The Regulatory Framework
| Author | Denis Boivin |
| Pages | 55-84 |
55
CHA PTER 3
THE REGULATORY
FR A M EWOR K
A. INTRODUCTION
Insurance law is pr ivate law. Not unlike torts and contracts, the fu nction
of this branch of law is to provide a relatively predictable framework in
which corrective justice can operate — that is, in which disputes be-
tween suppliers and consumers of ins urance products and services can
be settled efficiently and fairly. This regulatory f ramework has many
interrelated sources, the most obvious of which is the contract itself.
In theory, when a conflict arises, the fir st question is whether the parties
have envisaged a specific solution in their agreement. To the extent that
the contract is clear, it should arguably be enforced. As noted by the
Supreme Court of Canada, the prim acy of private ordering is a funda-
mental tenet of the Canadia n civil justice system.1 However, in practice,
the insurance contract i s often the problem, rather than the solution.
In many cases, t he wording of the contract clashes with counter vailing
factors or is open to conflicting interpretations. Moreover, the issue is
often whether a contractual relationship ex ists at all or whether the
terms of the agreement adequately reflect the reasonable expectations
of both part ies. In all of these inst ances, the so-called “will of the par-
ties” provides limited guidance. The regulatory framework must be
found elsewhere.
SCR 12 at 37.
INSURANCE LAW56
Canadian in surance law is a mixture of federal, provincial, and ter-
ritorial legislation, regulations, directives, common law, and custom.
This chapter provides an overv iew of this framework, but the details
are discussed throughout the book. The insurance industry i s heavily
regulated. In fact, few industr ies have attracted the attention of fed-
eral and provincial govern ments, legislatures, and court s as much as
the insurance indust ry has. Self-regulation has never been a feasible
option. Along with banking, insurance was one of the first industr ies
targeted by federal regulators after Confederation,2 and the first statute
pertaini ng to insurance was adopted by Parliament in 1868.3 Insurance
was also one of the first indust ries to provoke serious reflection con-
cerning the lim its of classical contract theory, which places freedom of
contract above all other considerations. Indeed, most of the statutor y
and common law principles discu ssed in this book were adopted in
response to deficiencies in the i nsurance market and in the la issez-faire
philosophy e spoused in e arlier centu ries.4
B. DIVISION OF POWERS
Legislation is an important component of insurance law, and the Can-
adian insurance industry is subject to a myriad of legislative provisions
and regulations, many of which are discussed in the following ten chap-
ters. Generally speaking, two statutory schemes apply to the industry.
First, there is the federal scheme conta ined in the Insurance Companies
Act.5 Second, there are provincial and ter ritorial schemes contained in
a series of provincial a nd territorial insurance acts. Today, there is rela-
tive calm between Ott awa and the provinces concerning t heir respect-
ive jurisdictions in t he field of insurance. However, as is often the case,
this har mony came after years of constitutional batt le between the two
levels of government.
2 Peter W Hogg, Constit utional Law of Canada, 2 d ed (Toronto: Carswell, 1985) at 457.
3 Marvin G B aer, “Harmonization of Can adian Insurance La w” in Ronald CC
Cuming, ed, Harm onization of Business Law in Canada (Toronto: Univers ity of
Toronto Press, 1986) at 208.
4 The story of how court s initially espous ed a laissez-fair e philosophy in resolving
contractual d isputes is recounted by Profe ssor Patrick S Atiyah in h is important
work, The Rise and Fall of the Freedom of Contract (Oxford: Cla rendon Press, 1979).
5 SC 1991, c 47.
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