Car dealership sanctioned for acting as an agent

The general insurance council of the Alberta Insurance Council has ordered Avenue Motors Ltd. to pay a civil penalty of $8,000 after it found that the dealership was acting as an agent by placing client business for its own customers using an online insurance provider designed to be used directly by consumers without intermediaries.

The dealership holds a restricted corporate auto dealership (equipment warranty) certificate of authority to transact insurance business within Alberta and concurrently holds a restricted certificate auto dealership (GAP) insurance certificate, both of which authorize the dealership to transact insurance business on restricted terms.

The insurance council began its investigation into the dealership’s activities after receiving correspondence from the insurance company being used by the dealership to place business. The platform, it says, is an online insurance provider, distinct from a broker-based distribution approach, and is designed to be used directly by consumers. Analytics revealed that the dealership had been using the website to place business for its own customers. The dealership also used its own corporate credit cards and its own email addresses to place the business.

Impersonating customers

“We believe that they have been impersonating customers on the phone at times,” the insurance company’s general council adds in its submission to the insurance council. The letter continues, stating that some customers have been unable to authenticate themselves as they are unaware of what information was used by the dealership to set up their account. “(The insurer) has insured persons who might otherwise be uninsurable. Or for premiums that may be far less than required,” they add. “We have incurred claims for insurance we either would not have sold or would have sold for more premium.” The dealership allegedly continued placing business in this manner, even after receiving a cease and desist letter from the insurer.

In responding to the allegations, the dealership claims the policies were placed by an employee who no longer works at the firm. Its legal council also questioned the Alberta Insurance Council’s jurisdiction, saying that the dealership is not an agent and that the insurance council does not have jurisdiction with respect to the charges in question.

“The council is cognizant that this is a complicated matter involving restricted certificates, automotive dealerships and the jurisdiction of the council over insurance intermediaries in Alberta,” the council writes in its decision. Citing the Insurance Act and a ministerial directive, the council adds that it rejects the dealership’s position.

Statutory responsibility

It also addresses the claim that the dealer’s actions were the action of one employee, stating that “it would be negligent of the council to absolve the dealership of its statutory responsibility merely because the dealership had terminated an employee who was allegedly solely responsible for the misconduct. Even if that were to be the case, it would send a dangerous message to the industry that sanctions and penalties against a restricted certificate could be avoided by blaming a singular employee,” they write.

“The Act is clear; the dealership and employees are treated as one entity and must act within the parameters of that certificate. To direct otherwise would undo the power of the certificate itself and would require that each employee obtain their own individual certificates. This is not the design nor the intent of the legislation.”