The British Columbia Supreme Court has upheld a new rule from the Insurance Council of British Columbia (ICBC) that prevents licensed insurance brokers from engaging in insurance business with strata corporations sharing common ownership with property management companies.
The ruling is significant for its implications on industry practices and regulatory standards in British Columbia.
The case was brought by FS Insurance Brokers Inc. (FSIB), which works with First Service Residential BC (FSR), a property management company. FSIB provides advisory services to strata councils managed by FSR, partnering with BFL Canada Insurance Services Inc. (BFL) to supply insurance coverage. FSIB earns a commission from BFL if FSR-managed strata corporations purchase insurance.
FSIB argued that the new rule, which prohibits brokers from conducting insurance business with strata corporations tied to property managers with shared ownership, could restrict its ability to operate.
The brokerage maintained that its business model did not fall under the definition of "insurance business" and that the rule was unreasonable. It also claimed the rule overstepped the intentions behind the 2020 amendments to the Strata Property Act and Financial Institutions Act (Bill 14), which only banned referral fees for unlicensed brokers.
The court, however, focused on the broader issue of whether the rule was reasonable and fair. While acknowledging some ambiguity in how the rule related to Bill 14, the court concluded that the rule was aligned with the regulatory framework for insurance brokers. It determined the rule was meant to prevent potential conflicts of interest, particularly when there is shared ownership between a broker and a property management company.
The court's decision is expected to reinforce the Insurance Council's role in regulating potential conflicts of interest and maintaining ethical standards. The ruling sets a precedent for how brokers and property managers will operate under these new conditions and may influence other jurisdictions in Canada as they consider similar regulatory measures.
