Thursday 20 May 1993

Insurance Statute Law Amendment Act, 1993, Bill 164

Subcommittee report


Chair / Président: Johnson, Paul R. (Prince Edward-Lennox-South Hastings/

Prince Edward-Lennox-Hastings-Sud ND)

*Vice-Chair / Vice-Président: Wiseman, Jim (Durham West/-Ouest ND)

Caplan, Elinor (Oriole L)

Carr, Gary (Oakville South/-Sud PC)

Cousens, W. Donald (Markham PC)

Lessard, Wayne (Windsor-Walkerville ND)

Jamison, Norm (Norfolk ND)

*Kwinter, Monte (Wilson Heights L)

*Mathyssen, Irene (Middlesex ND)

*North, Peter (Elgin ND)

Phillips, Gerry (Scarborough-Agincourt L)

*Sutherland, Kimble (Oxford ND)

*In attendance / présents

Substitutions present / Membres remplaçants présents:

Elston, Murray J. (Bruce L) for Mrs Caplan

Klopp, Paul (Huron ND) for Mr Jamison

Haeck, Christel (St Catharines-Brock ND) for Mr Sutherland

Harnick, Charles (Willowdale PC) for Mr Carr

Owens, Stephen (Scarborough Centre ND) for Mr Paul R. Johnson

Tilson, David (Dufferin-Peel PC) for Mr Cousens

Winninger, David (London South/-Sud ND) for Mr Lessard

Also taking part / Autres participants et participantes:

Bass, Julia, executive coordinator, Automobile Insurance Review

Callahan, Robert V. (Brampton South/-Sud L)

Fisher, Julia, legal counsel, Automobile Insurance Review

Halpert, Art, senior policy analyst, Ontario Insurance Commission, Ministry of Finance

Owens, Stephen, parliamentary assistant to Minister of Finance

Clerk / Greffière: Grannum, Tonia

Staff / Personnel: Beecroft, Doug, legislative counsel

committee met at 1013 in committee room 1.


Resuming consideration of Bill 164, An Act to amend the Insurance Act and certain other Acts in respect of Automobile Insurance and other Insurance Matters / Loi modifiant la Loi sur les assurances et certaines autres lois en ce qui concerne l'assurance-automobile et d'autres questions d'assurance.

The Vice-Chair (Mr Jim Wiseman): I'd like to call the committee to order. We are here to consider clause-by-clause of Bill 164, An Act to amend the Insurance Act and certain other Acts in respect of Automobile Insurance and other Insurance Matters. We are to consider the government motion set before you on section 3 of the bill, section 7 of the act. In front of you, you have some additional amendments.

Mr Murray J. Elston (Bruce): Could I just ask a question of the parliamentary assistant before we get started, Mr Chair?

The Vice-Chair: Could I just do this first?

Mr Elston: Oh, you just want to tell me that we've got these three proposed amendments in front of us for consideration at some point?

The Vice-Chair: Yes, 1B, 1C and the amended amendment to section 3 that was stood down in the last meeting. Today we will begin with section 5. I will recognize Mr Elston.

Mr Elston: I was just wanting to ask the parliamentary assistant how long it is that he and the minister have known in fact that the cost of auto insurance was going to be increased by 5% by the Treasurer, as a result raising the cost of this entire package by 5%. Can you now tell us exactly how much more people are going to pay for their auto insurance under the auspices of this bill and the amendments that you're proposing, and do you propose to address any amendments to us which will offset the 5% grab by Mr Laughren?

Mr Stephen Owens (Scarborough Centre): I want to thank the member for his question. I can, with a good level of honesty, tell him that yesterday afternoon at approximately 4:15 this matter became known to myself and, I'm going to presume, to the minister as well.

In terms of its application, as the member is aware, tax and revenue issues are the responsibility of the Minister of Finance. They do not fall within the purview of Brian Charlton through his role with respect to the auto insurance review, and therefore he does not have responsibility for the implementation of the revenue or the tax measures. I think at this point, because of the newness, there is not an understanding of its impact, there is not an understanding of how costs will be flowed through to premium holders. I'm sure, as time unfolds, that will become clearer.

Mr Elston: Any amendments proposed?

Mr Owens: Not at this point.

Mr Elston: Can I ask then if the 5% is on the combined price of the premium plus the 3% premium tax, or is it just 5% on the premium cost?

The Vice-Chair: Perhaps I could interject here and suggest that those questions would be better suited for the Minister of Finance when he comes to the committee, and he has been, according to --

Mr Elston: Actually, we talk about that at noon, I think, right?

The Vice-Chair: Okay.

Mr Owens: I think, respectfully, you also have an ample opportunity during question period to --

Mr Elston: They never show up.

Mr Owens: Come on, Murray. Don't be so negative. I'm sure they'll be there today.

Mr Charles Harnick (Willowdale): You know, it strikes me that everything we have been told about the costing of this reformed auto insurance package is now up in the air. Everything this bill has been predicated upon in terms of costing is now totally out of whack. It seems to me that between the budget and the increase of 5% and the pending Court of Appeal decision dealing with the threshold, what we're doing here now is really wasting a whole lot of time and resources.

It seems to me that until you can at least tell us how the new financial arrangements are going to impact on this bill, there really is very little point in proceeding any further. I can appreciate that you want to get it done, but this really very much changes what it is we're trying to do here. All of the things that the minister and the deputy minister and lawyer Endicott have come in to tell us about pricing are now no longer valid.

The Vice-Chair: Mr Harnick, I understand your point. This committee has been instructed by the Legislature to continue with clause-by-clause. We have not received any instructions otherwise. So I would suggest that you take that up with the Legislature and that this committee will continue with section 5 of the bill.


Mr Elston: On a point of order, Mr Chair: Although those are sage words of advice, as you know, the Speaker will refuse to deal with any item with respect to the operation of this committee unless respectfully submitted on behalf of the committee by the Chair.

If you're prepared to submit a request for further instructions, I would support that, because we've raised these items before in the House and the Speaker said unless the majority of the committee members agree that there should be a request for further instruction, he on his own will not intervene with respect to committee business.

I put it to you that you can't actually direct Mr Harnick to raise the issue in the House. It's a matter that should be dealt with here, and I think it would be reasonable if you would take that message for us. I know there are others who --

Mr Kimble Sutherland (Oxford): Just to clarify, I haven't been sitting at this committee regularly, but let's be clear. Yesterday's changes are changes to the Retail Sales Tax Act. You are dealing with Bill 164 regarding the Insurance Act and certain other acts.

Mr Elston: That wasn't Mr Harnick's point, though.

Mr Sutherland: That was the sense I got from his point, and I think that needs to be clarified.

Mr Harnick: Quite simply, and I appreciate that Mr Sutherland wasn't here, but one of the major focuses of all of our discussions and one of the major issues is the issue of what Bill 164 is going to cost the consumer. The government, quite apart from the fact that there are reams of other documentation and studies indicating that the government is not correct, has persisted in telling us that Bill 164 will cost consumers 4.5% or 5% more.

We now know, as of yesterday, that is no longer so and it totally contradicts what the government is saying. The mere imposition of provincial sales tax at a rate of 5% on insurance, which includes auto insurance, now effectively says that this package is going to cost 10% more as opposed to what the government was originally telling us.

If you're to believe, for instance, the studies commissioned on behalf of State Farm, it indicates that the auto package now, if you believe its numbers, is going to cost somewhere around 25% more than what we have initially been told.

It just seems to me that this bill, because of the simple reason of costing, which the minister has told us has dictated what is in fact in here, may all be totally out of whack now, because he was indicating a 10% increase or a 15% increase was unacceptable. He told State Farm, when it said that the increase is going to be 10%, 15% or 20%, that it was absolutely wrong and couldn't be that high because then the package would be no good.

Now, with the imposition of this tax, it seems to me that everything the minister and the deputy minister and lawyer Endicott were talking about no longer permits us to proceed with this bill as it presently is written because the minister himself said that increases of more than 4% to 5% would not happen, could not happen because it would not be in the interest of consumers.

All I'm saying is that -- look, it's your bill. If you want to proceed with it, if you want to jack up people's insurance rates 10%, 20% or 25%, be my guest, but it seems to me that we should at least have the parliamentary assistant have the opportunity to meet with the minister.

I can appreciate that he didn't see it, as the parliamentary assistant said, till 4:15 yesterday. His assumption was that that's when the minister first saw it, and I suspect that the parliamentary assistant has not had the opportunity to speak with the minister yet. It seems to me that at the very least, the parliamentary assistant should be speaking to the minister and providing us with the information about where this package is now going, because it may no longer be a viable package based on all of the things that the minister, the deputy minister and lawyer Endicott were telling us.

Mr Owens: Mr Harnick raised a couple of interesting questions. The issue with respect to the tax again is not germane to the issue of the bill under consideration. As I indicated, there is not yet at this point an understanding of how the flow-through will take place with respect to insurance premiums.

On point 1A, with respect to alleged rate increases, the member for Willowdale quotes -- again a non-actuarial study -- the Coopers and Lybrand study commissioned by State Farm that talks about out-of-the-ballpark increases, while the Mercer report commissioned by the government in fact talked about a 4.5% increase, not to the premium, but as an industry cost.

In terms of how that would be applied by the various players in the industry, it would be at their discretion. Any increases, of course, Chair, as you are well aware, have to approved by the Ontario Insurance Commission and are based on demonstrated need.

Mr Harnick may or may not have been at the committee on late Thursday afternoon when I made my comments, in response to Mr Elston's questions with respect to amendments, that there will be an announcement later today on some of the issues that were raised about verbal thresholds versus deductible.

I think we are moving in a good direction. We still have a lot of work ahead of us. I would respectfully request that we continue the good work that we left off with on Thursday afternoon of last week.

The Vice-Chair: If this is not on section 5, you'll have to raise it on a point of order.

Mr Harnick: Point of order, then: In response to what Mr Owens said --

The Vice-Chair: That is not a point of order, and therefore I will rule you out of order and move to section 5.

Mr David Tilson (Dufferin-Peel): Point of order, Mr Chairman: Surely he's is commenting on what --

Mr Harnick: Mr Wiseman, surely when Mr Owens makes a statement, we are entitled to respond to that statement.

Mr Sutherland: You made the original statement.

Mr Harnick: All I want to say -- and we could have been finished by now, but I can see the autocratic hand of the Vice-Chair in here --

The Vice-Chair: I would reject those comments and I would also ask you to temper your language.

Mr Harnick: I'm not going to temper my language.

The Vice-Chair: The rules of the standing orders clearly indicate what is a point of order and what is not a point of order.

Mr Harnick: You didn't let me get three words out, so you don't even know what I was going to say, unless you're a mind-reader, and I don't think you're quite capable of that.

Mr Owens: Come on, let's get down to work here.

The Vice-Chair: Mr Harnick, I find your language to be somewhat offensive. I believe that it would be in the best interests of the committee and the work of the committee if the language remained parliamentary and not moving in the direction you were going. I would request that you temper your language to the Chair and respect the Chair for what it's supposed to be and for what it does. If you have a point of order, I will listen to it, but I will not entertain insults.

Mr Harnick: My point of order is a further comment, additional to what the parliamentary assistant said. Quite simply, I did not indicate in my remarks whether I thought the government's projections or the State Farm projections were correct or incorrect. That's not the issue of the debate here.


The Vice-Chair: This is also not a valid point of order, so I would like to move to section 5 of the act, please.

Mr Harnick: Point of order, or maybe I'll make this a point of privilege: This afternoon, we will be debating the budget. It may be the only scheduled budget debate, and it certainly is the only particularly relevant day to debate the budget because we are rising for a week of vacation next week.

Mr Sutherland: Maybe for you.

Mrs Irene Mathyssen (Middlesex): You may be vacationing, but I'm not.

Mr Owens: Is that what the Tories do?

The Vice-Chair: In the direction that you are now pursuing, you do not have a valid point of privilege.

Mr Harnick: How do you know what I'm going to say?

The Vice-Chair: I'm saying that on the current course that you are now going, you haven't said anything yet that indicates a valid point of privilege.

Mr Harnick: In light of the fact that this afternoon may be the only opportunity for the opposition parties to respond to the budget, I think we should consider not sitting this afternoon so that all members have the opportunity to be in the Legislature for the budget debate. That's my point of privilege.

The Vice-Chair: Now we can move along to section 5 of the bill. If the parliamentary assistant would read the government amendment.

Mr Owens: Subsection 5(2) of the bill: I move that subsection 33(3) of the Insurance Act, as set out in subsection 5(2) of the bill, be amended by striking out "fifth" in the fourth line and substituting "seventh."

Mr Elston: I feel the heavy, autocratic hand of the Vice-Chair in this. I think he supported my interjections just last week.

Mr Owens: In terms of the reason for this amendment, there were issues raised with respect to postal service and the sometimes spotty service in some of the areas represented by the member for Bruce, for instance, and wanting to ensure that all communicants with the OIC are given a reasonable chance, we have taken the member's advice and have so moved the change with respect to the days required as proof of service.

Mr Elston: It moved the days of service from five to seven.

Mr Tilson: A question to the legislative counsel as to --

Mr Owens: Just to bring us in line with the Ten Commandments and the number of days it took to create the earth.

Mr Tilson: Mr Chairman, can we get off the Bible and perhaps on to Bill 164?

Interjection: That was six days.

Mr Owens: Sorry, I'm corrected. It was six, and rested on the seventh. It's been a long day.

Mr Elston: That tells us how many more committee days we have left.

Mr Tilson: I'd like to ask legislative counsel this: Just generally, whether it be rules of procedure in the court system or any piece of legislation where service is required by registered mail, is there any standard, set date as to the rationale why we changed from "fifth" to "seventh"? I did hear Mr Elston's rationale as to why he wanted it extended from five to seven, and I understand that, but why did we pick seven? A good religious reason?

Mr Owens: In terms of your question with respect to the rules of procedure, as I read out on the last day we met, with respect to civil law it is in fact five days.

Mr Elston: Civil procedure.

Mr Owens: Pardon me, civil procedure. Thank you. In terms of wanting to address some of the peculiarities of the postal service, it was our view that we want to keep the number of days within reason. We consulted with the Ontario Insurance Commission, and we have Art Halpert here from the commission. He would be pleased to respond in more fulsome detail on the commission's view with respect to the number of days.

Mr Art Halpert: I guess basically we had no objection to moving it to seven days. We were asked if it would have a major impact on the commission if we moved it from five to seven days, and we felt it wouldn't. That was basically it.

Mr Tilson: I believe that with the benefit package that's being proposed by this government, the Ontario Insurance Commission is going to be a very busy organization. The administration it's going to have is probably something you've never even thought of -- you may have thought of it, but maybe perhaps never realized -- and it may get worse and worse.

There have been some remarks in the past, specifically by Mr Scott, as to the number of bureaucrats -- I don't mean that in a derogatory sense, but administrators perhaps -- who are required to operate the Ontario Insurance Commission.I guess I look at the process. We've seen the restraints of this government, that you may not get the people you --

Mr Paul Klopp (Huron): Speaking of staying on topic --

Mr Tilson: I am speaking on topic. I'm talking about how this process is going to be administered, and we're talking about expanding it from five days to seven days. What I want to know is --

Mr Klopp: Speak on the topic.

The Vice-Chair: Mr Klopp, you do not have the floor, and your interjections are not helpful.

Mr Klopp: These city members.

