Editorial | public order laws and auto insurance don’t mix

Anyone seeking clarity on how the federal government’s Emergencies Act was supposed to apply to auto insurance cancellations won’t find it in the Federal Court of Canada’s latest ruling.

The Federal Court of Canada last Tuesday found the federal government’s use of the Emergencies Act during the 2022 Freedom Convoy protest was unconstitutional. It found this on the basis of several reasons, one of which is that provincial legislation already existed to handle aspects of the crisis, and so the federal government’s imposition of the Emergencies Act was unnecessary.

The federal court’s decision references insurance a few times, but it is silent about the how the Emergencies Act applied (or should have applied) to the termination of auto insurance contracts. It essentially punted the question over to the politicians without answering it.

And so, when the next political crisis comes along requiring the suspension of Canadians’ Charter rights, it remains uncertain how cutting off people’s legal requirement to carry auto insurance may be executed constitutionally.

As the federal court noted, paragraph 3 (a) of the federal Emergencies Act reads as follows:

“For the purposes of this act, a national emergency is an urgent and critical situation of a temporary nature that: (a) seriously endangers the lives, health or safety of Canadians and is of such proportions or nature as to exceed the capacity or authority of a province to deal with it…and that cannot be effectively dealt with under any other law of Canada.”

The federal government passed the act when protestors from all over Canada camped in Ottawa, and threatened not to leave until the government rescinded its COVID vaccination requirements. The protests then took to closing the bridges between the Canadian and U.S. border, thereby halting trade between the two countries.

The federal government made it part of the act to require insurers to terminate people’s auto insurance if the insureds were identified as being involved in the illegal protests. At the time it happened, insurers and brokers were scratching their collective heads, wondering what purpose this would serve.

For example, do you want to rescind the vehicle insurance of protesting truckers, thereby making it illegal for them to leave, which is what police wanted? And did the Emergencies Act trump all provincial laws that have strict requirements for how to cancel insurance – including lengthy notice periods?

The federal court decision cites the federal government’s reasons for wanting the federal Emergencies Act to apply to insurance.

“Before the new measures, in respect of insurance, provinces would only be able to cancel or suspend policies for vehicles registered in that province. Protestors from different provinces would not be subject to, for example, the Government of Ontario’s powers under its declaration of a state of emergency to cancel licenses of vehicles participating in blockades or prohibited assemblies.  The emergency measures now require insurance companies to cancel or suspend the insurance of any vehicle or person while that person or vehicle is taking part in a prohibited assembly as defined under the new Emergency Measures Regulations.”

However, Alberta’s government opposed the need for the federal government’s intervention, saying in the federal court:

“One problem, according to the Section 58 Explanation [justifying the use of the federal Emergencies Act], was that, outside of Ontario, the police could not compel insurance companies to cancel or suspend the insurance of designated vehicles or persons.

The applicants [Freedom Convoy protestors] and Alberta submit that the provinces could have obtained this power by using their respective emergency legislation, e.g. Alberta’s Emergency Management Act.

The fact that provinces did not exercise those powers should not mean that they were not available and cannot justify invoking the [Emergencies Act], they argue. Provincial decisions not to use authorities within their jurisdictions is not incapacity, Alberta submits.

Federal disagreement with provincial decisions not to exercise particular powers is not a sufficient basis to conclude that the situation exceeded the capacity or authority of the provinces or could not be effectively dealt with under existing law.”

Related: No one’s auto insurance was suspended under the Emergencies Act: Inquiry Report

The federal court ultimately sided with the Freedom Convoy protestors and the Alberta government on this particular point, ultimately finding that:

“While I agree that the evidence supports the conclusion that the situation was critical and required an urgent resolution by governments the evidence, in my view, does not support the conclusion that it could not have been effectively dealt with under other laws of Canada, as it was in Alberta, or that it exceeded the capacity or authority of a province to deal with it. That was demonstrated not to be the case in Quebec and other provinces and territories including Ontario, except in Ottawa.”

But then this ruling begs the question: How do the provincial variants of the federal government’s Emergencies Act apply to the unilateral cancelling of auto insurance contracts? What happens when provincial emergencies are declared and are similarly vague about the revoking of insurance certificates?

Ultimately, this matter did not come to a head in the Freedom Convoy context, because police deemed the cancellation of auto insurance to be unhelpful.

As Public Order Emergency Commissioner Paul S. Rouleau commented briefly in a 2,000-page report on the use of the Emergencies Act, police chose not to apply federal Emergencies Act measures to suspend the auto insurance policies of any Freedom Convoy protest participants last year.

“The duty to cease dealings [with clients involved in the Freedom Convoy protests] under the [Emergencies Act] was not limited to banks and credit unions. It applied to a wide range of financial institutions, including insurance companies with respect to automobile insurance.

“However, those provisions were not ultimately applied, insofar as the RCMP did not distribute its lists of designated persons to insurance companies. Law enforcement officials were concerned that suspending insurance policies might make it difficult for protesters to leave, since they would not be able to drive their uninsured vehicles.

“In the circumstances, the RCMP considered that this would do more harm than good.”

However, just because the idea wasn’t helpful two years ago doesn’t mean this may never come up again.

It would therefore be wise for the P&C insurance industry to settle this issue of how provincial public order measures may apply to insurance contracts, in case this punitive idea might ever give rise again.

Feature image courtesy of iStock.com/PaulMcKinnon