The Regulatory Framework

AuthorDenis Boivin
Pages55-84
55
CHAPTER 3
THE REGULATORY
FRA 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 framework has many
interrelated sources, the most obvious of which is the contract itself.
In theory, when a conf‌lict arises, the f‌irst 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 primacy of private ordering is a funda-
mental tenet of the Canadia n civil justice system.1 However, in practice,
the insurance contract is often the problem, rather than the solution.
In many cases, the wording of the contract clashes with countervailing
factors or is open to conf‌licting interpretations. Moreover, the issue is
often whether a contractual relationship exists at all or whether the
terms of the agreement adequately ref‌lect the reasonable expectations
of both parties. In all of these instances, the so-called “will of the par-
ties” provides limited guidance. The regulatory framework must be
found elsewhere.
1 BG Checo Interna tional Ltd v British Columbia Hydro & Power Authorit y, [1993] 1
SCR 12 at 37.
INSURANCE LAW56
Canadian insurance law is a mixture of federal, provincial, and ter-
ritorial legislation, regulations, directives, common law, and custom.
This chapter provides an overview of this framework, but the details
are discussed throughout the book. The insurance industry is heavily
regulated. In fact, few industries have attracted the attention of fed-
eral and provincial governments, legislatures, and courts as much as
the insurance industry has. Self-regulation has never been a feasible
option. Along with banking, insurance was one of the f‌irst industries
targeted by federal regulators after Confederation,2 and the f‌irst statute
pertaining to insurance was adopted by Parliament in 1868.3 Insurance
was also one of the f‌irst industries to provoke serious ref‌lection con-
cerning the limits of classical contract theory, which places freedom of
contract above all other considerations. Indeed, most of the statutory
and common law principles discussed in this book were adopted in
response to def‌iciencies in the insurance market and in the laissez-faire
philosophy espoused in earlier centuries.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 contained in the Insurance Companies
Act.5 Second, there are provincial and territorial schemes contained in
a series of provincial and territorial insurance acts. Today, there is rela-
tive calm between Ottawa and the provinces concerning their respect-
ive jurisdictions in the f‌ield of insurance. However, as is often the case,
this harmony came after years of constitutional battle 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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