement. The in-

surance contract is the source of all rights, obligations, and principles

recognized in insurance law. With the exception of the contract for

the sale of goods, it is arguably the most common type of agreement

found in the marketplace.

The insurance contract is also one of the most distinctive of legal

instruments. In this chapter, the key elements of this distinctiveness

will be reviewed. First, we will describe t he fundamental characteristics

of an insurance contract — the features that disting uish this instrument

from other commercial agreements. Second, we will describe the many

ways in which insurance contracts can be classif‌ied and the import-

ance of these classif‌ications from a regulatory point of view.

INSURANCE LAW26

B. THE CHARACTERISTICS OF INSURANCE

Insurance law is a branch of the law of contracts. Generally speaking,

the principles learned in a f‌irst-year contracts course apply to insurance

contracts. However, classifying an agreement as insurance engenders

many consequences. Some principles of law apply only to insurance

agreements, while others are ir relevant to this type of contract. Further-

more, insurance contracts are heavily regulated in comparison to agree-

ments pertain ing to other commercial ventures. Freedom of contract still

exists in the insurance industry, but it is strongly curtailed by regula-

tors and the courts. Hence, one must be able to recognize that a given

contract relates to insurance.

A recent case before the Alberta Court of Appeal illustrates the

importance of this determination. In Brick Protection Corp v Alberta

(Provincial Treasurer),1 a provincial treasurer was trying to collect over

$700,000 in taxes from a corporation on the theory that it was oper-

ating as an insurance company. The corporation in question, Brick

Protection Corp (Protection), was a sister company to the Canadian

furniture retailer The Brick (Brick). During the period relevant to the

tax assessment, Protection provided extended warranties to Brick fur-

niture and appliance customers in Alberta. The warranties were sold

by Brick employees and were available exclusively to Brick customers.

According to the terms of the warranties, Protection promised to repair

or replace the items warrantied for a f‌ixed period of time in exchange for

a fee that was between 10 and 15 percent of the purchase price of the

goods. In the event that repairs or replacements were impossible, Brick

reserved the right to cancel warranties by refunding the price paid for

them. Before the Court of Appeal, the treasurer of Alberta argued that

Protection was carrying on the business of insurance within the mean-

ing of the Alberta Insurance Act2 and, as a result, the corporation should

pay the same taxe s as insurance companies pay on the policies they sel l

within the Province.

The ramif‌ications of Brick Protection could have been far-reaching.

For starters, if Protection were an insurance provider within the mean-

ing of Alberta tax legislation, other provincial treasurers could have

assessed the corporation for business conducted within their own juris-

dictions. Moreover, the services offered by Protection are widespread

in the Canadian marketplace. Many companies offer extended warran-

ties on furniture, appliances, and electronic equipment. Many retailers

1 2011 ABCA 214 [Brick Protection].

2 RSA 2000, c I-3.