Insurance Council of British Columbia

In the Matter of the FINANCIAL INSTITUTIONS ACT, RSBC 1996, c.141 (the “Act”)

and the INSURANCE COUNCIL OF BRITISH COLUMBIA (“Council”)

and EVERYTHING FINANCIAL CONSULTANTS INC. (the “Agency”)

and PETER JOSEPH CISHECKI (the “Nominee”)

ORDER Pursuant to section 237 of the Act, Council convened a hearing at the request of the Agency and the Nominee to dispute an intended decision of Council dated July 11, 2017.

The subject of the hearing was set out in an Amended Notice of Hearing dated September 7, 2018. A Hearing Committee heard the matter on October 30, 2018 and presented a Report of the Hearing Committee to Council at its January 22, 2019 meeting.

Council considered the Report of the Hearing Committee and made the following order pursuant to sections 231, 236 and 241.1 of the Act:

1. A condition is imposed on the Agency’s and the Nominee’s life and accident and sickness insurance licences that requires the Nominee to successfully complete the Council Rules Course, on or before May 6, 2019;

2. The Nominee is fined $5,000, to be paid on or before May 6, 2019; 3. The Agency is fined $10,000, to be paid on or before May 6, 2019; 4. The Agency and the Nominee are jointly and severally liable to pay Council’s hearing costs of $5,047.29, to be paid on or before May 6, 2019; and

Order Everything Financial Consultants Inc. and Peter Joseph Cishecki LIC-9135898C114245R02 / LIC-84037C69582R1 / COM-2016-00129 February 5, 2019 Page 2 of 2

5. A condition is imposed on the Agency’s and the Nominee’s life and accident and sickness insurance licences that failure to successfully complete the Council Rules Course or pay the above noted fines and hearing costs within the stipulated time frame will result in automatic suspension of Agency’s and the Nominee’s life and accident and sickness insurance licences and the Agency and Nominee will not be permitted to complete their 2019 annual filings until such time as the Council Rules Course is successfully completed and the fines and hearing costs are paid in full.

This order takes effect on the 5 th day of February, 2019. _________________________________________ Ken Kukkonen Chairperson, Insurance Council of British Columbia

INSURANCE COUNCIL OF BRITISH COLUMBIA (“Council”)

REPORT OF THE HEARING COMMITTEE IN THE MATTER OF THE FINANCIAL INSTITUTIONS ACT (R.S.B.C. 1996, c. 141) (the “Act”)

AND EVERYTHING FINANCIAL CONSULTANTS INC. (the “Agency”)

AND PETER JOSEPH CISHECKI (the “Nominee”)

Date: October 30, 2018 Before: Karl Krokosinksi Chair Frank Mackleston Member John Van Tassel Member Location: Suite 300, 1040 West Georgia Street Vancouver, British Columbia V6E 4H1

Present: David McKnight Counsel for Council Stephanie Streat Counsel for Everything Financial Consultants Inc. and Peter Joseph Cishecki Peter Joseph Cishecki Nominee BACKGROUND AND ISSUES On July 11, 2017, Council made an intended decision, pursuant to sections 231 and 236 of the Act, against the Agency and the Nominee. The intended decision respected allegations that the Agency and Nominee breached Council Rule 7(11) by failing to ensure the Agency had errors and omissions (“E&O”) insurance and that, as a result, the Agency had operated in an unlicensed capacity.

On October 5, 2017, the Agency and Nominee requested a hearing before Council to dispute Council’s intended decision pursuant to section 237(3) of the Act. Council held a one-day hearing in this matter on October 30, 2018.

The issues in the hearing were:

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1. Did the Agency and Nominee breach Council Rule 7(11) and fail to act in a competent manner and in accordance with the usual practice of the business of insurance:

a. by failing to ensure that the Agency had E&O insurance in place and by allowing the Agency to act in an unlicensed capacity for 23 months; and

b. in any other manner. 2. Are the Agency and Nominee able to carry on the business of insurance in a competent manner and in accordance with the usual practice, as required under Council Rule 7(8) and pursuant to section 231(1)(a) of the Act.