Mr Tilson: I don't think my constituents would appreciate, Mr Chairman, my being described as a city member. I'm far from a city member. I happen to reside in the beautiful riding of Dufferin-Peel, which has some beautiful -- two wonderful --

The Vice-Chair: You are now off topic, Mr Tilson, and I would appreciate the government members restraining themselves.

Mr Tilson: Mr Klopp should come to my riding and see what type of riding I have. I have two medium-sized municipalities, but basically, the riding of Dufferin-Peel consists of --

The Vice-Chair: If you have concluded your comments, Mr Tilson --

Mr Tilson: No, I haven't.

The Vice-Chair: Then I would ask you to return to topic, please.

Mr Tilson: I'm responding as to my knowledge of my concern as to the operation of the Ontario Insurance Commission and the administration of sending mail out. I have no idea of the size of your staff now. There's no question, listening to Mr Scott's comments and listening to the delegations that have come to us, that the amount of bureaucracy that's going to be required is going to be astronomical. Taking all that into consideration, the consideration of sending out notices, if you are not given the amount of staff that you feel will be required, will the seven days that's being suggested by this amendment be sufficient to enable you to send out notices or anything else that's required?

Mr Halpert: We think the seven days would be sufficient.

Mr Tilson: With the staff you have?

Mr Halpert: Well, I'm not sure that the number of days would be impacted by the number of staff we have.


Mr Tilson: I guess my response to that, Mr Chairman, is that I've seen mail leave this building. Sometimes it's very difficult for mail to leave this building, for all kinds of reasons. The machine moves slowly. I can assure you, if you haven't thought of it, that if you aren't given the staffing that you require to operate the Ontario Insurance Commission, the wheel could grind to a dead stop because of the amount of issues over the definitions of benefits and other such matters. My concern is, taking all that into consideration: Is the period of seven days long enough?

Mr Halpert: Well, this is seven days' notice. I don't think it's impacted by the number of staff we have. We will get the notice out and then that will be seven days from there.

Mr Tilson: I guess my only comment is that you're going to require an awful lot of staff to prepare these notices, because you're going to have to have an awful lot of them. I think you're guaranteed to require that staff. If you don't get them, I simply say that seven days may not be enough, but if you feel it is and you feel that the Ontario Insurance Commission on that basis can operate, that's fine.

The Vice-Chair: Shall the motion carry? Carried.

Should section 5, as amended, carry? Carried.

Mr Owens: Section 6:

"Paragraph 1 of subsection 45(1) of the act is amended by striking out `no-fault benefits required by subsection 268(1)' in the fourteenth and fifteenth lines and substituting `statutory accident benefits referred to in subsection 268(1)."'

Mr Tilson: Mr Chairman, I assume we're going to have some explanation as to why this amendment is being proposed.

Mr Owens: Absolutely. Just a very brief comment that this is a minor wording change, again to bring the current legislation into line with the new wording under our proposed bill.

Mr Tilson: I have expressed this concern before and it's been suggested that I have been out of order, but I think this concern that I have applies to this particular section more than any other objection that I've had, and that is the issue of the regulations.

Throughout all the various public hearings that this committee conducted in Toronto and outside of Toronto, we had before us a package of regulations which dealt with what is being suggested in section 6. Considerable time was spent by many of the delegations reading those regulations. Whether it be the medical profession, whether it be the legal profession, whether it be the various insurance companies, insurance brokers, people in the insurance industry spent a great deal of time reading those regulations, and all of them, as you may recall, every last one of those delegations expressed the concern that they didn't understand them. They didn't understand the meanings.

They expressed concerns that there would be possibly litigation, trying to determine what sections meant, that the amount of applications that would be made towards the Ontario Insurance Commission would be expanded to something that it has never contemplated and that unbelievable amounts of time would be spent in litigation. In fact, when I say "litigation," litigation before the Ontario Insurance Commission, and possibly before the courts, but I suspect they were suggesting before the Ontario Insurance Commission.

In fact, they were suggesting that whenever anyone had a motor vehicle accident, there would be debates as to whether something was included in the benefit package or whether it was outside the benefit package.

That concern led to another issue and that led to the issue as to who was going to represent the innocent accident victim, who was going to represent before the Ontario Insurance Commission those people who were involved in motor vehicle accidents. The lawyers wouldn't be involved because, simply, they couldn't afford it. In the tort system, as you know, the innocent accident victim would be compensated in costs. Before the Ontario Insurance Commission, the innocent accident victim, unless there are amendments to this legislation or unless Professor Arthurs makes some recommendation, would not be compensated in costs.

Generally speaking, there is the fear expressed throughout, particularly by individuals who have been involved in motor vehicle accidents, that they would be unrepresented before the Ontario Insurance Commission and that they would simply be clobbered by the insurance industry in determining whether or not people fell under the benefit package.

To be fair to Mr Owens and his minister, they did respond to that and they have commissioned Mr Arthurs to make a report or a presentation with respect to some form of advocacy system. I don't know what that means. I don't know what that's going to cost, nor does he, nor does the minister at this stage, which is why we're getting into that. That was an announcement that was made by the minister in the House some days ago or some weeks ago; I can't recall whether it was last week.

Secondly, the minister announced that there would be new regulations -- the draft regulations that we spent so much time on in these hearings, because the whole premise of Bill 164 is built on the benefit package, the statutory benefits that one receives. That's the whole premise. You can't properly debate the bill unless you have some idea as to what the regulations are.

I fully understand the principle in the past that many pieces of legislation are passed without regulations, but in this of all the pieces of legislation, there's no way in a million years that one can properly comprehend what one is doing, namely, the government is doing, without having some idea as to what the regulation package is going to be. Hence, again to give the government credit, it did put a draft regulation package forward and that was reviewed by members of this committee --


Mr Tilson: Packages? Whatever. There were packages of regulations and they were fairly extensive. In fact, that was the criticism, that it was far more critical than we had ever seen.

In fact, to my knowledge, there was never any input by any of the interest groups, whether it's the lawyers, whether it's the medical profession, whether it's the insurance industry, with respect to those regulations. In American jurisdictions, before pieces of legislation are passed, one of the things that the Americans do is seek out the comments of the interest groups, the parties they involve, the stakeholders, the partnerships, whatever these new funny words are that you people have devised, and they have then reviewed draft regulations. That has not been done.

Obviously, you discovered -- I don't mean you, Mr Chairman, but the government has discovered -- that there was an error made in that package of regulations, which really brought some sort of futility to the entire committee process. The minister announced a second issue, a second matter of reviewing this bill, and he proposed that that would be some weeks -- I don't know what "some weeks" means; that could mean 52 weeks; gosh knows what it could mean, but he said "some weeks" -- before that new regulation package would be made available.

I believe that before considering this section, section 6, and many of the other sections that deal with the regulation package, an opportunity should be given for members of this committee, members of the interest groups, the legal profession, the medical profession, the insurance industry, the various other individuals who were involved, who took an interest to present submissions to this committee, to review that new regulation package that is going to be presented, according to the minister, in some weeks' time, which presumably will be the early part of June, I would hope, if I'm reading what the words "some weeks" mean.


I have grave concerns of voting and debating on anything to do with statutory accident benefits because it all may be futile. I know this is a definition, this is a technical section, and you could say, "What in the world are you spending all this time on a technical section?" The reason why I am doing this is that this is part of the overall process referring to regulations.

I am concerned that on the one front, Mr Arthurs is going to go out and then report back -- I don't know when he'll do that; maybe it's been announced, but I don't recall when it was announced -- as to the advocacy process, whether that means that the legal profession is going to get involved in the advocacy process, the issue of costs, how these people are going to be trained, because the lawyers certainly aren't going to get involved. No one's going to hire them. So you're going to have to in fact train and pay for --


Mr Tilson: I'm talking about the innocent accident victim. I'm talking about who's going to represent the innocent accident victim.

Mr Owens: It's got nothing to do with the clause.

Mr Tilson: With due respect, it certainly does.

Mr Owens: It absolutely does not.

Mr Tilson: We're talking about statutory accident benefits, and that has everything to do with the clause.

Mr Owens: Sorry, your Chair has been quite generous with you.

Mr Tilson: I'm sorry? Do you want me to carry on a debate --

The Vice-Chair: Mr Owens, I would hope that we could keep this in some kind of order. Mr Tilson, I know, is shortly going to wrap up his comments and we can move on.

Mr Robert V. Callahan (Brampton South): On a point of order, Mr Chair: It's the first time in all the years I've been on a committee where the parliamentary assistant has instructed the Chair on what he should do in terms of dealing with a member and his or her rights to question, and I object to that.

The Vice-Chair: My instructions come from the standing orders; they do not come from members of the committee unless on a motion or a vote of the committee. Other than that, I am in the hands of the Legislature. I would like to ask Mr Tilson to continue and to wrap up his remarks.

Mr Tilson: Yes, Mr Chairman. We are now going to get into more and more sections dealing with statutory accident benefits, because whether you like it or not, this entire bill is based on the benefit system. That's what no-fault's all about: the benefit package. That's what it's all about. It seems to me to be rather silly to proceed with a bill when we know those regulations are going to be changed. The minister's told us that they're going to be changed -- I don't know whether substantially; he hasn't said, but they're going to be changed. So everything that we have done to date may be for naught, because we may have a completely different package that's going to be presented to this committee and to this House and to the insurance industry.

The insurance industry needs to know, for example, the funding of it, because if the package of benefits changes under those regulations, the insurance industry will have to change to adapt to those regulations.

The Vice-Chair: With all due respect, Mr Tilson, the mandate of this committee is not the regulations; the mandate of this committee is to consider clause-by-clause of this bill, and on two occasions, this occasion now and last day, you've made those points about the regulations.

Mr Tilson: I'm going to make them every time, Mr Chairman. I'm going to put you on notice for that.

The Vice-Chair: There are two points I would like to make with reference to the standing orders.

The first point is that we have been instructed to do clause-by-clause of the bill, which means that while it is important that you make your points, they are, within the confines of the orders, not strictly pertinent to this bill as we are dealing with it and therefore are not in order, according to the standing orders.

The second point that I would like to make is, also pertinent to the standing orders, the clause on repetition. You have made these points, they have been out of order now twice, and repetition of out-of-order comments cannot be accepted by the Chair because they hold up the process of what is in order, and what is in order is the clause-by-clause discussion. While the regulations are important, and you've made your point, I would rule, as the Chair, that unless you have some specific relevant comment dealing with section 6 as it is written here and not referencing the regulations, your comments are not in order.

Mr Tilson: Mr Chairman, with due respect, I challenge your ruling. You're precluding me from debating Bill 6. My comments are most relevant with respect to the regulations. I have every right in this world to talk on the regulations. You're wrong, with due respect, Mr Chairman, and I challenge your ruling.

Mr Callahan: Could I speak to the --

The Vice-Chair: There's no debate. It goes directly to a motion of the committee. The Chair has been challenged and it goes directly to a vote. I would ask if the committee supports Mr Tilson's view or the ruling of the Chair.

Interjection: How do you want to word that?

Mr Callahan: I think the vote is, do you uphold the Chair?

The Vice-Chair: Do you uphold the Chair? Does the committee uphold the Chair? All in favour of upholding the Chair?

Mr Callahan: A recorded vote.

Clerk of the Committee (Ms Tonia Grannum): All those in favour?


Mathyssen, North, Owens, Sutherland, Winninger.

Clerk of the Committee: All those opposed?

Mr Callahan: I'm going to be perfectly honest. I don't think I'm permitted to vote. I'm not subbed in.

Clerk of the Committee: No, you're not.

Mr Callahan: As much as I would like to be on the record.


Kwinter, Tilson.

Mr Tilson: Mr Chairman, I believe there's a process on which I can appeal that and I would like to proceed with the appeal of that ruling to the Speaker.

Interjection: Does that mean that we're adjourned now until that happens?

The Vice-Chair: We will take a five-minute recess.

The committee recessed at 1058 and resumed at 1107.

The Vice-Chair: I'd like to reconvene the committee and to indicate that having checked with the clerks, the vote of the committee is final and there is no process of appeal. So I would like to continue with the discussion on section 6 of the bill.

Does anybody have any further comments on section 6 of the bill? Seeing none, should section 6 of the bill carry? Carried.

Section 7, Mr Harnick.

Mr Harnick: Can I see a copy of subsection 48(6) of the act and a copy of subsection 48(7) so that we can know what we're appealing? Thank you.

Mr David Winninger (London South): There is a government amendment to subsection 7(1), subsection 48(6) of the act.

I would like to move that subsection 7(1) of the bill be struck out.

The Vice-Chair: Mr Winninger moves that subsection 7(1) of the bill be struck out. Comments?

Mr Harnick: I don't understand where Mr Winninger is nor do I know where his amendment is. If you can enlighten me so that I can try and keep up with what you're doing.

Mr Winninger: I'll defer to the parliamentary assistant.

Mr Owens: I thank my able friend the member for London South for moving that amendment. This issue is with respect to the mutual insurance corporations which operate under the fire mutuals guarantee fund, and they will be exempted from the $3-million capital requirement. The reasoning behind that is that there are currently safeguards in operation with respect to the fire mutuals and it was never foreseen that they would be covered by capital requirements. I have a further explanation from Mr Halpert from the Ontario Insurance Commission on that.

Mr Harnick: Maybe if I could ask a question first, I might understand what you're doing and then I'll understand what the gentleman's going to tell us. Are you now saying, according to your amendment of subsection 7(1) of the bill, that we are not going to be repealing 48(6)? Is that what we're now saying? Okay, now you can enlighten me.

Mr Halpert: It was never the intention to include the fire mutuals, to have them be required to meet the capital requirements of ordinary insurance companies. Fire mutuals are protected by the fire mutuals guarantee fund. They also have the fire mutuals reinsurance plan, and generally speaking, they insure fairly small amounts relative to their surpluses. So making them have $3 million in surplus requirements would essentially put a fair number of them out of business. They've been around for over 100 years in most cases and they serve a very useful function and they're among the most stable insurers in Ontario.

Mr Harnick: How many of those companies are writing auto insurance?

Mr Halpert: I believe about 31 of them.

Mr Harnick: What percentage of their business would be auto insurance-related?

Mr Halpert: Usually very small.

Mr Harnick: In terms of their reserve capacity, does this affect the necessity to reserve or their ability to reserve in any way?

Mr Halpert: No. They were never intended to be covered by the $3-million capital requirement. It was in fact a drafting error.

Mr Harnick: I'd like to see this, because I can't really understand it without it, but it talks about operating on the plan known as Lloyds. Do you have a copy of the plan known as Lloyds?

Mr Halpert: No, I don't, certainly not with me.

Mr Harnick: Could we maybe get a copy of that?

Mr Owens: For which purpose?

Mr Harnick: If I'm going to vote on doing something to subsection 48(6) or not doing something to 48(6) -- I'm reading 48(6) and it refers to "or to an underwriter or syndicate of underwriters operating on the plan known as Lloyds." I'm sure that members of the government know what a plan known as Lloyds says, but I don't. I know they all have a copy of that plan known as Lloyds, but again, I don't. I wonder if you could furnish that to me.

Mr Halpert: Well, the intention of the motion was to leave subsection 6 as it was, that there would be in effect no change.

Mr Harnick: My difficulty is you're now asking me to vote and confirm that I either want to leave it as it is or I don't want to leave it as it is. I either have to decide whether I'm going to vote for this amendment to the amendment or whether I don't want to vote for the amendment to the amendment because I may want to dump subsection 48(6), as you originally stated, but I can't make that decision until I look at the Lloyds plan.

