So Many Unanswered Questions

For the impatient among us, interim stay applications can be frustrating. These applications only determine whether a decision is to be put on “hold” without deciding the main issues. An example of this is found in the case of FS Insurance Brokers, Inc. v Insurance Council of British Columbia, 2023 BCSC 1190 (CanLII).

The regulator made a rule preventing licensed insurance brokers benefitting from insurance contracts for condo-type properties managed by an affiliate of the broker. This type of relationship was viewed as a conflict of interest. The rule was apparently directed at one broker whose business model was to provide proactive measures for properties managed by an affiliate to reduce their insurance claims (and, thus, presumably, its premiums). The broker sought, and obtained, a temporary injunction to prevent enforcement of the rule pending a determination of its validity on an application for judicial review.

In doing so, the Court indicated that the following arguments could be made by the broker at the ultimate application hearing, even if the arguments would not necessarily be successful:

  • The rule should not be permitted to close a perceived loophole within the enabling legislation.
  • The rationale for the new rule was not adequately explained when enacted. While policy decisions do not need the level of explanation that an adjudicative decision requires, where a policy targets one licensee, a greater explanation may be necessary.
  • The regulator did not adequately consider the broker’s comments on the proposed rule during the consultation process. For example, only a high-level summary of all of the submissions received was provided to the decision makers.

 

The Court also noted that there was an obligation on the regulator in these circumstances to give the broker guidance as to the application of the new rule to its business model (even if that guidance did not amount to an advance ruling).

The Court found that there was sufficient evidence to conclude that allowing the rule to be enforced pending the court proceedings would cause the broker irreparable harm by leaving the legality of its business model in limbo. While there was also a presumption that there was irreparable harm to the regulator in not being able to enforce its public interest rule, the balance of convenience favoured the broker. This determination was made partly on the basis that the regulator did not provide evidence of the specific harm to the public that it felt that the broker’s continued operations posed and because the injunction was narrowly tailored to only affect the regulator’s enforcement activities against the broker to a limited extent.

The upcoming decision on the merits of rule will be of interest to regulators, particularly if it addresses the policy making obligations when making rules directed at a specific registrant.

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