A lengthy Alberta Insurance Council decision concludes with the imposition of a $340,000 civil penalty on Derek Shaefer, and the revocation of Shaefer’s license for a period of one year after the regulator determined that errors made in 68 applications were misrepresentations, fraud and deceit as contemplated by the province’s Insurance Act.
In the case, the agent unsuccessfully argued that the council’s investigators did not do enough due diligence to verify the facts, relying on unreliable witnesses, and that it “wrongfully imputed a non-legislated duty” on the agent to obtain accurate information from the applicants.
The decision, however, goes on to itemize the falsehoods contained in the 68 applications made on behalf of the 16 applicants – purportedly the employees of an employer who approached him to obtain corporate insurance.
The discrepancies included varying responses to different insurers made by the same applicants: beneficiary relationships, occupations and salaries, legal names, addresses, phone numbers and even birth dates varied from one application to the next.
Licensed as a life and accident and sickness insurance agent “periodically” since November 2018, Shaefer was reported to the insurance council by an insurer filing a life agent reporting form (LARF) in February 2023, indicating that the agent’s contract had been terminated.
During the investigation, Shaefer told the council’s investigators that he was notified of the misrepresentations made by the applicants at the end of 2022. When he then asked for letters of employment, the employer refused to verify that the applicants were in fact employees.
Shaefer then provided the council with a “letter of misrepresentation” from six of the applicants indicating that the misrepresentations were made innocently. He also provided a “letter of direction” for five of the applicants indicating that they understood the beneficiary to be their employer.
As for the suggestion that the regulator wrongfully put a non-legislated duty on the agent to obtain accurate information from applicants, the decision states that insurance agents work in a profession which necessitates the accurate completion of forms and insurance documents.
“If there was no responsibility on the insurance intermediary to ensure the accuracy of information, then the insurer would presumably be assuming risk on which it had no basis of information. Therefore, it is not unreasonable to expect a high standard of due diligence,” the decision states. It then goes on to discuss the fiduciary duty which requires insurance intermediaries to act in the best interests of their clients and finds that on 68 occasions, the agent’s conduct was “reckless, and it is fraud, deceit, dishonesty, untrustworthiness and/or misrepresentation,” as contemplated by the province’s Insurance Act.
The regulator imposed the maximum allowable penalty in the case.