Mr Winninger: Point of order, Mr Chair: Perhaps we could then defer approval of section 7 and move on to section 8 while Mr Harnick phones Lloyds of London and inquires about their plan.

Mr Harnick: Well, I'm not going to write Lloyds of London, because obviously this is referred to in the legislation. I would hope that if it's referred to in the legislation, someone within the government can provide me with a copy of that plan. Otherwise, we could be waiting months until Lloyds acknowledges my letter and sends it to me.

Mr Winninger: Phone them.

Mr Harnick: I don't want to delay this any longer than I have to. I know Mr Winninger doesn't like this bill and he'd like to delay it as long as he can, but that's not my intention here.

Mr Winninger: Mr Chair, I'm anxious to move forward with this now.

Mr Owens: Lloyds is simply an insurer.

Mr Harnick: Oh, I know that, but Lloyds is very much of a cooperative type of affair, and when the document refers to "On the plan known as Lloyds" --

Mr Owens: To satisfy the point raised by Mr Winninger and to satisfy the curiosity of Mr Harnick, perhaps we can stand this clause down until this afternoon and look to having an explanation of the functionality of the Lloyds plan as it applies to this amendment.

Mr Harnick: Thank you.

The Vice-Chair: That's fine. Mr Kwinter's going to do that for us now.

Mr Monte Kwinter (Wilson Heights): Mr Chairman, just so that I have it clear in my mind, the motion by Mr Winninger is in effect to say that the proposed amendment of subsection 7(1), that subsection 48(6) of the act is repealed, shall be deleted, the effect being that this subsection is not going to be repealed. Is that correct?

The Vice-Chair: Yes, it exists in the act and will continue to exist in the act. That is correct. But Mr Harnick has raised the question about what the plan known as Lloyds means and what that would reflect. If I understand him correctly, if this section is up for discussion and debate, he would like to know whether or not he wants to vote in favour of repealing it or leaving it the way it is. I think that's a perfectly valid request. Since we've already said we will defer it until this afternoon, then we should move to section 8.

Comments, debate, section 8 of the bill.

Mr Harnick: I'm just quickly reading through this and it strikes me that section 61 is being significantly expanded. I wonder if we can have the parliamentary assistant or the legal representative explain why we're doing this.

Mr Owens: This was an amendment requested by the insurance commission, so I'll pass the question over to Mr Halpert.

Mr Halpert: Yes, this does indeed expand the powers of the commission. Generally speaking, the federal government, for example companies incorporated federally and licensed by the Office of the Superintendent of Financial Institutions in Ottawa, is responsible for the solvency of federally registered insurers. Ontario-registered insurers' solvency is the responsibility of the Ontario Insurance Commission.


The expansion here deals with market conduct and the conduct of all insurers in Ontario. When there is a situation where the conduct gets to a point where the commission feels that the interests of the public are being disserved, then this expands their right to go in and seize the assets of the company.

Mr Harnick: I notice that there's a significant distinction between insurers incorporated in Ontario and insurers not incorporated in Ontario. I wonder if you can tell me a little bit about what the minimum amount of assets insurers incorporated outside of Ontario must maintain as a percentage of their business, because I notice that in subsection 8(10) it states that:

"If an order is made under subsection (8) in respect of an insurer that is not incorporated or organized under the laws of Ontario, the order extends only to those assets of the insurer that are in Ontario or that are under the control of the insurer's chief agent in Ontario."

It strikes me that an Ontario-incorporated insurer has a much greater exposure and obligation and onus than a foreign insurer if there's not some minimum requirement that the foreign insurer must maintain. Did you follow the drift of where I'm going?

Mr Halpert: I think so.

Mr Harnick: I just wonder what the answer to that question is.

Mr Halpert: Well, any insurer operating in Ontario is required to keep a certain minimum of capital and surplus in order to do business in Ontario. It really doesn't deal with the minimum amount of assets that are required. It's essentially the net of the assets over the liabilities, the capital and the surplus that's required.

Mr Harnick: You see, what concerns me here is that you're going to go in and say that because an insurer is not maintaining the levels he should be maintaining -- you're going to go in and you're going to try and enforce compliance. If the foreign insurer doesn't comply and doesn't have that amount of assets over liabilities, then there may be nothing to seize. My concern is, how are the insureds or claimants being protected?

Mr Halpert: Foreign insurers and in fact all insurers that are registered by the federal government are their responsibility with regard to solvency. What you seem to be talking about deals with solvency when the assets over the liabilities are not adequate to, for example, meet future claims. The expansion is dealing specifically with market conduct issues where, for example, an insurer refuses to pay claims arbitrarily.

Mr Harnick: I'm not sure that's exactly what it means, because if you look at subsection 8(8), it says, "If an insurer does not comply with an order or interim order directing the insurer to correct a failure or deficiency," it can "order the superintendent to take possession and control of the assets of the insurer." My concern is, what control is there that there are going to be assets available?

Mr Halpert: I'm not sure I can answer that. We're always monitoring companies -- all the companies that operate in Ontario are being regularly monitored. We look at deteriorating conditions and we act before that situation arises. The capital and surplus is in fact the cushion between assets and liabilities, and that's what we concentrate on.

Mr Harnick: You see, I know that companies such as Pitts, Northumberland, Advocate General, all went out of business. I don't know if they officially declared bankruptcy, but I know they did not have assets to cover the liabilities. They were in fact, I believe, Ontario-incorporated companies which had offices here and assets here. Even with all the monitoring in the world, it didn't help. In terms of a foreign insurer, if it was impossible to regulate an Ontario insurer which had assets here that were available to the superintendent or commissioner, whatever it was of the day, how can you deal with the foreign insurers?

Mr Halpert: The foreign insurers, as I was mentioning, are basically, with regard to solvency, a responsibility of the federal government. We are responsible for their market conduct so that if they're doing something that is reprehensible to the public, we can act. This section of the bill would allow us to act.

Mr Harnick: So are you saying that your interest here is more with the day-to-day operation of the companies as opposed to their solvency?

Mr Halpert: If you mean by "day-to-day operations of the company" how they deal with their clients --

Mr Harnick: Yes.

Mr Halpert: -- then the answer is yes.

Mr Harnick: So this section is really not directed to anything dealing with solvency or financial ability to carry on?

Mr Halpert: Nothing that has changed in the bill makes a change in the solvency issue.

Mr Harnick: Okay.

Mr Kwinter: On the same section, I have some concerns about due process. If you take a look at subsection (6) of section 8, section 61 of the act, it says: "If the commissioner is of the opinion that the interests of the public may be adversely affected by a delay in making an order referred to in subsection (4), the commissioner may make an interim order before the time for requesting a hearing has expired and, if a hearing is requested, before the hearing has been completed," which I have no problem with.

We get to the next section; it talks about what happens unless the commissioner revokes an interim order.

Then we get to subsection (8). It says: "If an insurer does not comply with an order or interim order directing the insurer to correct a failure or deficiency set out in the report of the superintendent within the time period specified in the order, the commissioner may, following a hearing, order the superintendent to take possession and control of the assets of the insurer and the superintendent shall deliver a copy of the order made under this subsection to an officer of the insurer."

Where I have the problem is in the next section. There's a provision under subsection (9) that says: "If the commissioner is of the opinion that the interests of the public may be adversely affected by a delay in making an order referred to in subsection (8), the commissioner may make the order without holding any hearing."

It would seem to me that, under due process, there should be the same provision as is provided for under the interim order: that if, in the opinion of the commissioner and/or superintendent, the public may be adversely affected, then there should be a provision that he could make the order prior to the completion of the hearing or even before the hearing, but not eliminating the ability to have a hearing. It would seem to me that that would be only a matter of, as I say, due process.

In every other provision there is an opportunity for the superintendent or the commissioner to protect the interests of the public by making the order during or before the hearing, whereas in this particular section there's no provision for a hearing at all. It would seem to me that there is a provision for the hearing in subsection (8), but then it's taken away without any recourse in the next one by just saying, if in the opinion of the commissioner the interests of the public may be adversely affected, the commissioner may make the order without holding any hearing.

I feel that may be challengeable in the courts, and I think that in order to provide fairness and equity, the same provision should be applied to that particular order as it is to the interim order.

Mr Halpert: Could I confer with my colleagues for a moment?

My feeling, after conferring with my colleagues here, is that we would not be uncomfortable with such an amendment that says something like "before holding any hearing" or the like.

Mr Owens: Do you need time to draft this?

Mr Doug Beecroft: Five minutes.

Mr Owens: Five minutes, that's fine.

The Vice-Chair: We'll take a five-minute recess.

The committee recessed at 1132 and resumed at 1142.

The Vice-Chair: We are about to deal with the second Kwinter amendment. Mr Kwinter, if you could read your amendment into the record, please.

Mr Kwinter: I move that subsection 61(9) of the Insurance Act, as set out in section 8 of the bill, be struck out and the following substituted:

"Order without hearing

"(9) If the commissioner is of the opinion that the interests of the public may be adversely affected by a delay in making an order referred to in subsection (8), the commissioner may, without holding a hearing, make an interim order requiring the superintendent to take possession and control of the assets of the insurer pending the completion of the hearing required by subsection (8)."

The Vice-Chair: Thank you. Discussion?

Mr Owens: I just want to thank the member for his input. I believe that his amendment has addressed his concern with respect to due process but has also kept our intent with respect to consumer protection intact, and I again thank the member for his input.

Mr Harnick: One section that strikes me as perhaps being a difficulty for an insurer in this situation is subsection (3), where "The insurer may, within fifteen days after the notice is given, request the commissioner in writing to hold a hearing before taking any action described in the notice."

It strikes me as being a short period of time, and if you miss the 15 days, it may present some difficulties. With all of the opportunities to have an interim order in force anyway, can you not make that a longer period?

The Vice-Chair: Mr Owens?

Mr Owens: To Art Halpert.

Mr Halpert: This is just a notice provision. If you're an insurer and your assets are seized, you would, I think, want to take action almost immediately.

Mr Harnick: Well, yes, that may be so, but if the company is in such disarray that they miss that 15-day opportunity for a hearing, it could be a pretty short period of time. There's an interim order in force to protect the public anyway, but if you miss that 15-day period, does it mean you've given up your right for a hearing?

Mr Halpert: Yes.

Mr Harnick: And is there any danger in making that 30 days? Is the public not protected --

Mr Owens: I'm trying to understand why you feel that the 15 days is onerous. In terms of carrying your theory forward with respect to the company being in such a position of disarray, I'm not quite sure how the 30-day period would in fact help bring that company's affairs into a higher level of organization.

As Mr Halpert has indicated, I think that if a company's assets are in danger of being seized, there is some motivation in order to respond within the time period. It's our view that 15 days is certainly an adequate period of time for a company to respond to what is a fairly serious matter of process.

Mr Harnick: It just seems to me that short limitation periods often present difficulties, and if there's the opportunity for the interim order to be made and to remain in force anyway, why confine an insurer to a 15-day limitation period that it may miss, for whatever reason?

Mr Owens: I'm at the disposal of Mr Halpert for further clarification. Again, in terms of the time period, 15 days is a substantive period of time. We're talking about three working weeks of time.

Mr Harnick: No, it's not three working weeks. Three working weeks is still 21 days. It doesn't indicate that the time period stops running on weekends and holidays.

Mr Owens: The issue is clearly that you have senior officers of the corporation who have a responsibility with respect to their policyholders, and we don't view the period as being onerous. I'm not quite clear on why the 30-day period would be necessary.

Mr Harnick: Let me pose this scenario to you: What if the company is about to appoint a receiver and the officers of the company become functus because the receiver is coming in to take over the company, but you're in that interim period when officers of a company really don't want to make a decision because the receiver is about to be there, and then ultimately somebody has to make the decision to ask for a hearing?

All I'm saying is that the 15-day period is a short limitation period that can be extended because subsections (6) and (7) protect the public in the event of the extension. Maybe you can change it to 30 days or say that there's some opportunity to ask that leave be given to extend that time.

Mr Owens: Mr Halpert.

Mr Halpert: I don't think there's any perfect time period. If they're going to take action, the likelihood is they're going to take action immediately. The fact that you raise it from 15 days to 30 days is not likely to help in this situation, and what is 30 days compared to 45 days or 60 days? I'm just not sure there's a perfect number. Fifteen days seemed to be adequate for most people to react when their assets are seized, because they can't do anything, they can't pay out any claims, they can't operate, really.


Mr Harnick: Except that the company may not be in a position, because of who might or might not be running the company when this situation occurs, which is a very serious situation for a company to be in -- there may not be someone who can readily make that decision because of the predicament that the company finds itself in. All I'm saying is that you can save 15 days but you can also provide that leave be granted to extend that time. You can maintain your 15 days; just say that leave can be granted to extend that time, on application.

Mr Halpert: All I can do is repeat my remarks. I'm just not sure that 30 days is any better than 15 days. In fact, as the period lengthens, the likelihood is that it would become less likely that the people in charge would have the ability to make that; the longer you go, they tend to, shall we say, disappear.

Mr Owens: I think the concern with respect to consumer protection, and Mr Halpert hits the nail on the head, is that as we move further down the line in terms of the number of days -- using your scenario, Mr Harnick, I can appreciate your concern, but if the company is going to be at the level of disarray that you characterize at 15 days, my sense is that at the end of 30 days or whatever further time period may be prescribed, their situation is not going to be improved.

In the event of the appointment of a receiver, and Mr Halpert can correct me if I'm wrong, in terms of protecting the entity, one of the first jobs of the receiver, in my view, would certainly be to respond to an action of this nature in order to ensure that the assets are available to be disposed of or to be reorganized as may be required.

Mr Harnick: Let me give you this scenario: What if the application for the appointment of the receiver is received but the hearing date for the appointment of the receiver isn't for three weeks; the application is now pending; the officers of the company I don't believe have any authority once that application is pending to maybe deal with an issue such as this.

All I'm saying is that you don't have to change the number of days; just add the rider to that section that if the 15 days have expired the company may seek leave from the commissioner to request a hearing. Then if they can present evidence as to why they missed the 15 days, why they couldn't make a decision because the application to appoint the receiver was pending, then you've solved your problem. I don't think you have a consumer protection problem, because you still have an interim order that can remain in force.

Mr Elston: This is a bit of a confusing section inasmuch as we're chasing around a situation where I think practically how it's going to work is that the commission, together with the superintendent and the company officials, will probably be locked in pretty intense discussions all the way through this thing.

I think Charles is right to be concerned about a 15-day time limit in the sense that oftentimes a company in this state of affairs is pretty much awash in all kinds of other items that it's considering and a 15-day period may very well be too little. But it would not go without the notice of both the superintendent and the commissioner that the timing of the release of the report would be an influential item for their agenda. In a sense, there would be, if not cooperation, at least an understanding of how the affairs of the company would be operating.

I would not like, in that regard, therefore, to just accede to Charles's amendment, which would suggest that after 15 days had expired they could apply for the hearing, unless you put a rider on there that said "within a reasonable time," because if they took another 20 days and then said, "Gee, I think we missed something and we'll come back," then it could very well mean that the hearing wouldn't come together for a period of two months or better after the commissioner and superintendent together had felt that there was a reason for stepping in.

So while I understand the theoretical situation, I think practically it's one where the timing of the release of the report, which would start the 15 days, might very well be a managed item between the superintendent and commissioner or among the three parties. But I think in safeguarding the interests of shareholders and policyholders under a company that is having some difficulties, you might just say, "Listen, within a reasonable time after the expiration of the 15-day period, they may apply if, in the discretion of the commissioner...." That would settle it.

