Regulators cannot enact legislation through policy. However, regulators frequently publish policies interpreting or applying their legislation. The line between those two activities is sometimes fine. A recent BC decision offers some reassurance to regulators: LGM Financial Services Inc. v British Columbia Financial Services Authority, 2025 BCSC 2423 (CanLII).
LGM sold “appearance protection service contracts” to automobile purchasers for many years without objection. Following an investigation into a related matter, the regulator issued a Statement indicating that automobile insurance covers a loss “if the glass, paint, or other part of a motor vehicle is otherwise damaged due to a fortuitous event.” LGM argued that the Statement materially altered the definition of automobile insurance in the legislation and that the Statement indicated that compliance was mandatory.
The Court concluded that the Statement simply interpreted and provided examples of the definition of automobile insurance contained in the legislation (which referred to protection from “damage to” an automobile). Quoting from Laboratories C.O.P. Inc. v. New Brunswick College of Pharmacists, 2020 NBCA 74 (CanLII), the Court said: “Importantly, ‘professional bodies charged with administrative and regulatory duties over their members are entitled to issue’ statements which serve to inform and guide entities subject to its authority, without attracting judicial review .…”
The Court also found that the Statement did not have a mandatory effect. Despite using language about compliance with a Statement as being mandatory, those words had to be read in context. When reading the Statement as a whole, it was apparent that, because the Statement was explaining the meaning of the legislation, it was compliance with the legislation that was seen as mandatory. The Court said: “LGM would have still needed to comply with the requirements outlined in the Statement even if it had not been issued, because LGM is required to comply with the underlying legislation.”
The Court would also have declined to make a declaration on the issue without the regulator first making a formal decision respecting LGM providing the courts with its reasons for decision and an evidentiary record to evaluate.
While this decision gives comfort to regulators trying to provide guidance to its registrants and the public as to how it interprets and applies its enabling legislation, it is also a reminder that regulators should be careful in the language used in such policies.