3. Should the Agency and Nominee be subject to any disciplinary or other action in the circumstances; and if so, whether Council should do one or more of the following in accordance with sections 231 and 236 of the Act:

a. Reprimand, suspend or cancel the Agency’s and/or Nominee’s life and accident and sickness insurance agent licences.

b. Impose conditions on the Agency’s and/or Nominee’s life and accident and sickness insurance agent licences.

c. Fine the Agency an amount not more than $20,000.00. d. Fine the Nominee an amount not more than $10,000.00. e. Require the Agency and/or Nominee to cease any specified activity related to the conduct of insurance business or to carry out any specified activity related to the conduct of insurance business.

f. Require the Agency and/or Nominee to pay the costs of this hearing. The Hearing Committee was constituted pursuant to section 223 of the Act. This is a report of the Hearing Committee as required by section 223(4) of the Act.

EVIDENCE The Hearing Committee reviewed and considered the following evidence: Exhibit 1: Agreed Statement of Facts Exhibit 2: Council’s Book of Documents Exhibit 3: Email Chain at TAB 1 of the Defendant’s Book of Documents Exhibit 4: Copy of Axis Errors and Omissions Insurance at TAB 2 of the Defendant’s Book of Documents

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Exhibit 5: Letter from Peter Cishecki to Insurance Council of BC at TAB 3 of Defendant’s Book of Documents Sworn Testimony of Peter Cishecki at the October 30, 2018 hearing.

FACTS At the hearing, the parties entered into and tendered an agreed statement of facts (“Agreed Statement”) containing the majority of the facts relevant to the issues in this matter.

Background The Agency was originally licensed as a life and accident and sickness insurance agent (“Life Agent”) in British Columbia between 1998 and 2003. The Agency was relicensed in 2012 and has maintained an active licence since then. The Nominee obtained a Life Agent licence in 1991 and has been the Agency’s Nominee since May 2012.

Circumstances Leading to the Lapse of E&O Insurance The Agency had an E&O policy in place in 2012 and 2013. In December, 2013, the E&O provider for the Agency sent an email to the Agency advising that it needed to renew its E&O insurance for 2014. The application provided by the E&O provider included a section to select “corporate entity” E&O insurance. The Agency did not select that section and submitted the renewal to the provider without indicating that it sought to renew the corporate E&O insurance.

The Nominee employed an assistant (the “Assistant”) beginning in the fall of 2013. The Assistant took over “all responsibilities” relating to running the Agency office in January 2014. The Nominee delegated responsibility for renewing all E&O policies for the 2014 and 2015 periods to the Assistant. The Nominee also provided the Assistant with a corporate credit card to pay the premiums on the policies. The Assistant did submit renewals for the E&O policies of each individual agent. However, when submitting the insurance renewals the Assistant did not select the corporate entity rider to renew the Agency’s corporate E&O insurance for 2014. This occurred again for the 2015 policy.

The Nominee did not review the credit card statements or the insurance policies himself and so was unaware that the Agency’s E&O insurance had not been renewed.

The E&O provider did not notify the Agency that its corporate E&O insurance had lapsed. The Agency conducted seventy insurance transactions during the period it was without E&O insurance.

Investigation of Lapse of E&O Insurance In January 2016, Council conducted an inspection of the Agency, wherein Council determined that the Agency had not had E&O insurance since January 2, 2014.

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The E&O provider advised Council that the Agency’s corporate E&O insurance lapsed in January 2014 when the corporate entity rider was not selected. All other agents’ E&O policies were renewed as required. The difference in the Agency’s annual premium was approximately $400.00.

Response to Lapse of E&O Insurance In January 2016, Connel Lewis of Council audited the Agency. Two weeks after the audit, Mr. Lewis requested the Assistant provide a copy of the Agency’s corporate E&O coverage. This was the first time the Assistant had heard of corporate E&O coverage. Following this phone call, the Assistant reviewed the Agency’s 2012 and 2013 insurance documents and discovered that the Agency had E&O coverage through a corporate entity rider but did she not find this coverage in place for 2014 and 2015. The Assistant, on instruction from the Nominee, then immediately contacted the E&O provider, both to renew the corporate E&O insurance and to obtain “past acts coverage” for the period during which the Agency’s E&O policy had lapsed. The “past acts” coverage effectively insured all acts during the period of under insurance.