It's not really losing anything and I think, practically, there would be almost no situations where you would have to get to it. There would be a very exceptional circumstance, but I think you might as well put that in play, because the other option, of course, is that they take the matter before the courts and there would be a judicial review of how it was done, and again you would end up having injunctions and a whole series of other things. So you might as well make the arrangements that can be handled internally, as opposed to having to force it into a higher court where, to be quite honest, the costs are going to mount.

That's my rider. I think practically it probably will work better than it reads, but I think theoretically, if we allowed a clause that said, "If, within a reasonable time after the expiration," then you could limit any kind of extension or games-playing by people.

Mr Winninger: I can certainly understand the concerns expressed by Mr Harnick around possible contingencies. It may make the 15 days onerous. On the other hand, I think there's some comfort in having finality of time limits. So I, along Mr Elston's lines, was looking at section 10 of Bill 164, which provides for recourse to the Divisional Court. It seemed to me that if there was some injustice in imposition of the 15-day time limit, the relief might be sought by the party in Divisional Court.

Mr Elston says it's probably better to resolve these things internally, but I would submit that if that was an easy thing to do, it would probably have been done three years ago, when the legislation was amended. Mr Elston knows more about that than I do; I wasn't in government at that time. But it seems to me that section 10, which provides for the recourse of appeal to the Divisional Court, protects the interests of aggrieved parties that might find the 15-day time limit onerous and at the same time ensures that the public is protected.

As opposition members here know, who are all lawyers, sometimes council has to move under even more onerous time limits. For example, an interim injunction only lasts eight days, and unless you move within eight days to extend it, that injunction is dissolved. Sometimes with municipalities there are even shorter time limits. So it would seem to me that your recourse is to the Divisional Court if the 15 days is troublesome.

Mr Klopp: I think we all can take examples, and I feel that with the friendly amendment that Mr Elston was talking about with regard to saying "a reasonable time," I think that would probably get lawyers etc talking more like, "What is that definition?" Section 10 does allow for maybe that exceptional circumstance to be looked at in fairness to all sides. On balance, when we talk about exceptional circumstances, I'd like to think that when we have an insurance company getting into a financial bind, it is an exceptional circumstance. I'm not that versed in insurance companies, I'll admit that, but I also haven't seen a lot of them -- you know, we don't seem to have many of them in the courts having trouble with their insurance policies and premiums and the commission etc.

So in all balance, I think I can live with the idea that 15 days, for that corporation that has got itself into a bit of a bind, is far better than even having the proviso of a reasonable time frame added on. I think I can live with 15 days. They have to, in 15 days, have a notice in to the commission to say that, "We want to have time to talk." Especially, as was pointed out, with section 10 being there for some discussion in court, I can live with a little more definite time and leave it at 15 days.

Mr Harnick: I don't think Mr Winninger, with respect, is correct. I think that even if section 10 was not there, one still has the right to appeal a decision of the board or a tribunal to the Divisional Court on an issue of law. You don't have the right and you'll never get leave to appeal on the issue of missing the 15 days.

The other aspect is that, in terms --

Mr Winninger: But here you do, in section 10.

Mr Harnick: No, I don't think so. I think as well, in terms of Mr Winninger's analogy, an interim injunction lasts eight days. Granted, it does last eight days, but the person who obtains the injunction knows that. He's taken the action to obtain the interim injunction that lasts for eight days. He's taken the step, he's obtained the injunction, and he knows that the injunction lasts for eight days. Here it's someone else imposing an obligation of a 15-day period. I don't believe that section 10 is an escape clause or provides any comfort in that situation.

Mr Elston: If you miss the time period.

Mr Harnick: If you miss the time period. It's a substantive appeal. But I don't think the Divisional Court is going to say, "We're going to overturn the decision of the commissioner because you missed the time limitation."

Mr Owens: I hear what both Mr Harnick and Mr Elston are saying. I almost agree totally with what Mr Elston has indicated, that in terms of the state of affairs that a company may be in, there will be close cooperation between the commission --

Mr Elston: At least communication.

Mr Owens: Well, okay. I certainly wouldn't want to characterize it as --

Mr Elston: It may not be cooperation. There may be some adverse interests as among the various parties.

Mr Owens: Absolutely. So in terms that there would be communication at that point, I still believe that 15 days is not an onerous period. Based on the process as described, and Mr Winninger has pointed out the avenues for relief, it's the view of the government that 15 days is a wholly reasonable amount of time for this process to take place.

Mr Elston: If I might, I actually tend to agree with Mr Harnick in relation to the --


Mr Elston: No, no, not in terms of the substance of what I put before you before, but in dealing with David's points about being able to go to the Divisional Court. Unless there are some unusual circumstances, a limitation period is very hard to get around. You've got to have some very, very serious issues to deal with. I think once you miss a limitation period, the Divisional Court doesn't have very many grounds upon which to go, and that's really what we're talking about. We're talking about the 15 days.

In the arguments that will be put either on behalf of the superintendent or the commissioner or whoever might resist the application by the company -- and, again, I repeat, while there may be close communication, there may be adverse interests as among the various parties -- the commissioner and superintendent may very well say: "No, the Legislative Assembly discussed this during debate and said there would be no waiving of the 15-day period. That's it. There are not grounds. They decided that in fact 15 days was it."

I'm just saying, were adverse interests to carry over as among the three, if they can't resolve something, then you're going to find yourself in disputes which people will be looking for a manner of resolving but which may not have the outlet that David described. I think it's very difficult to avoid the limitation periods.

Mr Owens: I guess, though, Murray, that we've discussed here before that we don't base law on the worst-case scenario. I think that we would agree that in terms of the --

Mr Elston: The worst-case scenario does make law.

The Vice-Chair: Sometimes.

Mr Owens: Sometimes.

Mr Elston: Most often, in fact. Those are the court cases that ultimately come back.

The Vice-Chair: Mr Elston, I'd like to indicate that we are being called for a vote. Under the standing orders this committee must stand recessed until this afternoon.

Clerk of the Committee: After routine proceedings.

The Chair: After routine proceedings.

The committee recessed at 1205.

The committee resumed at 1555.

The Vice-Chair: I'd like to call the committee to order. This committee is in session for the afternoon of May 20.

Mr Owens: Just on two points: First, I'd like to request that we stand section 8 down. Legislative counsel is feverishly working on an amendment that we have come to an agreement on with respect to time limits. Second, Mr Elston asked a question around a proposed package of amendments. I'm to understand that they will arrive close to the end of the session here today. We will pass some out as soon as we receive the package. Can we move on to section 9?

Mr Elston: So it's not only the legislative counsel who is working feverishly. Is that what you're trying to tell us?

Mr Owens: Absolutely. You probably have seen me running out from time to time with my drafting paper.

The Vice-Chair: All that work is probably the warmest thing around in this town at this time. So we should move to section 9 of the bill.

Mr Harnick: Chairman, section 9 refers to subsection 62(1). I don't know what subsection 62(1) says. If I can make a suggestion to try and speed this process along, if you take a look at virtually every section, section 10 refers to subsection 63(1), subsection 10(1) refers to section 62 and, all the way through, virtually every section refers to the Insurance Act. We have only the bill. We have the amendments, but we don't have the copy of the act that we're amending.

Mr Winninger: You never read the act?

Mr Harnick: It's got a lot of sections in it and I can't remember them all.

Mr Tilson: You must be a lawyer.

Mr Harnick: What I would like to be able to do as we discuss these, and I think it would be helpful for every member of this committee, would be to have a copy of the Insurance Act in front of us so that we could see what it is we're amending as we go through the clause-by-clause. It may speed this up considerably. Certainly I know that the government members must all have the Insurance Act memorized, but I don't have the Insurance Act memorized and at least I'd like to know what subsection 62(1) says, because it may be that I don't have to debate it at all.

If I could request that maybe the clerk can obtain for us from the government printer a copy of the most up-to-date printing of the Insurance Act, so that we can follow through and know what it is we're amending, or if she could make copies of the sections in the Insurance Act that are referred to in each of the sections in this bill, then at least we could follow the clause-by-clause along. Is that possible, Chairman?

Mr Owens: If it will give Mr Harnick some level of comfort, I can read for him the clauses 62(1)(a) and (b).

"Power of superintendent upon taking control

"If so ordered by the Lieutenant Government in Council under section 61, the superintendent shall take possession and control of the assets of the insurer and shall thereafter conduct its business and take such steps as in his or her opinion should be taken towards its rehabilitation, and for such purposes the superintendent has all the powers of the board of directors of the insurer, and, without limiting the generality of the foregoing, the superintendent may,

"(a) exclude the directors, officers, employees and agents of the insurer from the premises, property and business of the insurer; and

"(b) carry on, manage and conduct the operations of the insurer and in the name of the insurer preserve, maintain, realize, dispose of and add to the property of the insurer, receive the incomes and revenues of the insurer and exercise all the powers of the insurer."

Now the amendment to section 9 of the bill is simply a transfer of the powers from the Lieutenant Governor to the commission. So we're in fact taking it out of the political hands and putting it into the non-partisan hands of the commission.

Mr Harnick: I appreciate that you've read it. You have a distinct advantage because you have it in front of you. I think it would be helpful for everyone on the committee to have it in front of us so that we can properly debate it, or at least then I have it in front of me and I say: "I don't have to debate this section. All we're doing is taking out the words `by the Lieutenant Governor in Council."'

Mr Tilson: We won't even have to read the sections.

Mr Harnick: We won't even have to do it.

Mr Owens: My sense is that that would never be true. But I think that if we can provide through the clerk copies of the legislation, then we do it.

Mr Klopp: I understand that -- I'd hope that you did too, but maybe not -- but every member is given the bound statutes. In 1990 it was given to us. I know I got it when I got here. Unfortunately, mine's at home but it's got the Insurance Act in there.

Mr Elston: Do you read it every night?

Mr Klopp: Yes, before I go to bed, when I'm at home of course.

Mr Harnick: The government has been so busy for three years, it probably amended the Insurance Act extensively.

Mr Klopp: No. I've double-checked just to make sure. We haven't amended the act.

Mr Winninger: He reads the Ontario Statute Citator too.

Mr Klopp: No, no. I won't go that far.

Although today we don't have it in front of us, and that's unfortunate I suppose, but we're trying to save government money and everything, I think probably the next time we're here all of us who want to have it here can go back to their office, wherever it is, and bring their copy with them. Today we'll just try to get through the best we can.

I trust the PA when he reads part of the act that it's there. I trust that it's there.

Mr Tilson: You trust me?

Mr Klopp: He can't fool us. It's written there, I'm sure, and next week you'll quickly say if he did say something wrong, Mr Tilson. So let's move on today to go through, and next week all of us as individual members can go back to our offices and pick up our statutes and bring them with us, if we so wish.

Mr Winninger: Sounds reasonable to me.

Mr Elston: Just very briefly, instead of reading the statutes, I know of course everybody will be reading the Leader of the Opposition's reply to the budget speech over the weekend.

Mr Owens: For better or for worse?

Mr Elston: It's probably much better. But anyway, just in terms of what is happening here and the trend, I understand the scheme is to be developed that in fact the Lieutenant Governor in Council or the cabinet is no longer going to be in charge of reviewing what are major events in financial arrangements.

It's a pretty serious item when a financial organization goes down. It's a very exceptional one in fact. What this means is that the government of the day, while it will not be responsible for either stepping in too late or stepping in too early, as it were, in fact is being buffered by all of this. It also means that the minister who is in charge and officially will remain responsible for the activity of the commission or otherwise will not have his or her name on the documentation.

It's been a long-standing position of mine that an awful lot of the public administration of this province, while it is being moved away from the political arena because of the "partisanship," it really does mean that the elected officials will remain -- and I mean this in the best sense of the word -- the executive council who is responsible to the Legislative Assembly is going to remain to a large extent uninformed until well after the events are going through, because there is no need to address a particular crisis to any of the political people at all.

In this case, once this bill is finished it will be transferred over to the Minister of Finance again, I presume. I'm not sure whether that's happening. I presume that's what's going to happen. Brian has until this thing is passed. But basically the Minister of Finance will find out at some stage that this company somewhere or other is being taken over but the cabinet colleagues will not find out until some time after there has been quite a local fuss about some organization going down.

I raise it only because the development of this type of public administration means that there is an ever-increasing gap between the responsibility of the political people, the political arena, the council of the province, with regard to making sure the financial affairs of the province are in good order.

I think that, in my view, while I understand the partisanship issues and the reasons not to have "politicians" involved in this, I tend to see things slipping away from us even a little further. I don't mean to make comment about the abilities of any of the people in the commission or any of the people in the superintendent's office; it's just that pretty soon there isn't going to be anybody really responsible.

I regret that type of a trend. I think that instead of our being less and less accountable for this stuff, as elected people and as members of the executive council, we ought to be -- and I'm obviously not an executive council member now but I was one -- I think rather than trying to remove ourselves from the general fray, we ought to be very accountable for whatever is happening and for the length of time it takes us to do certain things to protect the people.

Ultimately, if there is a really big fuss, the minister is going to get himself or herself into some real problems in any event. But I just want to register concern about the increasing removal, or at least drifting, of public administration further and further away from the people's assembly. That's more of a personal sort of philosophical comment on this and has nothing to do with the practical qualifications of any of the people who are involved now. But I think it's something that we should watch, because pretty soon there won't be anything that this Legislative Assembly can do to correct problems without taking major, major lengths of time to become involved in issue resolution.

I just raise that for people's interest. I'm not going to vote against the amendment. Obviously, the series of amendments are all designed to allow the commission to work on its own and free of executive council.

Mr Tilson: Mr Chairman, I did hear Mr Owens, and it is difficult to go through these, and I think that Mr Harnick's observation was well founded. Yes, each time the section could be read. The difficulty is a lot of this is written in legalese and to properly understand what is going on --

Mr Winninger: You have to be a lawyer or bring your statute along.

Mr Tilson: To properly understand what is going on, it seems to me that for the rest of the day at least we're going to be relying on what the staff say as to what these sections are.


Mr Tilson: Well, you know, it's just that I think we're remiss, particularly in the comments that Mr Elston made, that we seem to be delegating more and more to our officials. Here even in our own committee we're not even responsible enough to look at what particular section it is that's being amended.


Mr Tilson: Do you know what subsection 62(1) says?

The Vice-Chair: Mr Tilson, this is out of order. Mr Klopp.

Mr Tilson: Tell me what it says.

The Vice-Chair: Mr Tilson, if you would like to take a two-minute break and run up and get the copy of the statutes from your office, then it would be --

Mr Tilson: I guess I'm just repeating what the concern of Mr Harnick is. It seems to me that when we're going through these sections, it's very strange that all of us don't have a copy of the section before us. It's fine for Mr Klopp to sit over there and tell us what he thinks it says, but he hasn't got a copy before him and my guess is he has no idea what it says either.

The Vice-Chair: Thank you, Mr Tilson. In terms of section 9, I would ask that you confine yourself to the debate on section 9. It has been the tradition of this place, as I understand it, that the bill, as it is put forward, is all that is required in terms of being delivered to the members and that each of us has in our offices a copy of the statute --

Mr Tilson: On a point of order, Mr Chair: That's nonsense.

