On March 27, 2009, following two extensive consultations conducted by the Autorité des marchés financiers (the AMF, Quebec's financial sector regulator), with respect to motor vehicle replacement guarantees, the AMF published Avis de l'Autorité des marchés financiers relatif aux garanties de remplacement automobiles (the Notice), which provided its views on the nature of these guarantees and how they will be regulated in Quebec. A replacement guarantee generally provides coverage for the replacement of a vehicle in the case of a total loss, coverage of the deductible in the case of a partial loss and the use of a replacement vehicle. The consultation process was undertaken to consider the various insurance-like products, such as replacement guarantees, routinely offered by automobile dealers to their customers and whether an insurer's licence is required to offer such products.
According to the Notice, in the opinion of the AMF a motor vehicle replacement guarantee is an insurance product subject to AMF oversight. Therefore, such guarantees must be issued by insurers in a standard form that has been approved by the AMF. The AMF has not yet decided, however, how the distribution of the replacement guarantees will be regulated. Further, while no definition of "motor vehicle replacement guarantee" was provided in the Notice, the AMF indicated that it considers the main difference between a true "guarantee" and an insurance product to be the following:
- a guarantee protects the consumer against manufacturing defects in, and poor performance of, the product purchased and is generally offered by the manufacturer;
- an insurance protect protects the consumer against a variety of risks (e.g. collision, theft, vandalism, etc.).
According to the Notice, the AMF has taken this position with respect to motor vehicle replacement guarantees only and not other types of guarantees.
Insurance products may currently be distributed in Quebec either through licensed insurances brokers and agents or through the "distributor" channel permitted under An Act respecting the distribution of financial products and services (Quebec) (the Financial Products Act). Only insurance products listed in the Financial Products Act or those that have been the subject of a special government order are permitted to be sold by "distributors". A distributor is a person who offers or arranges for insurance as an accessory to goods he or she sells. The Financial Products Act sets out the obligations of the distributor and the insurer when the "distributor" channel is used.
The AMF has delayed full implementation of its new policy for 12 months. During this time, it will work with stakeholders to assist them in making the required changes to ensure compliance with the Financial Products Act and consult with them in order to determine the best way to regulate distribution of the guarantees. All replacement guarantees sold during this 12-month period must be honoured until their expiration date.
In order to benefit from the 12-month moratorium, manufacturers and administrators of replacement guarantees must register with the AMF within three months of publication of the Notice, (or before June 27, 2009). The Notice implies that the manufacturers or administrators of replacement guarantees may be subject to sanction if they do not register.