The Assistant said in an email to Council that she was confused by the insurance certificate issued to the Nominee because “on all of Peter’s Individual Certificates it lists the insured individual as Peter Cishecki and the Personal Corporation and Firm Name as Everything Financial Consultants Inc. This can be confusing as it implies the coverage is for both.” The insurance certificate for the Nominee’s personal insurance states that the insured individual is “Peter Joseph Cishecki”. It also lists the “Firm Name” as “Everything Financial Consultants Inc.”. Below the firm name are the words “Vicarious liability only”. At the top of the certificate are the words: “TYPE OF INSURANCE: Financial Advisor Professional Liability Insurance.”

The Nominee also contacted the E&O provider to determine what had happened following the lapse in insurance. The E&O provider advised the Nominee that since his Agency’s issue came to light, the E&O provider examined its policies and discovered that there were other companies in the same situation as the Agency.

As a result of the E&O insurance lapse, the Agency has improved its procedures to include more E&O insurance renewal procedures. The Nominee also represents that he has since become more diligent in the operation of the Agency.

ANALYSIS Legal Framework Section 225.1 of the Act enables Council to make rules for the purposes of licensing and regulating the conduct of insurance agents, insurance salespersons, insurance adjusters and employed insurance adjusters.

Section 231(1)(a) of the Act authorizes Council to impose penalties on a licensee or nominee of a licensee if Council determines that the licensee and/or nominee “no longer meets a licensing requirement established by a rule made by the council or did not meet that requirement at the time

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the licence was issued, or at a later time”. The possible penalties are set out at section 231(1)(f) to (k) of the Act:

(f) reprimand the licensee or former licensee; (g) suspend or cancel the licence of the licensee; (h) attach conditions to the licence of the licensee or amend any conditions attached to the licence;

(i) in appropriate circumstances, amend the licence of the licensee by deleting the name of a nominee;

(j) require the licensee or former licensee to cease any specified activity related to the conduct of insurance business or to carry out any specified activity related to the conduct of insurance business;

(k) in respect of conduct described in paragraph (a), (b), (c), (d), (e) or (e.1), fine the licensee or former licensee an amount:

(i) not more than $20 000 in the case of a corporation, or (ii) not more than $10 000 in the case of an individual.

Council Rule 7(8) states that a licensee must comply with Council’s Code of Conduct, as amended from time to time.

Council Rule 7(11)(a) states that an agency must maintain or be covered by E&O insurance of $1,000,000.00 per claim and a minimum aggregate limit of $2,000,000.00.

Council Rule 7(11)(d) states a licensee’s licence is automatically suspended without Council taking any action, where the licensee remains uninsured for a period exceeding 30 calendar days. Council Rule 7(11)(e) states an agency whose licence is suspended under subsection (d) will automatically be reinstated where: (i) the licensee obtains the required E&O insurance within 30 calendar days from the date of the suspension; and (ii) the licensee delivers to Council the required verification.

Council Rule 3(2)(c) states that Council may grant a licence if the applicant intends to publicly carry on business as an insurance agent, salesperson or adjuster in good faith and in accordance with the usual practice of the business of insurance.

Council’s Policy & Guidelines, January 2014, Section 4 Suitability Policies states that the Code defines trustworthiness, good faith, competence, financial reliability, and the usual practice of the business of insurance. The purpose of the suitability policies is to assist Council in assessing the suitability of a person where Council learns of a possible suitability concern. The Code serves as the benchmark upon which applicants and licensees are measured.

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Under the suitability policies, Council considers the nature of a matter to determine if it is relevant to a person’s trustworthiness, competence, or intention to carry on the business of insurance in good faith and the person’s overall fitness to be an insurance licensee.

Council’s Arguments Council seeks the following findings against the Nominee and the Agency: 1. The Agency and Nominee breached Council Rule 7(11); 2. The Nominee’s and Agency’s actions bring into question their competency and the ability to carry on the business of insurance in good faith.