The Vice-Chair: -- of all the statutes of Ontario --

Mr Tilson: That's absolute nonsense, Mr Chair. There's no question that this committee --

The Vice-Chair: -- but to facilitate this afternoon and your request, it is being copied and will delivered to you. I would like to move along with section 9 in the interim.

Mr Tilson: While we're waiting then, perhaps I could have it explained again to me, in English, what subsection 62(1) says. I don't want it read to me; I heard Mr Owens. I'd like somebody to tell me.

Mr Elston: If I could take a stab at it, just to be helpful, we've had a chance to take a look at the section. It basically is just suggesting that instead of having "by the Lieutenant Governor in Council," -- because the Lieutenant Governor in Council does not make an order now under section 61, that phrase is to be removed -- the order is made now by the commissioner, and then it proceeds to talk about the order being made to allow the commissioner to go into possession of the assets of the company.


This is an easier case. I do think that in the later stages we should make sure we each have our own sections here, but I think this one is a relatively straightforward one, and perhaps at another day we can make sure that the statutes are here.

Certainly, section 10 as well is going to be relatively straightforward, because they actually revoke --

Mr Owens: Are you moving that the question be now put?

Mr Elston: No, I'm not going to get into that business. You've got ample. I'm just trying to help.

Mr Tilson: As I understand it, then, what this is doing is taking it out of the political arena and putting it in the hands of the commission. Is that what it's doing? Is that your understanding?

Mr Owens: That may be a bit of a crass characterization, but essentially what it is --

Mr Tilson: Crass but true?

Mr Owens: Crass but correct -- is simply moving it out of cabinet and into the commission, taking it out of the partisan arena that it currently may reside in. As Mr Elston points out, it's a fairly simple amendment in its explanation and its application.

Mr Elston: Simple but --

Mr Owens: Simple but far-reaching.

Mr Elston: Exactly.

Mr Owens: I'm finished with my explanation, if people are ready to vote.

The Vice-Chair: All in favour of section 9 carrying? Carried. Section 10.

Mr Owens: Just by way of a quick explanation, this provision sets out the appeal procedures where assets are seized, and in terms of the reasoning behind that, in moving it out of the purview of cabinet and into the purview of the commission, the appeal procedures are required to again address the issue of fairness and reasonableness.

Mr Tilson: What does subsection 63(1) of the act say?

Mr Owens: Subsection 63(1) of the act says:

"Despite section 62, an insurer may appeal to the Divisional Court from any order made by the Lieutenant Governor in Council under section 61 within thirty days after the delivery of a copy of the order to an officer of the insurer.

"(2) An order of the Lieutenant Governor in Council under section 61 shall take effect immediately, but where there is an appeal, a judge of the Divisional Court may grant a stay until any appeal is disposed of.

"(3) The commissioner shall certify to the Divisional Court,

"(a) the decision of the Lieutenant Governor in Council;

"(b) the reports of the superintendent to the commissioner or the Lieutenant Governor in Council;

"(c) the record of any hearing; and

"(d) all written submissions by the appellant to the superintendent, the commissioner or the Lieutenant Governor in Council.

"(4) The commissioner is entitled to be heard, by counsel or otherwise, upon the argument of an appeal under this section.

"(5) Where an appeal is taken under this section, the court may by order direct the superintendent to take such action as the court considers proper or refrain from taking any action specified in the order and the superintendent shall act accordingly.

"(6) Despite the determination of the appeal under this section, the commissioner and the Lieutenant Governor in Council have power to make any further reports and orders on new material or where there is a material change in the circumstances, and any such further order is subject to appeal under this section."

Mr Tilson: No questions.

Mr Harnick: Under subsection 63(2) it states "but where there is an appeal, a judge of the Divisional Court may grant a stay until any appeal is disposed of." Why is that taken out of section 10 of the bill?

Interjection: That's not been taken out.

Mr Harnick: Show me where it is in section 10. Subsection 63(2) is amended by striking out "an order of the Lieutenant Governor" -- okay, so that the balance of that stays. Okay.

The Vice-Chair: Are we all happy now?

Mr Tilson: We're happy, Mr Chairman.

Mr Harnick: It's amazing how simple it becomes when you have the act in front of you.

Mr Owens: Or even the amendment that we're discussing.

Mr Elston: Could I just ask -- I did do my little thing on removing the executive council member from any direct contact with this. Do you feel any discomfort with that at all? In a sense, the real reason the executive council or the Lieutenant Governor in Council was making orders was because of the issue of accountability. Is there any sense that this may be or could be problematic? If it isn't, I guess that's fine. Maybe we should have an explanation of what practically would occur if something like this were to happen.

Mr Owens: Having the highest regard for your concerns and understanding from your experience as a member of the executive council --

Mr Elston: I was in it.

Mr Owens: -- particularly in this particular portfolio, I can understand why there may be some twinges with respect to judgement and accountability. It's our feeling, however, that ultimately the accountability is still there. In terms of the political masters, or however you want to characterize the executive council, ultimately the accountability is still there, whether in statute or by the more ethereal ministerial responsibilities. I understand why you have a level of concern. In terms of undermining that responsibility, I don't believe that happens.

Mr Elston: I think ultimately, as I said in my remarks earlier, that the minister will be ultimately responsible, but there is no direct contact, there's no early contact. Basically, this will set up the regime for insurance, but it seems to me that the regime for deposit-takers like credit unions and the regime for organizations like trust companies will still be the direct link. I presume the superintendent of deposit-taking institutions is still required to go to the Lieutenant Governor in Council for all of the orders to seize assets.

This is just different. It's a new embarkation towards a different type of regulation, or at least a regulation that's one step further removed from the political process. I just wondered if you are now going to do the same with the rest of those organizations as well.

Mr Owens: You're probably aware of the industry-led credit union review that has taken place with respect to the credit union act and that there are currently legislative proposals being drafted that may or may not form part of those proposals. I can't quote you --

Mr Elston: It would seem fairly reasonable: that "may or may not."

The Vice-Chair: Maybe he will, maybe he won't.

Mr Owens: I can't quote you chapter and verse on the recommendations, what the industry has recommended, but I think from your recollection in your time as minister of this portfolio that there was want of the credit union movement to be more independent, more self-regulating in terms of its affairs. How we do that is still certainly an issue for the minister to work through.

Mr Elston: I'm now fully informed.


The Vice-Chair: Should section 10 of the bill carry? Carried.

Section 11. Mr Owens, isn't there a government amendment on this one?

Mr Owens: Absolutely.

Mr Harnick: Excuse me. My recollection is that when the insurance bureau presented its brief, it had a significant number of proposals to amend the withdrawal sections. I wonder if we can take a look at the proposals they made to see if any of them were incorporated into the withdrawal provisions that now appear in the amended version. Is that possible?

Mr Owens: Mr Harnick, we will not be able to tell whether or not the proposals form part of the amendment until I read the amendment into the record and it's put on the table.

Mr Harnick: That's fine, but I wonder if --

Mr Owens: If you would please allow me to read the amendment and then we can get into a further discussion.

Mr Harnick: Be my guest.

Mr Owens: Thank you. I move that section 11 of the bill be struck out and the following substituted:

"11. The act is further amended by adding the following section:

"Withdrawal from automobile insurance


"65.1(1) For the purpose of this section, an insurer is withdrawing from the business of automobile insurance if the insurer does anything that results or is likely to result in a significant reduction in the amount of gross premiums written by the insurer for automobile insurance in any part of Ontario, including any of the following things that have or are likely to have that result:

"1. Refusing to process applications for automobile insurance.

"2. Declining to issue, terminating or refusing to renew contracts of automobile insurance.

"3. Refusing to provide or continue coverages or endorsements in respect of contracts of automobile insurance.

"4. Taking actions that directly or indirectly result in termination of contracts between the insurer and the agents and brokers who solicit or negotiate contracts of automobile insurance on behalf of the insurer.

"5. Reducing the ability of the agents or brokers to solicit or negotiate contracts of automobile insurance on behalf of the insurer.

"6. Reducing the insurer's ability to act as a servicing carrier or ceasing to act as a servicing carrier under the plan of operation of the Facility Association.

"7. Taking actions that directly or indirectly result in the termination of any contract between the insurer and the Facility Association.

"8. Engaging in any activity or failure to act that is prescribed by the regulations.

"Withdrawal from automobile insurance

"(2) An insurer shall not withdraw from the business of automobile insurance except in accordance with this section.

"Procedure for withdrawal

"(3) An insurer that intends to withdraw from the business of automobile insurance shall file with the commissioner a notice in the form provided by the commissioner.

"Time for notice

"(4) The notice shall specify the date that the insurer intends to begin to withdraw from the business of automobile insurance and shall be filed at least 180 days before that date.

"Additional information

"(5) The commissioner may require the insurer to provide such information, material and evidence as the commissioner considers necessary in addition to the information, material and evidence required to be provided in the notice.

"Authority to withdraw

"(6) The insurer may withdraw from the business of automobile insurance on or after the date specified in the notice under subsection (4).

"Commissioner's powers

"(7) Despite subsection (6), the commissioner may,

"(a) authorize the insurer to withdraw from the business of automobile insurance before the date specified in the notice under subsection (4); or

"(b) prohibit the insurer from withdrawing from the business of automobile insurance until a date specified by the commissioner that is not later than ninety days after the date specified in the notice under subsection (4).

"Application of regulations under subsection 121(1), paragraph 16

"(8) The commissioner may order that the regulations made under paragraph 16 of subsection 121(1) do not apply to a class of contracts, coverages or endorsements specified by the commissioner to which the insurer is a party."

The Vice-Chair: Thank you, Mr Owens. Any discussion?

Mr Tilson: Mr Chairman, I was just looking for some of the comments that did come, anticipating this amendment. I do know that there was one which was concerned that the proposed amendment was too broad. I believe it was State Farm that made some comments submitting that the proposed definition was too broad. They felt that a more appropriate definition of "withdrawal" would be the actual tendering of licence to do so in the province, whereas the proposed amendment that you're speaking of is much broader.

I'd like to read very briefly what they have said. This is an undated paper. I have no idea where I got it.

Mr Klopp: Found it on the floor.

Mr Tilson: Probably found it on the floor.

"The withdrawal-from-the-market proposal in Bill 164 will be amended by the government. While the amendment is an improvement upon the current draft, it needs further revision.

"The Ontario provincial government traditionally has recognized the value of allowing for relatively easy entrance and exit from the auto insurance market in Ontario. This fosters competition and provides for consumer choice. It also allows for an investor to expect a reasonable rate of return.

"The definition of what constitutes a withdrawal from the market is overly broad. If an auto insurer, for example, decides to discontinue an endorsement on the auto policy for any reason, then the entire regulatory machinery of withdrawal is imposed upon the insurer.

"If the intent of the drafters of 164 is to provide for an orderly, systematic system of market withdrawal, then the current draft misses the mark substantially."

I'd like Mr Owens or the staff to comment on that suggestion, that perhaps the amendment that's being proposed is overly broad. State Farm has suggested that there would be an actual tendering of the licence to do business in Ontario to trigger the withdrawal-from-market provisions that you're anticipating.

Mr Owens: One could certainly never accuse State Farm of not using colourful language in its descriptions about how much it doesn't like this bill, or this provision in particular.

As I stated during the public hearings and as other groups stated during the hearings, this provision is not broad in any respect. We have done extensive consultation with the industry on this issue and in fact this is a reasonable compromise. We're talking about 180 days for the purposes of notification, a further 90 days after that, so it's clearly not intended to be the draconian measure that State Farm seems to envision and the member for Dufferin-Peel seems to concur with.

I think that, again, the intent of this section is to provide a stable marketplace for consumers of insurance. The government is not saying that an insurance company will never be able to withdraw from a market, but we want to ensure that the stability of the marketplace is protected and that certainly the consumers of automobile insurance are protected as well.

Mr Tilson: I don't think you should be so sensitive, Mr Owens. I think if anything, State Farm was congratulating you on modifying the provision that you'd really put forward in Bill 164. I do think, however, that they deserve an answer to the example that they've given whereby a company decides to discontinue an endorsement on the automobile policy. If a company decides to do that, whether it's State Farm or any insurer, then that triggers this section. That's their concern, that that may not necessarily be withdrawing from the market. They simply may be withdrawing an endorsement on a specific policy.


Ms Julia Bass: Which paragraph is it that you're referring to, Mr Tilson?

Mr Tilson: I guess what I'm getting at is that they feel that the definition is too broad and that if you look at the overall section of section 65.1, it does mean, for example, as I understand it, unless you can show me to the contrary, that if you do withdraw a specific endorsement, that's the end of it; they're deemed to be withdrawing from the market.

I don't think anyone's going to challenge what you're saying, Mr Owens. Obviously, if a company is going to get out of the business, then that's getting out of the business. That's what the intention means; that's what the section means of withdrawal from automobile insurance. In other words, you simply say, "We're not going to do automobile insurance any more."

I agree with everything that you're saying; I think State Farm does as well. They're simply giving the example that if you discontinue an endorsement, you still may remain in the auto insurance industry, but the specific company may discontinue an endorsement.

The staff may want some time to pause on that. If I'm wrong, that's fine, but they put that submission forward to the committee, and I think it's a reasonable request to hear a response from this committee.

Mr Owens: I certainly would never want to accuse you of being wrong.

Mr Tilson: Well, I never am; sometimes I'm misguided.

Mr Owens: I don't believe that the intention is that endorsements be classed as a substantial reduction in the amount of business. However, one would certainly want to be concerned about the number of consumers that may be caught out in the event that this business decision was made. I'll ask Ms Bass to provide a further response on that.

Ms Bass: I think it might help to read the eight paragraphs in connection with the wording at the top. I think those two things have to be read together. There are eight paragraphs set out in the motion, each of which would be regarded as, to some extent, alarm signals with regard to the ability or intention of the insurer to continue to offer auto insurance.

I think, read together with the wording at the beginning, the objective here was a consumer protection measure that would attempt to come up with an overall view of what constitutes an intention to withdraw from the market. I believe that this is a fairly conservative definition, reading those paragraphs together with the wording at the top.

The Vice-Chair: Mr Elston.

Mr Tilson: I haven't finished, Mr Chairman.

The Vice-Chair: Oh, sorry.

Mr Tilson: I am concerned on this point, because if I look at the opening lines of section 65.1, the reasons that are given, those eight reasons, the wording says to include "any of the following things that have or are likely to have that result." That is the very point that State Farm is saying. I hope I'm interpreting them; that's why I read what their definition was, what their concerns were. Their concerns were that these eight reasons give too broad a definition.

I must say, if the intent is to use the opening heading, which is "Withdrawal from Automobile Insurance," then it's precisely that, but you could interpret that if there was the discontinuance of an endorsement on a specific automobile insurance policy, reading any one of these eight things could be interpreted as a withdrawal from automobile insurance and hence would trigger the mechanisms that Bill 164 is intended by. So that was their very point, that those eight reasons are too broad.

Mr Owens: But again, if I can respond, in terms of the effect that the dropping of that endorsement may have, depending on the number of subscribers to that particular endorsement, in fact there may be a significant impact that would have to be studied before the allowance of that action to take place.

Again, and I think that you agree with me, we're certainly interested in consumer protection and the stability of the marketplace with respect to the insurance industry and that this provision allows for that to happen.

The Vice-Chair: Mr Harnick, you're going to attempt to be helpful on this question?

Mr Harnick: I think so.

Mr Tilson: Always.

Mr Owens: Say they dropped the TTC endorsement. Charlie wouldn't be able to get back to his riding.

Mr Harnick: I drive. I don't take the better way.

