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Important Notice from the Law Society: Restricted Lawyer Involvement in Title-Insured Conveyances

Posted March 1, 2004

The Law Society has received an important notice from the Insurance Council of Manitoba (“ICM”) on the role of lawyers in arranging title insurance coverage for their clients. ICM has assessed the marketing strategies used by title insurers for the sale of title insurance products in this province, and in particular the role of lawyers in completing policy applications and ordering title insurance policies from title insurers for their clients. ICM takes the position that a lawyer who participates in this process is acting as an insurance agent in breach of The Insurance Act of Manitoba. “Agent” is defined in the Act as any person who “for compensation solicits insurance on behalf of any insurer or transmits for a person other than himself, an application for or a policy of insurance to or from such insurer or offers or acts or assumes to act in the negotiation of such insurance or in negotiating the continuance or renewal of other than life insurance contracts”. Section 369(1) of The Insurance Act provides that “no person shall act, or offer or undertake to act, as an insurance agent in this province without having first obtained a license” under the Act.

ICM has further advised the Law Society that, while there is no “sole occupation” requirement for an individual seeking to be licensed as an insurance agent, there are certain occupations restricted from obtaining a license due to the potential for undue influence or conflict of interest. Lawyers are one of the professions restricted from licensing under the Act. Although an individual lawyer may, in certain circumstances, be licensed subject to qualification pre-requisites, a lawyer cannot be licensed for the purpose of selling insurance in the context of a transaction where the lawyer is also representing the interests of one or more clients. The issuance of a general insurance agent license to a lawyer for the purpose of selling title insurance to his or her clients would create a conflict of interest situation that would be unacceptable to the ICM.

In summary, title insurance products may not be marketed by unlicensed individuals and therefore may not be sold by lawyers. If it is determined that a client has a need for a title insurance policy, a licensed insurance agent must be retained to provide this service and product.

Members of the profession who frequently act for vendors, purchasers and lenders in the conveyance of residential properties are advised to review their practices to ensure that they are not in breach of the provisions of The Insurance Act. Lawyers are cautioned against engaging in any activity that amounts to selling insurance without a license.

If you have any questions about this ruling please contact Erin Pearson, Assistant General Manager, at the office of the Insurance Council of Manitoba at 988-6800.

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