Council seeks the following penalties against the Nominee and the Agency: 1. Impose a condition on the Agency’s and Nominee’s life and accident and sickness insurance licences that requires the Nominee to successfully complete the Council Rules course within 90 days of Council’s order;

2. Fine the Nominee $5,000.00 to be paid within 30 days of Council’s decision being issued; 3. Fine the Nominee $10,000.00 to be paid within 30 days of Council’s decision being issued; 4. Order that the Agency and Nominee be jointly and severally liable to pay Council’s costs associated with the hearing to be determined.

Council submitted as follows: • The fact that the Agency and the Nominee did not have systems in place to ensure the error did not occur, and the fact that the Agency did business for almost two years and went through two additional renewal periods without determining that the E&O insurance had lapsed speaks to the Nominee’s competence to effectively and adequately manage the Agency’s operations.

• By not having E&O insurance in place, the Agency’s Life Agent licence was terminated on or about March 4, 2014 in accordance with Council Rule 7(11), which means the Agency engaged in insurance activities while unlicensed for almost two years.

• Had Council’s inspection of the Agency not occurred in 2016, the Agency may well still be operating without E&O insurance.

• The Nominee provided evidence that he assigned the renewal of the Agency’s E&O insurance to the Assistant who was a new employee but did not take any steps or any sufficient steps to ensure the new employee was trained or supervised to ensure the E&O

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was handled properly. All of this, submits Council, point to a lack of an appropriate system of safeguards.

• Council criticizes the Nominee for blaming the E&O provider for not bringing it to the Agency’s attention as this deflects responsibility for taking steps to ensure that all insurance was handled properly. Council submitted that it is a glaring error on the part of the Nominee and the Agency that the difference in premiums was not noticed as missing for two years. The Nominee did not review the corporate credit card statements and therefore was not aware that the insurance had not been renewed.

• The fact the Nominee made annual filings in 2014 and 2015 to Council in which it confirmed that it was in compliance with all of Council’s Rules indicates a failure in competency and diligence.

• Last, Council argues that had a claim been made while the Agency was uninsured, it is not certain that the E&O provider would have honored a claim while the Agency was uninsured, despite the fact that the E&O provider eventually offered past acts coverage.

The Council relies on several precedent decisions of Council to support the penalties it seeks as follows:

• In the Matter of Global Warranty (West Coast) Corporation and Andrew Mark Hall, June 20, 2017: The agency held a general insurance licence in BC. The agency was without insurance in Saskatchewan and BC for a 138 day period and failed to cease insurance activity during this time. The nominee explained that the agency’s head office, which is located in Ontario, is responsible for maintaining the agency’s E&O insurance. The nominee stated the agency’s head office failed to renew its E&O insurance and did not inform the nominee that it had expired. The nominee confirmed he did not take any steps to ensure the agency operated in B.C. in compliance with Council’s Rules including not being aware when the agency’s E&O insurance expired or following up with the head office to ensure the agency had E&O coverage in B.C. Council fined the agency $6,000.00 and the nominee $1,000.00. Council also ordered that the nominee complete the Council Rules course.

• In the Matter of Prosperity Protection Corp, February 15, 2017: The agency held a life and accident and sickness insurance licence in BC. The agency failed to maintain valid E&O insurance in BC for 39 days. Council found the agency breached Council Rule 7(3)(a)(i) by failing to notify it within five days of disciplinary action by the ICS and breached Rule 7(11) by failing to notify Council when it ceased to have E&O insurance. As a result, Council imposed a condition on the agency’s licence that required the nominee to successfully complete the Council Rules course within 90 days of Council’s order and fined the agency $1,000.00.

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• In the Matter of Johnson Fu Insurance Agency Inc., June 24, 2014: The agency operated 7 months without E&O insurance. The nominee was unaware that there was inadequate insurance coverage and failed to inform Council of the same. Notwithstanding that Council determined the breach was unintentional, Council determined that the failure to carry adequate insurance coverage represents a substantial risk to the public and fined the agency $2,800.00.

Nominee’s and Agency’s Arguments The Nominee and Agency submitted that a citation is just and fit in the circumstances and that Council should impose no other penalty.