Mr Tilson: Too expensive.

Mr Harnick: Not always, though.

Mr Owens: Do you hear that, Mayor Mel Lastman? Charles Harnick does not take the subway to work.

Mr Harnick: I was on the red rocket yesterday.

Mr Tilson: What happened?

Mr Harnick: The car was broken.

What I think you have to look at, and I'd appreciate the guidance of the ministry counsel, are the statutory conditions that are set out in the Insurance Act, and it's always very helpful to have the Insurance Act in front of you, as I now have.

Mr Tilson: How come I don't have one?

The Vice-Chair: He went to get his.

Mr Harnick: If you take a look at the statutory conditions set out in section 234 of the Insurance Act and you take a look at statutory condition 12, where we deal with termination, it seems to me that the procedure there sets out what an insurer must do to terminate a contract of insurance, and it sets out that the insurer has to give the insured 15 days' notice of termination by registered mail or five days' written notice personally delivered, the insurer has to refund the excess of premium actually paid over the proportionate premium for the expired time etc, and the refund shall accompany the notice unless the premium is subject to adjustment etc.

It seems to me that this will tell you that an insurer is entitled to terminate, under certain conditions, an individual insured, which on the face of it would answer the question that State Farm has asked.

But I think if you go a little bit further, State Farm then goes on, and what if it decides --

Mr Tilson: Come on, Floyd, we're talking about you.

Mr Harnick: He must have heard us.

If State Farm decided, for whatever reason, because it wanted to cut costs, that it was going to take a thousand of its worst risks who were always delinquent in their payments or who were outstanding on any given day and it was going to send termination notices to a thousand people all on the same day, complying completely with section 12 of the statutory conditions, does that mean that it has done something that results or is likely to result in a significant reduction in the amount of gross premiums written by the insurer for automobile insurance? And any one of the things that might be construed that way are listed (1) through (8), the second one being declining to issue, terminating or refusing to renew contracts.

So what I think you have here is, you have to have some kind of reference to the fact that an insurer can terminate, pursuant to the statutory conditions set out in section 234. But at the same time, if you decide you're going to, in one day, terminate all of your bad risks, all the people who are delinquent -- and there might be several thousand if you're a big company like State Farm -- then the government can turn around and say, "What you're doing is you're withdrawing, and you can't do that." And they say: "No. All we're doing is we're terminating people who were delinquent in payments pursuant to the statutory conditions." Do you follow me?


Mr Owens: Yes.

Mr Harnick: And what you have is a significant conflict.

I think the wording of this section is not particularly helpful. It says there has to be a "significant reduction in the amount of gross premiums written by the insurer." What's a significant reduction? If you have a thousand people who haven't paid and you terminate them and they're all paying $1,000 a year in premiums -- what's a thousand times a thousand? A million dollars. That's a lot of money. Somebody may say --

Mr Elston: Didn't I just hear him say, "What's a thousand times a thousand?" Isn't that the same as saying, "What's a million dollars?" I can't imagine that someone could say that.

Mr Winninger: What's a million times a million?

Mr Harnick: I don't know. I can't think in terms of that many zeros.


Mr Harnick: I'll tell you, you guys have cornered the market in terms of thinking in that many zeros.

Mr Elston: I think we just turned a new corner in the debate.

The Vice-Chair: At this point, do I ask, does section 11 carry, or what?

Mr Harnick: I think the real dilemma is, what is a "significant reduction in the amount of gross premiums written by an insurer"?

Mr Owens: Does a tree make a noise if there's no one around when it falls over in the forest?

Mr Harnick: I've heard that.

The Vice-Chair: Let's stay on the course of this section. Mr Harnick, have you finished your questions?

Mr Harnick: Is what I said understandable?

Mr Winninger: As understandable as it usually is.

Mr Harnick: I tried to be as concise and clear as I could.

The Vice-Chair: Could I move this along a little bit? You are out of order and you are out of order. Could we move this along and could I have a response from counsel, please.

Ms Bass: I think Mr Harnick is absolutely right that this turns on the meaning of the words "significant reduction," and that was what I was trying to allude to before, perhaps unsuccessfully. I don't think anything that could be regarded as the normal course of business would have been regarded as a "significant reduction in gross premiums" for the purpose of this provision. To me, the wording is fairly clear that this is talking about something that would be out of the ordinary course of the insurance business day to day.

Mr Harnick: Could it not be expressed in terms of a percentage so that there would be clarity? In other words, if you wrote down 20% of your business in a given period of time?

Ms Bass: I think there might be some definitional problems as to exactly how you measure the amount of business carried on by a specific company. I don't think the intent is contrary to the wording we have here, but I would have to reserve on whether that is practical from a definitional point of view.

Mr Harnick: You see, the definitions that are here now are obviously going to be very much subject to litigation, I would think. If State Farm decided that it wasn't a significant reduction and the government said, "Yes it is," somehow or other, someone's going to have to decide.

It seems to me that all the insurers have to provide certain filings and certain disclosure to the government in terms of their operations. If you could determine what a percentage of their operation was from auto insurance and then if you tried to eliminate a percentage of that business beyond a certain point, then you could be deemed to be a in a withdrawal position, but it would be much more precise than what's here.

Mr Klopp: I think I can live with these words. I appreciate Mr Harnick's view and I even said something like a percentage, but then again, what is a significant amount? Most companies -- they'll have their numbers. It's quite clear that it says there are eight points the commission will look at, and I think most insurance companies can understand the words "significant reduction in the amount of gross premiums."

So I don't think I have a big problem with this. I recognize the point, but obviously we don't like to use percentages. They're going to check into that, but you can get an argument that, say, if we have that 10% is significant, then they go and write 11.4%, I'm sure their good lawyers would probably argue, "That's just a little bit over the line," and then it would probably go to litigation, which is only fair in our country.

So I think to say "significant reduction" sends a clear note to the auto insurance companies of this province that they have to look at their numbers. If we have a company that has 50,000 policies, it knows what its significant amount is, versus one like Zurich in my town that has maybe 400 policies. A significant amount to them is a different number, but it's quite clear, I think.

The common sense of it would be that they would know when they're crossing the line, that they would get a phone call from the commission to say: "Listen, we want to sit down and talk with you. You have 400 policies, and you've written off 100 today. We hear you aren't letting them reinsure with you." I would say they probably would get a phone call. They may not, but it would at least let them know they're crossing the line with the word "significant" rather than a number. So I can support this as it's written.

Mr Elston: Actually, a couple of the points I want to speak about are exactly on this item. There are some obligations where, let's say, the insurance company did not want to insure me or did not want to write the contract of insurance for me. I can appeal to the commissioner and the commissioner can then require the company to actually file the reasons it doesn't want me as a risk.

In fact, I borrowed a copy of the Insurance Act and subsection 238(1) has the provisions there that in the normal course of business the companies can file. I'm wondering, under the circumstances, if we couldn't add, for instance, under paragraph 2, which talks about "declining to issue, terminating or refusing," something like, "other than on a ground filed with the commission under subsection 238(1)," so that we are absolutely clear and precise with respect to the fact that they can do certain things. The commission is already taking notice of this.

What I think this section is designed to do is to prevent a company all of a sudden coming away from the marketplace and issuing a series of refusal notices, telling people, "You just will not be rewritten," sort of as a surprise to everybody.

But it is not beyond comprehension, for instance, to have a company from outside Metro Toronto -- having regard to the fact that Toronto is an interesting marketplace for a lot of non-Toronto companies to get involved in, I might very well, as a member of the insurance company, decide I don't want to take any new business in Toronto because there may be too large an exposure. In fact, I may be putting myself at risk in terms of solvency and other things, and I could then say, "I do not want to take on any new business in this geographic area because I have taken on too large a proportion of the risk in that market area." I could file a notice with the commissioner saying, "I do not wish to take on any more business in that area and in fact I have found myself at risk as a result of taking too much and I am going to terminate business." In fact, I could probably get the superintendent of insurance to support my requirements.

So I think what we could do is leave paragraph 2 under section 65.1 as it is but just add "other than on grounds filed under subsection 238(1) of the act." I don't think that confuses anything and I think it lets people then be consistent with the operation of the act.

I think a similar argument can probably be made under paragraph 3. I won't repeat my arguments for that, but it really does, I think, make it far more precise and it does tell the companies that as long as they're dealing up front with the commissioner and he knows, she knows, what's going on, then there isn't any real big surprise.

Maybe I could just stop there. I've got another couple of points in relation to items 4 and 5 under these paragraphs, but perhaps if you'd like to make a comment or two on those items or if you have any concerns about them, maybe we should stop there before I move on.

Mr Owens: Can we maybe have a two-minute conference?

Mr Tilson: This isn't an adjournment; it's a conference?

Mr Elston: You can only take one time-out during each period.

Mr Tilson: That's right; it's not allowed.

The Vice-Chair: We will have a 10-minute recess till 5 o'clock. While we're doing this, Mr Elston, perhaps if there are other issues as well that you might want to address and talk about --

Mr Elston: For instance, the next items are talking about the ability of agents or brokers to deal with companies. I have some information in the insurance industry that the people are terminating relationships with various organizations, and you might have some clause that would say "except under the regular course of business" or whatever. I don't want to see anybody lose associations with any insurers or otherwise, but from time to time people do change their agents or brokers of record for the company and I think you might want to consider whether or not you could put in something like "in the regular course of business."

Again, I would suspect that the commission would be advised if there were a wholesale termination of agents or brokers in dealing in the community. If we could put that in as well, I think that would mean there would be probably somewhat less requirement for formal interventions and I think people would then understand what was going on. I have a couple of other things on other subsections, but that deals with the eight point things, I think.

The Vice-Chair: We will take a recess until two minutes after 5.

The committee recessed at 1652 and resumed at 1704.

Mr Owens: Are we back in session?

The Vice-Chair: We are back in session. Yes, we are.

Mr Owens: We've spoken to legislative counsel, and I'd like to have some comments made from counsel with respect to the section and in terms of its impact on the section, if in fact amendments that have been proposed by members of the opposition are made from a technical perspective.

The Vice-Chair: Legislative counsel will need a microphone, please.

Mr Beecroft: I would simply point out that the eight items listed in subsection (1) of this motion are merely examples. The test of whether an insurer is withdrawing from the business of auto insurance is whether or not the insurer does anything that results or is likely to result in a significant reduction in the amount of gross --

Mr Klopp: Will you talk a little louder, please?

Mr Owens: Before you came up, this is in relation to some of your comments.

Mr Elston: I was distracted by the parliamentary assistant, or at least the legislative assistant to the minister responsible for auto insurance. I was chatting with him about trying to clean up some of the problems that this bill is causing. So I apologize.

Mr Owens: I appreciate your attention to our business.

Mr Beecroft: The eight items listed specifically in subsection (1) are simply examples. The key test for whether an insurer is withdrawing from the business of auto insurance is whether it does anything that results or is likely to result in a significant reduction in the amount of gross premiums written by the insurer.

Simply changing the words of paragraph 2 or changing the words of paragraph 4 doesn't do anything to change the test. So you haven't actually changed anything if you do that.

Mr Elston: If I may comment on that though, one of the tests is whether or not the paragraphs have been met, because it does say the test is met if it includes some of the following or it could include some or any. If the person says, "You have terminated a number of agents or brokers," for instance, then that is going to be a significant issue for them, and it seems to me in fact it could, because I might very well decide not to write any more insurance in a geographic area, as an insurer, and then the test would be met and there would be a significant reduction in the coverage for that particular area.

In fact, as it was the case when I was minister, the most difficult market to get coverage would be the Metropolitan Toronto area, where a number of insurers decided to withdraw. Then any substantial withdrawal from that geographic area would be seen to be terminating the practice of writing insurance. I rather think, under those circumstances, that the modification of those paragraphs is necessary.

Mr Owens: I think, from the policy perspective, that the clause is intended as a mechanism for notification.

Mr Elston: Sorry?

Mr Tilson: For what?

Mr Owens: The policy intent of the clause is to provide a method of notification that in fact the insurer intends to do as you say, to withdraw or to cease selling from a marketplace, whether it's northern Ontario or a section of Metropolitan Toronto, for whatever reasons that company may deem reasonable. In fact, it will allow, again, for the commission to track this activity. It is by no means a method to prevent that from happening. Mr Elston, your example, I think, is a good one in terms of why this kind of a clause is necessary.

Mr Elston: No, listen. I'm not talking about whether or not the clause is necessary. I'm just trying to make it a little bit more certain that as long as the insurance companies are complying with other statutory requirements in the regular course of their business, they shouldn't be penalized by it.

If you're really absolutely sure you don't want to have this clarification in there, then I guess I can't proceed with it. But I just think it makes a much more rational type of legislative amendment if you restrict it to exceptional circumstances of withdrawal. These basically -- the four areas which I have suggested -- are merely indications that the insurance company is performing its duties within the requirements of the act and within the requirements of regular course of business.


In fact, it also has in those cases been in touch at some point or other with the commission, with the exception of perhaps issues around agents and brokers, but the other ones, the communication is there, and what the sections are designed to do is prevent surprise. I mean, that's really what this is all about, and I'm just saying there can't be any surprise if the insurance company is already complying by giving notice that it's not going to be writing new contracts of insurance for several reasons that it's enumerated and brought to the commissioner's attention under subsection 238(1).

I think it's straightforward, and while I agree in general with the counsel's presentation earlier on, I think there are circumstances in which the modification of these paragraphs ought to be included to make it extremely clear.

I've put the case, and if you're all decided you don't want to do it, that's fine, and we'll have to move on. But I think it's more rational to make sure that we are precise when we're dealing with this.

Mr Beecroft: If I could just make sure I understand what Mr Elston is saying, leaving aside the precise words that are used to accomplish your objective, I take it that the policy you're suggesting is that an insurer that significantly reduces its amount of gross premiums in the ordinary course of business, using mechanisms that it would otherwise be allowed by the act to use, should not be considered to be withdrawing.

Mr Elston: Yes, that's right, because basically the commissioner already knows, and there's sort of an understanding that if you're complying and the commissioner knows you're complying under one of the other sections of the act that the activity is being carried on -- and for some valid reason, presumably. There would be a sense, in my view, that the commissioner would not allow you to withdraw from insuring or terminate a contract of insurance against someone; otherwise you wouldn't even have to file to begin with. If they get the reason that they don't want to insure me because "I just don't want to insure him because he's formerly a resident of Bruce county," then they're not going to let the guys terminate my contract anyway.

They've got to have a real reason, like (1), I never pay -- I presume that's always going to be a good reason for terminating insurance; (2) I have committed a fraud in my application, or a whole series of other sort of unhappy events that I have perpetrated on the insurer. It's in that sense that I think the commissioner is not going to let them reach the test of, whatever that word is, significant reduction in the amount of gross premiums under that circumstance, if the filing does not give them the reasons for doing it.

Now, I can say I'm not going to write any more in Metropolitan Toronto because -- and the list is going to be, (1) I'm going to become unstable, I don't have enough reserves; (2) I've already got 8% of the market and that's too much in relation to other companies' carriage, or (3) I can't get reinsurance, whatever it is. I just think it's much better. As long as the commissioner knows what's happening and has allowed the person to proceed, then I think that we could probably deal with it.

An interesting case in point was, just as I was coming into the Ministry of Financial Institutions, and I think the minister just before me -- there had been some contract problems in Metro and a company came in and accepted brand-new Metropolitan Toronto insurance, a large amount of it, and in fact put itself after a few months into a very difficult situation financially because of the exposure. Obviously, nobody would force them then to accept new contracts of insurance, because you're not going to force them to do something that extends them into an instability situation.

