The Products

• Author: Denis Boivin
• Pages: 25-54

25

CHA PTER 2

THE PRODUCTS

A. INTRODUC TION

One thread unites all participants in t he Canadian insurance indus-

try: the in surance contract. Whether one is an insur ance provider,

an in surance consumer, or an intermediary, there is no escaping the

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

a contractual relationship w ith an insurer and millions benef‌it from

an insurance contract w ithout being privy to the agreement. The in-

surance contract is the source of all r ights, obligations, and principles

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

the sale of goods, it is arguably the most common ty pe 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 di stinctiveness

will be reviewed. Fir st, 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 CH AR ACTERISTICS OF INSURA NCE

Insurance law is a bra nch of the law of contracts. Generally spea king,

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

contracts. However, classifyi ng 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 compari son to agree-

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

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

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

contract relates to insura nce.

A recent case before the Albert a Court of Appeal illustrates t he

importance of this deter mination. In Brick Protection Corp v Alberta

(Provincial Treasurer),1 a provincial treasurer wa s 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 reta iler The Brick (Brick). During the period relevant to the

tax asse ssment, 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 repa ir

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 ref unding the price paid for

them. Before the Court of Appeal, the tre asurer of Alberta arg ued that

Protection was carr ying on the business of insurance within t he mean-

ing of the Alberta Insurance Act2 and, as a result, the cor poration 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 mea n-

ing of Alberta ta x legislation, other provincial treasurers could have

assessed t he 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.