All representatives practicing activities in this role in Quebec must have professional liability insurance, or be covered by this type of insurance through the independent partnership or firm for which he works, in order to have the right to practice within the authorized fields.
This insurance allows representatives to protect themselves from the financial consequences of their civil liability in the event of errors, mistakes, negligence, or omissions made during the practice of their representative activities.
The insurance must meet several regulatory requirements and include clauses determined by the Autorité des marchés financiers, depending on the type of registration and authorized fields.
Professional liability insurance does not protect the representative for all actions taken for his clients. It includes exclusions, which must be paid special attention.
Most liability insurance policies refuse to cover claims arising from gross misconduct, a criminal act, misappropriation of funds, or gross negligence, and no intentional misconduct will be covered. In other words, not only will the professional liability insurance company not pay for damages resulting from these acts if the representative is found guilty of them, but it may also refuse to insure the representative’s defence, which he would then be responsible for paying.
The representative cannot, therefore, claim to be insured for each of his actions with no distinction and without taking into account the limits that may be defined in the professional liability insurance policy. He must carefully read the definitions and scope of the coverage included in the policy and, above all, meticulously read the applicable exclusions.
It is recommended that the representative notify his professional liability insurer…
- when he learns that a serious complaint has been filed against him by a client – certain types of policies actually require this
- before accepting or participating in any amicable settlement attempt with a client or before discussing any compensation offer, because the insurer may refuse to cover it if it has not previously approved the transaction or strategy.