Mr Owens: And in fact that's not the intent of the language.

Mr Elston: In fact, the superintendent was suggesting that they remove themselves from some of the market. That was substantial, because they were a relatively large writer. In fact, they were a significant writer of insurance. But it was done under the auspices of work with the superintendent at that point. We didn't have a commissioner.

So I'm just suggesting that those are real circumstances. I think the modification has to be there, and as long as the commissioner knows and as long as the companies are operating in the regular course of business, I don't see what the problem, in fact, might be.

That's really what this legislation -- by the way, I'm not really a supporter of the withdrawal section at all, but if we're going to have it, then let's make it work in a reasonable fashion. That's all I'm proposing.

Mr Tilson: I think the point raised by State Farm is certainly a legitimate one. Counsel has indicated that the key test is where an insurer withdrawing from the business of automobile insurance -- if the insurer does anything that results or is likely to result in a significant reduction in the amount of gross premiums written by the insurer.

The difficulty is, when I look at members of the government when they were debating -- and I wasn't here at that time. Mr Elston was, of course, and experienced an interesting time with the members of the opposition --

Mr Elston: I was always so happy with the support of the Conservative caucus.

Mr Tilson: I'm certain you were. One of the difficulties we had with Bill 68, of course, was the uncertainty of the threshold test; in other words, the word "uncertainty." In other words, what did the words "serious" or "permanent" mean? Well, we may find out in August what it means after these cases are determined by the Court of Appeal.

Mr Klopp: Or in October. Or later.

Mr Tilson: Or later, yes, that's right. But now we're into another section which is talking about yet another definition. In other words, what does "significant reduction" mean? I don't know what it means. I defy anyone in this room to tell me what "significant reduction" means. To use either Mr Klopp's or Mr Harnick's words, when we start talking about percentages maybe it's 75%, maybe it's 45%. It's a problem that the insurance industry, which is trying to determine some sort of certainty in this business, is now going to be put in. The insurer does anything -- and there's no question that eight examples have been given. As Mr Elston said, it could be any one; it could be a combination. I believe the staff said the same thing.

You look at point 6, of course, "engaged in any activity or failure to act that is prescribed by the regulations." Well, that means that there could be eight more examples or there could be 16 more examples that could be created from time to time that we don't even know about yet.

That is why, to return to my opening remarks, to repeat the concern of State Farm that this is a very broad definition and that they, as I'm sure the insurance industry, as I'm sure I and anybody in this room, will have a difficult time determining what this test means.

Mr Owens misinterpreted me. I don't know whether I necessarily agree with the definition that they suggested, and the suggestion would be, to use their words, "a more sensible definition of withdrawal from the market would be the actual tendering of the licence to do business in the province." Well, that may be too narrow; I don't know. I do concur with him, however --

Mr Owens: It is extremely narrow.

Mr Tilson: Well, that's right, it may well be.

Mr Owens: It envisions a worst-case scenario. I prefer to use the examples provided by Mr Elston as a good rationale with respect to the necessity for this language.

Mr Tilson: Again you misunderstand me, as you're wont to. I am simply saying that this definition is a very, very broad definition, the simple observation. Section 8 really says it could be anything, as do the opening paragraphs. It says it "includes any." Of course, "to have" or "likely to have" mean that it could be determined that something the insurer is doing and may be doing is going to result in its possibly taking actions resulting in a withdrawal from automobile insurance.


So I guess I express a concern that I fear this is going to lead to continual queries. I don't know where you decide. I don't know who decides what "significant reduction" means. I mean, someone who has had more experience in this than I can tell me, but I would assume the commission does that. I would assume that. Can counsel tell me that?

Mr Beecroft: Ultimately, if there's a dispute about it, it would have to be resolved in the courts. The commission could say, "We think you're withdrawing."

Mr Tilson: Then they appeal to the Divisional Court under that previous section.

Mr Beecroft: Well, not under that section --

Mr Tilson: Another section.

Mr Beecroft: -- but they could challenge that ruling.

Mr Tilson: I guess that is the fear I have, that we've seen the uncertainty of a provision in Bill 68, in which I'm sure even Mr Elston would concur the words "serious or permanent" have given --

Mr Elston: The words "serious and permanent."

Mr Tilson: I'm sorry, I'm starting to think in other terms.

Mr Elston: You certainly are.

Mr Tilson: Yes, indeed. "Serious and permanent" is a very vague definition.


Mr Tilson: If I could finish, my comparison to that section in Bill 68 is the very section that we're now dealing with. There is a great deal of uncertainty. What does "significant reduction" mean? What does anything mean?

Mr Elston: Why don't we try "serious and permanent reduction"? How's that?

Mr Tilson: What does "have or are likely to have" mean? There are all kinds of words really defining definitions that we haven't even seen yet. I'd like the parliamentary assistant or some of the staff to comment on that as to how the consumer and the insurance industry will be able to rely on this section with all of this uncertainty.

Mr Owens: Just one more time for clarity, this is a notice provision that allows or, probably more accurately, compels insurance companies to notify the commission. Within 180 days is an extremely reasonable period of time.

Mr Tilson: On a point of order, Mr Chairman: We're dealing with subsection 65.1(1), which is the definition of "withdrawal from business." We're not dealing with the subsections, at least I'm not dealing with the subsections, dealing with the various notices. I'm dealing specifically as to what it means. So that when it is -- I'm sorry?

The Vice-Chair: With due respect, Mr Tilson, we're dealing with all of them.

Mr Tilson: That's fine, but he's talking about notices. That's all very fine and good. What I'm talking about, what I thought the rest of the debate was at this time on this specific section, is the concern as to what "withdrawal from automobile insurance" means. That is dealt with in subsection 65.1(1), and we're referring specifically to the key test of "significant reduction" and how no one knows what that means.

It's fine if you want to deal later with the notices, the notice provisions that are dealt with in subsection 65.1(4) and the other subsections, but I would like your comments specifically on subsection 65.1(1) to deal specifically with the key test of that definition.

Mr Owens: To begin with, I don't think that you can read the clause in isolation. In terms of the other applicable sections or examples, as Mr Beecroft has characterized the subsequent points, there has to be an ability to describe the process as a process for notification. What is significant for State Farm may in fact be catastrophic for Tilson Insurance Brokers Inc.

Mr Tilson: I'm not afraid; I'd never incorporate.

Mr Owens: What needs to happen under this section is that there needs to be an allowance for the variations on the amount of business that is written company by company. I just want to state again that this is a clause that was drafted after much consultation with the industry, and State Farm notwithstanding, there is some level of comfort around this particular provision.

The Vice-Chair: Are you finished?

Mr Owens: Just one more point. Again, in terms of the issue that Mr Elston raised, there is an ability of the commissioner to abridge the process, to deal with the kind of scenario that Mr Elston was envisioning.

Mr Tilson: Before you leave that, Mr Chairman, I thought I had the floor on the specific issue of the key test. He's moving on to something else, I think, and that may be fine.

I'd like to get back to the comment that counsel had indicated, that if it's determined that a company has made a significant reduction in the amount of gross premiums that is challenged, that would go to the insurance commission; the insurance commission makes a decision, that ultimately would end up before the courts. Now, you know perfectly well that if a --

The Vice-Chair: Is that a recess? A 10-minute recess.

Mr Tilson: Why not.

The committee recessed at 1727 and resumed at 1728.

The Vice-Chair: That was metric time out. Mr Tilson, you had the floor.

Mr Tilson: I think before you stood up, Mr Chairman, I was in the middle of a sentence.

The Vice-Chair: Midword, actually.

Mr Tilson: Well, you're all looking a lot better and I'm glad to see you back.

I am alarmed by the comments -- I don't mean them in a derogatory sense -- from the counsel when he says that--you know perfectly well that if this issue arises and there's a dispute over whether an insurance company has withdrawn or has not withdrawn from the automobile insurance, you know that issue, particularly if it goes against an insurance company, and they're going to have to go through all this stuff that you've put in this section, they're not going to stop with the Ontario Insurance Commission. You know perfectly well that because of the broad definition and, with due respect, vague definition that you've created, they're going to be off to the courts.

Mr Owens: What is this stuff that you're talking about? This is a notification provision, so they have 180 days to notify the commission.

Mr Elston: I think he's talking about the definition that sets up all of this other stuff. You see, they can withdraw from the market. This section says you can withdraw from the market if you follow the rules, and that's when the notice comes. But this says if you don't follow the rules, you're in contravention of this section, and the test for your contravention is contained in subsection (1).

I think, to be quite honest, he is actually leading the right discussion, which is the test of determining a contravention, because this section sets up a contravention. If you don't comply, then you're deemed to be in contravention of the act, ie, you're not giving notice as required under this section that you're withdrawing.

Mr Owens: Comments from ministry counsel?

Ms Julia Fisher: I think that the probable result of that would be to go to a hearing before the commissioner. The commissioner would order compliance with the act, which would be filing a notice.

Mr Elston: But that still doesn't answer his question, which is talking about the test and all this sort of stuff. Actually, to go one step further, my concerns are that you don't want to even get into that issue of whether or not there has been a contravention of the withdrawal proceedings, so you nail down specifics under each of the paragraphs. That's where my suggestions come in. But he hasn't gotten to the notice. He's not even talking about withdrawal, he's talking about a determination that a particular series of events have triggered the test, which is significant reduction in the amount of gross premiums.

He is right in proceeding on trying to understand the definition, because you don't even have to get to the notice if you don't pass any of these tests. I agree with Mr Tilson on this. I may not agree that the definition itself moves in the way he says it does, but that's another item. But I agree that you've got to determine the definition, because it triggers the contravention.

Ms Fisher: It triggers the notice provision; it triggers the requirement that you give notice, so that if there's a significant reduction in gross premiums written -- and "significant" means having meaning or consequential, important, and is the result of any of these particular actions -- then notice should be given.

Mr Elston: No, no, no, no, no. That's not what this says. This says you are withdrawing from the market of automobile insurance business if you transgress the test, significant reduction, and some of these clauses are the test for that.

Ms Fisher: It's not a transgression. The transgression is not giving notice, right?

Mr Elston: No, no, it's withdrawing without giving notice. That's correct. But the thing is, the commissioner can say, "You have breached section 65.1 if you've gone over one of the thresholds that have been designated by these various clauses." Then the world comes to a stop because under section 65, "It is the duty of the superintendent to report to the commissioner any contravention of this act by an insurer licensed thereunder, and thereupon the commissioner may, in his or her discretion, suspend or cancel or refuse to renew," or take such other steps as are required, which is to refuse to permit the withdrawal, ie, you cannot refuse to accept new business and a bunch of other things. But it doesn't require the company to give notice for withdrawal from business under 180 days or any of that if it's not its intention to withdraw from the market.

You totally, I think, have misperceived what this is about. This sets up a contravention. This actually says, "You are withdrawing from the marketplace and you are in contravention of the act for withdrawing."

Ms Fisher: No, you're only in contravention of the act if you don't give notice.

Mr Elston: That's right, but it may be that I have no intention of withdrawing and I don't want to give notice. There's no reason for me to give notice. But you will have triggered, by saying, "You're significantly reduced in your gross premiums, so you're in contravention."

Ms Fisher: But there is a reason for you to give notice in that the actions will or may well disturb the market, so you have to give notice of the fact that the market --

Mr Elston: No, no, no, no, no. That's not right.

Ms Fisher: It's a significant reduction in gross premiums.

Mr Elston: That's not what this section says. It's not what it's about. The test is, if you transgress sub 65.1(1), you are in violation of the act.

Ms Fisher: I don't think that's correct.

Mr Elston: That's what it says. Read it.

Ms Fisher: No, it says an insurer shall not withdraw except in accordance with this section. This section says an insurer that intends to withdraw from the business must file.

Mr Elston: Yes, but the test for whether you've withdrawn or not is subsection (1).

Ms Fisher: But you can't transgress a definition, can you?

Mr Elston: The definition sets up the violation of subsection (2). I'm sorry.

Ms Fisher: No, the violation is set up in subsection (2).

Mr Elston: That's what I said, and you violate subsection (2) by violating the definition, which is, I've got a significant reduction in my gross premiums.

Ms Fisher: And I didn't --

Mr Elston: I didn't want to file a notice of that.

Ms Fisher: But you have to file a notice. That's what this section is saying: You have to file a notice.

Mr Elston: I may not have any intention of doing it. I may not even be trying to get out of the business.

Mr Owens: But that's where the requirement has been placed.

Mr Elston: Listen, you don't -- I'm sorry. I give up. You take over, because they're done.

Mr Tilson: All right, I'll get mad now.

Mr Elston: If you won't comply with the act, you're in violation. Right?

Ms Fisher: Correct, yes.

Mr Elston: And you violate it by refusing to write business, and you are withdrawing from the business under sub (2) if you don't pass the test in sub (1).

Ms Fisher: No, if you don't file a notice.

Mr Tilson: Would you like me to try now, Mr Chairman?

Mr Elston: Yes, go.

The Vice-Chair: The floor's yours, Mr Tilson.

Mr Tilson: Let's look at --

Mr Elston: You're violating without even wanting to get out of the business. That's what I'm saying.

The Vice-Chair: Mr Elston, let's have Mr Tilson.

Mr Elston: I don't want to do a 180-day notice.

Ms Fisher: Well, you have to do a notice. You don't have to want to get --

Mr Elston: No, you don't, under section 238 --

The Vice-Chair: Excuse me, Mr Elston, counsel. Mr Tilson has the floor.

Mr Tilson: Subsection (2) says: "An insurer shall not withdraw from the business of automobile insurance except in accordance with this section." Well, we have to know what "withdrawing from the business" means.

Ms Fisher: That's correct, yes.

Mr Tilson: So we're going to look back at subsection (1). Hence, someone may come along -- let's say the insurance company decides, "Well, I'm not going to provide coverage in a particular area of Ontario," to use Mr Elston's example. Well, I'll tell you that someone is going to come along and say, "You're withdrawing from the business," and they're going to be in deep doodoo, trouble, because they haven't complied with this legislation.

Ms Fisher: And they will have to give notice.

Mr Tilson: Exactly.

The Vice-Chair: Exactly.

Mr Tilson: And hence it's most relevant because, you see, insurance companies could be doing something wrong and they don't even know they're doing it wrong. I'll guarantee you that if the insurance commission comes along and says, "You're doing something wrong," such as using Mr Elston's example, that thing is going to end up in the courts. For sure it's going to end up in the courts.

Why is it going to end up in the courts? It's going to end up in the courts because the definition section, subsection (1), is too broad. It's too general. We don't know what "significant reduction" means. The insurance company, for heaven's sake, won't even know because of clause 8 in subsection (1), which says "Engaging in any activity or failure to act that is prescribed by the regulations," because you people then, and let's use the minister's words, in a couple of weeks' time, could prepare a whole slew of regulations, and instead of dealing with eight things, we could be dealing with 24 things.

Ms Fisher: But the insurance companies will be aware of the regulations.

Mr Tilson: That's quite true, but I guess the problem --

Mr Elston: They may not like any of them, but they will be aware of them.

Mr Tilson: You've got it. I guess that gets back to the whole issue of what we're trying to explain to the committee, that this is a very broad section. The minister and Mr Owens and other members of the government have said: "We're trying to be more precise in our legislation. We're trying to be more precise in benefits. We didn't like going to the courts the way the tort system did and the way Bill 68 did because it was too expensive and too complicated." This guarantees a trip to the courts. This guarantees a trip to the Court of Appeal, for sure.

