When a regulator calls your insurance coverage firm or brokerage to request data, what’s the very first thing you must do?
Name your lawyer, says Arthur Hamilton, who works with the litigation dispute decision group at Dentons Canada LLP.
That’s as a result of the world of insurance coverage regulation is now complicated. Seemingly innocuous and/or easy questions from the regulator might carry hidden assumptions or contact on completely different areas of regulation — resembling privateness regulation, for instance. For that cause, an unconsidered reply might come again to hang-out the insurer or the dealer later.
Hamilton raised the subject at a media roundtable held at Dentons Canada LLP in Toronto on Nov. 20. A number of of Dentons’s authorized specialists mentioned sizzling matters in insurance coverage regulation, together with the authorized exposures associated to utilizing synthetic intelligence in insurance coverage, nationwide licensing for adjusters, concepts for find out how to cut back the burden of regulatory compliance, the influence of language legal guidelines on development technique of insurers or brokerages that wish to begin up places of work in Quebec, and extra.
In his presentation, Hamilton cited an instance through which a regulator reached out to an organization to ask what number of of its staff had been working from house. This occurred throughout the pandemic, when governments issued public well being orders requiring all employees in non-essential companies to earn a living from home to keep away from spreading COVID. (Insurance coverage was designated as an important service.)
The reply the corporate ought to have given, Hamilton mentioned, was: “’We’ve individuals who do their work in a digital workplace from house.” As an alternative, the corporate responded: “67.”
“Effectively, that began a large investigation, since you’re not allowed to earn a living from home [due to licensing regulations around supervision],” Hamilton mentioned. The regulator thought-about working from house to be the identical factor as doing ‘unsupervised’ work. In the meantime, the corporate maintained its staff had been correctly licensed and supervised whereas working in a digital workplace surroundings beneath the auspices of the corporate’s house workplace.
“The truth that they had been at their house, working of their digital workplace that’s totally managed by the [company’s] house workplace surroundings, didn’t matter [to the regulator],” Hamilton mentioned. “5 years and three court docket ranges — and specialists, and every part else — later, and we’re nonetheless preventing. And nobody agrees on what working from house means.”
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In different conditions, Hamilton cautioned, the regulator could also be asking for data that touches on laws or legal guidelines in numerous areas of regulatory jurisdiction.
“Even when the regulator is totally on the extent about what they’re attempting to research or take a look at, typically their request can ask you to do one thing that, as an insurer or an middleman, will get you in bother — like, on the privateness entrance, or an entire myriad of different points.”
For the reason that insurer’s or dealer’s counsel is sensible to those regulatory points, it’s finest that anybody taking a query from the regulator take that request to the corporate executives or dealer principals, who can then search authorized recommendation, Hamilton recommends. The legal professionals can then interact with the regulators to additional make clear the aim of the request and find out how to adjust to it.
“You don’t wish to sound hypersensitive, however you possibly can’t be too cautious,” Hamilton mentioned. “Generally the query that will get requested is the mistaken query, and you must politely return [to the regulator] and say, ‘I don’t suppose you meant to ask that query. What you meant was, ‘Is anyone unsupervised and doing one thing they shouldn’t be doing?’” The reply to that’s no.
“After which let [the regulator] come again and say, ‘We didn’t ask that. We predict anybody working from house is unsupervised. How many individuals earn a living from home?’”
To which counsel can come again and make clear, ‘No, I feel you’re asking, ‘Had been they unsupervised?’”
This type of engagement between counsel and the regulator is vital, Hamilton mentioned, as a result of penalties in opposition to insurers and brokerages will be harsh. Plus, they will trigger reputational injury if the general public perceives the corporate did one thing mistaken.
Due to the excessive stakes, it’s a good suggestion to have counsel interact with the regulator from the outset, Hamilton recommends.
Characteristic picture courtesy of iStock.com/Nastco
