On November 21, 2013, the Supreme Court of Canada issued its judgment in the case of La Souveraine, Compagnie d’assurance générale v. Autorité des marchés financiers, 2013 SCC 63, a decision which is now critically important in the context of the distribution of insurance products in Quebec. Indeed, the judgment sheds light on the extent to which insurers operating in Quebec may incur penal liability for regulatory offences committed by financial services firms which they authorize to distribute their products.

In this case, the highest court of the land found an insurer guilty of the offence stipulated at section 482 of the Act respecting the distribution of financial products and services (the “ADFPS”) for having provided its consent to a Manitoba damage insurance brokerage firm which was not registered with the Autorité des marchés financiers (the “AMF”) to provide Quebec merchants with the opportunity to participate in a master insurance policy issued by the insurer to cover the inventories financed by a third party institution.

Section 482 of the ADFPS provides that every insurer that helps, by encouragement, advice or consent or by an authorization or order, or induces a firm or an independent representative or independent partnership through which it offers insurance products to contravene any provision of this Act or the regulations is guilty of an offence.

Although the case involved a situation of non compliance with the registration rules of a firm located in Quebec pursuant to the ADFPS, it is important to note that an offence which may have resulted in the filing of a penal complaint against an insurer pursuant to its section 482 may extend to the violation of any supervisory rule prescribed under the ADFPS by a firm, an independent representative or an independent partnership.

The Court confirmed that section 482 of the ADFPS creates a strict liability offence for the insurer, that is, an offence for which the prosecution is not required to prove the culpable intent of the insurer. In turn, the physical element of the offence does not require evidence to the effect that the insurer has taken positive action to encourage the violation of the Act by the firm. For the insurer, to simply fail to oppose in due course to the illegal distribution of its insurance products is regarded as a consent or an authorization to such distribution.