Regulator imposes costs over $26K after licensee disputes intended decision

For facilitating improper insurance transactions, for failing to provide adequate disclosure to clients and for failing to adequately supervise general insurance salespersons and agents, the Insurance Council of British Columbia has fined Maxxam Insurance Services (Burnaby) Ltd., and its nominee, John Alexander Dewar, $20,000 and $5,000 respectively. The agency was also assessed investigation costs of $2,562.50, while the agency and Dewar were both assessed hearing costs of $26,726.43 on a joint and several basis.

Both the agency and Dewar have a number of conditions imposed on their licenses as well, including coursework for Dewar before he is able to reapply for a level 3 general insurance license. (One condition imposed on his general insurance license downgraded it from a level 3 license to a level 2 license for a period of two-years.)

According to the council’s intended decision in a related case, it identified concerns regarding a business arrangement between West Canada Insurance Services Inc. and Maxxam Insurance after commencing an investigation into the conduct of a level 1 salesperson transacting insurance business when conditions on their license prohibited them from doing so.

The intended decision in West Canada’s case states that effective January 1, 2017, the insurance council replaced its mobile road service (MRS) agreement with a new contract called the Autoplan service at dealerships (ASD) agreement. Maxxam had previously held an MRS agreement, but the insurance council elected not to issue an ASD to Maxxam. As a result, it was no longer permitted to sell Autoplan insurance at the motor vehicle dealerships it serviced.

Maxxam contacted West Canada to discuss the possibility of its road service agents – 12 level 1 salespersons and 13 level 2 agents – becoming authorized to represent West Canada, which did have an ASD agreement with the insurance council.

Within a month of making the agreement, it was discovered that the agents were still selling products from a company that West Canada did not have a contract with. “West Canada instructed the road agents to desist from this practice and only to sell insurance policies through West Canada,” the insurance council’s representatives write in the West Canada intended decision. They add that approximately 100 product polices were sold on behalf of Maxxam during the material period, with all policy documents identifying Maxxam, not West Canada, as the broker of record.

In the Maxxam case reasons for decision, the insurance council’s hearing committee states that “at certain points, the hearing committee found the factual foundation of this matter confusing and difficult to follow. There was a partial agreed statement of facts and admissions made, some of which ended up being disputed during the course of the hearing,” they add.

“Witnesses gave conflicting evidence, even on relatively minor points. There was little documentation to review, either because it was unavailable or had not been sought out. (When it came into being, the agreement between West Canada and Maxxam was almost entirely verbal.) The witnesses who spoke to the documentation that was available were often in conflict about what the documentation showed. Some witnesses who were best place to give evidence did not testify.” 

In particular, Dewar himself, despite requesting the hearing to dispute the hearing panel’s intended decision, did not testify.

“As long as the road agents remained licensed with the agency, which they did for the entirety of January 2017, the agency and the nominee had an obligation to supervise them, which they failed to do,” the hearing committee’s reasons for decision states in the Maxxam case. “Certainly, as soon as the agency and the nominee became aware of West Can’s position that the road agents were not to sell the Motormaxx product, the agency ought to have given the direction that the road agents cease doing so until the issue could be resolved.”

In levying the penalty against Maxxam, the insurance council also took into consideration the agency’s disciplinary history as the agency and its nominee were fined $20,000 and $10,000 respectively in April 2015, and fined $10,000 and $2,000 again in February 2016. “The hearing committee determined that a $20,000 fine was appropriate against the agency as it was in line with precedent decisions and nothing less was acceptable due to hits history of prior misconduct, the similarity of the prior misconduct and lack of mitigating factors,” they write.

In addition to paying the fine and costs before September 7, Dewar must also complete the Council Rules Course by that time, as well, and complete the Insurance Brokers Association of British Columbia’s Duties and Responsibilities for Level 3 Agents and Nominees in British Columbia seminar prior to reapplying for a level 3 license.

No order was issued against West Canada, but its nominee, Sujin Tim Choe must also complete the Council Rules Course and must also retake the seminar for level 3 agents before he is eligible to be appointed as a nominee of any insurance agency in the future.