Errors and omissions - CAIFA payment date extended

By Martin Beaudry | April 20 2010 06:49PM

The Canadian Association of Insurance and Financial Advisors (CAIFA) changed its mind. Despite repeated dire warnings that applicants to the new CAIFA sponsored errors and omissions (E&O) plan need pay up by January 31 or lose their coverage, CAIFA was still unofficially allowing late payments at the end of March.

Dave Traynor, Vice-President of Programs at CAIFA, said March 25 that of the 5,000 brokers who applied for the CAIFA sponsored E&O plan, 3,000 had paid and been accepted. Six hundred of the remaining 2,000 are known to have found coverage elsewhere, and the 1,400 other applicants could still pay up and be covered retroactively back to Dec. 31, 2001, when the former St. Paul policy ended.The edict to pay now or lose the chance to have coverage extending back to December 31 was not quite accurate.

Mr. Traynor explains, “We have discovered a fair number of people who didn’t seem to realize that they had to send in a cheque. There might be some people out there who think they are still waiting for a broker, and if they don’t get their money in they are not going to get coverage, which can be quite a problem if you have a break in your coverage.”He says, “A lot of people just don’t understand the significance of what they are doing. They might have been paying insurance for ten or fifteen years and had a clean record, and what they don’t seem to realize is that if they allow a lapse in coverage then they will no longer have coverage for those ten or fifteen years.”“What we are doing is just sort of continuing to push things through,” continues Mr. Traynor. “As we don’t make a big noise of it and the insurer doesn’t make a big noise of it, it just happens. It is very much a case of being at the mercy of the insurer, because they are under no obligation to accept it.”

Employers Reinsurance Corporation (ERC) – the insurance company for the CAIFA’s E&O program – could not be reached for confirmation. Mr. Taylor asserts the insurer is aware that payments are still being accepted, but only in an unofficial capacity. “ERC knows we are still processing applications,” he says. A letter from AON Reed Stenhouse – the broker for CAIFA’s E&O program – was sent mid-March, noting that the coverage opportunity still exists for the remaining non-paid applicants.

The easing of datelines is for a limited period. Mr. Traynor notes, “Essentially the January 31 date still stands as the official policy, and the danger is that if anyone does have a claim then they will not have continuous coverage.” No firm deadline has been set for the extension’s end.March 26, participants had yet to receive their policies, though accepted paid-up applicants had received certificates. Plan participants still had no clear idea of what their coverage entailed.

Lawsuits linger

CAIFA’s legal action against its former E&O broker Barber, Stewart, McVittie, and Wallace is still underway. A formal legal letter has not yet been sent because CAIFA’s lawyers are still gathering material.

In the other direction, a broker wishing to remain anonymous has engaged lawyers to proceed against CAIFA for breech of fiduciary duty. This broker is being sued for over $500,000 for actions taken by a now retired and uninsured broker who was under his supervision. The new E&O plan does not cover supervisory roles (third party administration) whereas this was covered in the previous plan. The plaintiff is saying that CAIFA was wrong to assure applicants that the new plan would cover everything the old plan did.