The Nominee and Agency submitted as follows: • The lapse of E&O insurance for the Agency was inadvertent and unintentional. With the exception of the current inquiry the Nominee has ensured that the appropriate insurance was in place at any given time;

• The Nominee instructed the Assistant to renew the policy and intended and believed the policy was renewed;

• The Nominee quickly remedied the lapse of E&O coverage by taking immediate steps to secure the coverage after he learned it was not in place. A new policy was in place within a couple days, including coverage for “past acts”.

• The Nominee had a reasonable belief that coverage was in place. Where a broker is engaged to assist with the acquisition of appropriate insurance coverage, it is commonly expected by the insured that the broker will assist in the insurance acquisition process, and will use its specialized knowledge to help the insured make appropriate decisions regarding coverage.

• The Supreme Court of Canada has found that brokers have a duty to properly inform insureds about coverages available (Fletcher v. Manitoba Public Insurance Co., 1990 CanLII 59 (SCC).

• It was reasonable for the Nominee to believe that upon instructing the Assistant to renew the coverages, that the appropriate insurance would be renewed. The Assistant’s failure was a failure to check a box on an insurance renewal form. The lapse was not at any time brought to the attention of the Nominee by his broker and that the insurance renewed was markedly different from what had been sought and delivered in the past.

• The broker admitted to failing in their practices. Had the discrepancy in the purchase of the intended E&O insurance been brought to the Nominee’s attention at any point in the lapse,

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it would have been remedied immediately, as is shown by how the Nominee swiftly addressed the under insurance once it became aware of same.

• The Nominee has at all material times taken an active role in taking steps to ensure that the administrative practices and procedures of the Agency are appropriately pursued. Since 1996, the Nominee has sought and obtained the coverage necessary to the Agency.

• At all material times the Agency had policies and procedures in place related to the operation of the Agency. The Assistant had only recently assumed the position of executive assistant at the time the insurance came up for renewal, so she had not been personally aware of any necessity to obtain a separate E&O rider for the Agency.

• The Nominee has taken steps to prevent similar incidents from occurring in the future. With respect to the precedent decisions, the Nominee and Agency submit: • In the Matter of Global Warranty (West Coast) Corporation and Andrew Mark Hall, June 20, 2017: This case is distinguishable on the basis that the agency made no inquiry into whether coverage had been obtained or not whereas in this case the Agency did attempt to obtain the E&O insurance and thought that it had been so obtained. An inadvertent error led to the failure to secure the renewal of a separate rider, and this error went undiscovered due to subsequent renewals under the same terms.

• In the Matter of Prosperity Protection Corp, February 15, 2017: This case is distinguishable as, unlike the current matter, Prosperity acted with ambivalence when it learned E&O insurance was not in place.

• In the Matter of Mark Wagner, September 6, 2018: Council found that the licensee had 25 improperly completed insurance forms in the client files, including signed bank forms, altered forms, incomplete forms, forms witnessed prior to client execution, and forms with date discrepancies. No client harm was identified in the improperly filled out documents. Council ordered remedial education, a period of supervision, and a fine of $2,500.00.

• In the Matter of Hugo Donais, September 6, 2018: Council found that the licensee had improperly completed various insurance forms, including ones with blanks, missing signatures, white out, crossed out information, or that had been partially or pre-completed. The licensee advised that there was no malicious intent, and that some of the errors would have been administrative employee errors. There was no harm found to have been caused to clients. The Council ordered education to address the repeated errors and a fine of $1,000.00.

• In the Matter of Annie Chu, May 2, 2018: Council found that the licensee failed to meet her continuing education requirements over 2 years, and showed a disregard for Council

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Rules. Fines of $3,000.00 were levied, and a number of restrictions imposed upon the licensee until she took steps to rectify the default.

• In the Matter of Patricia Brienen, August 29, 2017: a licensee obtained an endorsement on her automobile insurance policy to allow her son to drive the family car one weekend. The car was in an accident, and she thereafter realized that she had mistakenly caused the Endorsement to be registered for the wrong day, and that the coverage was not in place at the time of the accident. She called her Agency and instructed an employee to change/falsify the date of the Endorsement. She thereafter contacted her supervisor to report the incident, having realized that she did not handle the matter appropriately. Council issued a reprimand due to the licensee’s prompt response to remedy her mistakes.