You mean to tell me an insurance company is going to be told that they're withdrawing from the automobile insurance business and they say they're not -- do you think that they're just going to take that lying down, when they believe they're not?

Mr Klopp: As a point of clarification, in listening to the conversation, I just want to make it very clear that, in my mind, when we're talking about a certain specific area, that is the only area we're talking about in the province; ie, if I'm getting out of the business in, I don't know, Huron county, for whatever reason, this here tells me that I have to send in a written notice and that's where I'm out of line. But that does not mean that I'm told that I cannot sell insurance in the rest of the province.

I just wanted to make that clear, because I got the impression that we're telling me, the insurance company, that I cannot sell in the rest of Ontario, and I just wanted to get that clarified, that that is not the intent of this. Am I correct on that, to help me in this discussion?

Interjection: Yes.

Mr Tilson: Mr Chairman, when you look at the first few lines of subsection (1), it says, "For the purpose of this section, an insurer is withdrawing from the business," so now the bill is going to tell us what "withdrawing from the business" means, and that's the problem. Then it goes on to tell us what "withdrawing from the business" means, and that's the grave concern that's going to guarantee the very thing that we're trying to avoid, and that is litigation: litigation before the Ontario Insurance Commission, litigation before courts. I mean, my goodness, "serious and permanent" is already off to the Court of Appeal. It might even go further. I don't know whether it will or not, but it's certainly being debated among the judicial system now in the Court of Appeal.

When you know that -- I mean, you'll guarantee that, if you put yourself in the position of an insurance company which disagrees that it's doing anything "that results or is likely to result in a significant reduction in the amount of gross premiums written by the insurer," and so on, and then you list off at least eight examples and possibly a whole slew more according to subsection 8. That is the concern that I'm putting forward, that this subsection is too general. It's too broad. It can't be defined.


I'll ask you now -- I've asked at least once -- what does "significant reduction" mean? The answer that's been given? "If you read these eight sections, it could be any one of these eight `things,"' to use the word in the bill, although clause 8 says that there could be a whole slew of other things, and we don't know what those are.

There's a great deal of uncertainty. I use State Farm because it happened to be one of the reports that I got that was concerned with the -- I'm sorry?

Mr Owens: That you happen to agree with.

Mr Tilson: No, I'm not. That's not necessarily true. I haven't said I necessarily agree with State Farm's proposed amendment. I may, believe it or not, agree with you that it may be too narrow.

Mr Klopp: Am I to understand here though -- I'll pick on my own riding so nobody can get mad -- in Huron county, my company, I want to get out of there; there's not enough action for me; Hay swamp is too close; what can I say? I give a written notice that I want to leave. There's no problem; we're not forcing anybody to stay. It might be 180 days. I can put a written notice in. I don't give any reasons, although I may be asked, and I probably would want to give reasons that I'm getting out. I have written notice; there's no problem.

What this clause is saying, though, is that Paul Klopp's company doesn't give written notice. They just go and arbitrarily start cancelling insurance premiums and all of a sudden a bunch of people start complaining. This allows the commission -- I might be using the wrong term -- to come to me, though, under the act and say: "Listen, you have to give us written reasons. It's still 180 days, though. We can't stop you from getting out of Huron county. But it's a 180 days. We just want to slow it up and make sure again."

Mr Elston: Oh, yes, they can stop you.

Mr Tilson: They sure can.

Mr Klopp: I'd like clarification on that.

Mr Elston: They can take another 90 days.

Mr Klopp: Another 90 days, but they can't stop me from getting out. That gives some protection to the insureds, people whom I'm putting out on the road without insurance, and still not stopping me from getting out. It's another 90 days, but knowing how long it takes to get into court sometimes, probably 90 days is quicker than having it go through the courts. They're still allowing me to get out of Huron county, not stopping me selling insurance in Bruce or Grey or anywhere else.

Mr Elston: No, that's not clearly the case. The commissioner might make an order that forces you to write contracts of insurance. They can force you to stay in the market for sure up to 90 days after the 180-day notice runs out, and then they could have a hearing which requires you to continue to write insurance if, in their opinion, for some reason, your decision is subjective or arbitrary or bears no relationship to your stability.

Mr Klopp: What was in the old act? Did the old act maybe force somebody at the end of the day to still sell insurance?

Mr Elston: Yes, section 238 has the test of subjectivity and arbitrariness, but those are only with respect to declining to write insurance and refusing individual contracts, more specifically, than it is a complete withdrawal.

Mr Klopp: Yet if you force people to still stay in the market, they won't take maybe as many, but they'll still stay around.

Mr Elston: That's why I use 238. Section 238 requires me now, if I'm an insurer, to advise why I'm not writing your contract of insurance or it will, under the circumstances here, where declining to issue a contract of insurance in Huron county, to use your example, is a violation of my duty to write insurance, because that's really what this thing says. If you're an insurance company in the auto business, you have an obligation to insure and that has been built in under sections 237, 238 and some others already. This test, though, says you can't get out of it except on a 180-day notice.

All I'm saying is, why do you even want to trip the definition? Mr Tilson is saying something different, saying something further on it, but I'm saying, why do you want to come close to the definition? Why don't you just exclude any notices already given under section 238 and why don't you also exclude a test which has already been met as being in the regular course of business? Because I might terminate, as an insurer, the only broker in town A because I found that my loss-cost ratios, as a result of the business that's been written there, has just put me at risk. If I terminate my one broker, then in any part of Ontario as a test means that in that particular village or town or area, county, I have significantly reduced my volume of premiums. In fact, I've probably eliminated it, because my loss-costs are such that it is dragging me down. I'm just saying, if you're doing all this stuff in the regular course of business or if you're doing it under another section of the act, why don't we just lay it out?

Mr Owens: But there's still another notification in those circumstances.

Mr Elston: No, there isn't. Well, there is under 238, but there shouldn't have to be a second notification. That's all I'm saying, because you've already protected the consumer because he/she can have a hearing under section 238 of the act. It implies a double obligation, because if I don't give you notice under 238, I'm in breach --

Mr Owens: It's a broadening of the protection.

Mr Elston: -- and then if I don't give you a notice under 65.1, I can also be in breach. I should only have to comply with one section, it seems to me, and not be suffering what is called double jeopardy. I comply with one and give you notice and then you can say, "Well, you didn't give me notice under the other."


The Vice-Chair: At this point I should say that the subcommittee has instructed us to review the subcommittee report at 5:45. We are two minutes beyond that at this point. I don't think it will take a lot of time; we could do it very quickly and then rejoin this discussion.

"The standing committee on finance and economic affairs.

"Report of the subcommittee.

"Your subcommittee met on Thursday 20 May 1993 and recommends the following:

"1. That the committee approve the 1993-94 committee budget.

"2. That the committee as in previous years invite the Minister of Finance to appear before the committee to discuss the provincial budget."

Is there any discussion with respect to this?

Mr Winninger: I was going to move that the budget in the amount of $145,548 be approved and that the Chair be authorized to present the budget to the Board of Internal Economy.

Mr Elston: Can I reserve the right to review this at the Board of Internal Economy?

The Vice-Chair: If there are no questions or comments, then I will call the question. All in favour of adoption? The motion's carried.

It's also required that I call the question, that the committee as in previous years invite the Minister of Finance to appear before the committee to discuss the provincial budget. All in favour?

Mr Tilson: Just on that point, what is the intention of the subcommittee as to when that would take place?

Mr Elston: Actually, the suggestion was the first date that might be possible would be June 3, and I think the clerk was going to take a look and see if that's possible, or June 17, which is the next possible date.

The Vice-Chair: Either in the morning or in the afternoon, whichever can be arranged with the minister.

Mr Elston: We're looking for a two-hour appearance from him.

The Vice-Chair: It's a two-hour block of time.

Mr Tilson: Thank you.

The Vice-Chair: All in favour? Carried.



The Vice-Chair: Resuming discussion on section 11 of Bill 164. Further comments?

Mr Tilson: At the risk of smart remarks from the parliamentary assistant, there have been two issues raised, one by Mr Elston and one by myself, and they are quite --

Mr Elston: You can probably buy insurance against that.

Mr Tilson: There have been two issues that have been raised in this discussion, Mr Chairman.


The Vice-Chair: Is this a point of order, Mr Klopp?

Mr Klopp: No, no. Are we back on to the subcommittee now?

The Vice-Chair: We've finished the subcommittee work.

Mr Klopp: And we're on to?

Mr Tilson: Nice of you to drop in.

The Vice-Chair: We're back on Bill 164.

Mr Tilson: Any other questions before I continue?


The Vice-Chair: Mr Tilson, will you continue.

Mr Tilson: Mr Chairman, there have been two issues that have been raised, one by Mr Elston and one by myself. I hope the parliamentary assistant understands those issues. If he doesn't, Mr Elston and I would be pleased to spend some more time on it, but if he does understand those issues -- he's the one who's put this amendment forward. To use Mr Elston's words, one is the issue of double jeopardy, that there are provisions in the legislation now that provide for this sort of thing. The second issue that has been raised, if you ignore that and continue on with this section, is the issue of uncertainty and guaranteed litigation. Perhaps the parliamentary assistant can comment on both of those issues.

Mr Owens: It's certainly not from a lack of understanding of the points that you and Mr Elston have made, nor is it a lack of understanding that any piece of legislation that any government puts forward may at some point in its history be subject to litigation. I think the point we are at now is that we disagree with respect to the application and the functionality of the clause. It's my sense, although I could be wrong about this --

Mr Tilson: No.

Mr Owens: -- that I don't suspect that either Mr Tilson or Mr Elston is prepared to give ground on this particular point.

It's certainly our view that this is a clause that is necessary. I don't think we're debating the necessity of the language, but in terms of its application it's merely a notification process to prevent dislocation in the insurance industry. The examples that keep arising from Mr Tilson and Mr Elston demonstrate the necessity for this clause to be here. Mr Tilson talked about if ABC Insurance Co decided to withdraw from the market in northern Ontario: That has the potential to significantly impact on the marketplace in that area, so I think it's reasonable that a notification requirement be in place.

Again, I have to say that this section is not without major consultation within the industry. The fact that State Farm has an opinion that is at variance with other stakeholders in the business is one that's interesting, but in terms of how this clause has been shopped around and consulted on, there has been no small level of input from the insurance industry. It is with some level of compromise that we have come to meet our concerns and the concerns of the industry approximately halfway.

I think, as I say, we're at the point of disagreement on this clause, and we stand behind the policy direction that this clause sets out. Perhaps, unless there is some need to have Mr Tilson or Mr Elston back down -- I shouldn't characterize it as backing down -- to come to an agreement with the government on this clause, I'm not sure what areas we have left to explore.

Mr Klopp: I found it very interesting. I think we've had good discussion on this part, section 65.1, because it is important to all industries. It's important to the people I have talked to.

Specifically on section 238 and Mr Elston's remarks, not from a lawyer's point of view but an average citizen -- not taking away from lawyers: I think we had good discussion; I'm glad we have some lawyers here today. But I look at section 238, as it's been explained to me, in my humble opinion, to be more that the individual has the opportunity to have his day against the insurance company that says he can't have insurance, for some crazy reason like he didn't pay it, whereas section 65 is more global, like where a company says, "We're just going to cancel the whole thing in Huron county." I picked Huron county because that's my riding.

So I think it addresses two things: Section 238 addresses the individual having his day to argue, and section 65 is more for the global situation where a company doesn't give notice and allows some uncertainty out there.

That's where I'm coming from on that, if it helps at all. Therefore, I think I can support this section after this lengthy and good debate.

Mr Elston: Bearing in mind what was said by the parliamentary assistant, I will go away and draft the amendments for each of the items I spoke about, the paragraphs under 65.1(1), and be prepared to present them the next sitting day for each of those paragraphs.

If you want to have a vote on the preliminary paragraph under 65.1, I have some comments in relation to 65.1(2) and following. I don't want to deal with the entire sections, but if you want to start voting now on the first part of subsection (1), that's fine. I just want to give you notice that I'm going to go through that clause by clause to vote.

Mr Owens: In the interest of wanting to keep the section whole, what I would propose to you is that we stand the section down and you come back with your work, so that we are looking at an issue in totality.

The Vice-Chair: Just as a clarification, the clerk was whispering in my ear, while you were saying that, that it was the only option we had to standing it down. If we hadn't stood it down, we could not deal with it in the way you had suggested because the standing orders wouldn't allow it, the rules wouldn't allow it. Just for a point of clarification.

Mr Owens: As we are at one minute to 6 of the clock, I want to notify the committee that as we will not be meeting for approximately two weeks, I have tabled amendments with the clerk and they are in the process of being copied and will be made --

Mr Elston: You mean just now?

The Vice-Chair: These have been tabled and the clerk has undertaken to restructure them and distribute them to the members' offices tomorrow.

Mr Elston: I'm not going to be here, but that's fine.

Mr Owens: Well, I certainly hope that, like all hardworking staffers, Robin will be here to receive those amendments.

Mr Elston: She's my House leading assistant; I'm doing this material.

I mean, this was supposed to come to us early in the day. I thought you were going to make a statement this afternoon to tell us what they were going to be about. I'm a little bit surprised that you just kind of dropped them on the table. I understand what's going on. Brian told me he was --

The Vice-Chair: In fact, if you want them now, they are here.

Mr Elston: No. Basically, the minister told me that we would receive a bit of a statement by Mr Owens to tell us what was happening. I understood earlier that when Mr Owens hadn't received it, he could hardly make it, and I sort of understood that we would get something near the end of the afternoon. I sort of thought that since we weren't hearing anything from Mr Owens, we weren't going to be hearing anything at all.

Now, to have this stuff dropped on us at the last moment, when we're heading off for a week or so -- I'm not going to be back, really, until the following Monday to do some consultations and calling on this stuff. I just find that that's a little bit of a difficulty for me. I don't have a lot of people working with me on this and I'm going to have to do the work, I'm going to have to hold the meetings. That's all. It's just a little frustrating.

Mr Owens: There's no intent to want to cause you frustration.

Mr Elston: No, maybe not. I'm not blaming you. It's just that it's going to cause us problems. That's all.

Mr Owens: If I can respond to your comments, in fact there is a continuing consultation ongoing with the industry and the package may not be complete. We wanted to get the amendments out on to the table during this period so that you would have the extra time to review the amendments.

Mr Tilson: Mr Chairman, that's a genuine concern, the fact that no one's going to be here next week. They're going to be off doing other things, and to drop them off, deliver them to our staff tomorrow, is really asking a great deal.

The Vice-Chair: The clerk has them here. She can give them to you right now.

Mr Elston: I'm not going to be doing much telephoning tonight either, in fairness, but if they're available, sure.

The Vice-Chair: Should the clerk distribute them now?

Mr Klopp: Sure.

Mr Tilson: I have no problem receiving them now. The difficulty I have is that if all of a sudden in two weeks' time we're going to start debating them -- it sounds like we've got two weeks to prepare for this thing, but we really don't, because next week we're all going to be doing other things. It is rather unfair. Again, I'm not being critical personally of Mr Owens -- I realize that he's receiving instructions from someone -- but it is giving members of the committee a great deal of difficulty.

The Vice-Chair: I thank you for your comments. I believe this committee should be adjourned until Thursday, June 3, at 10 o'clock.

The committee adjourned at 1802