A Quebec court has upheld a decision by the Autorité des marchés financiers that an insurance company can be held vicariously liable for embezzlement by one of its reps.

The AMF says that Judge Jean Lemelin found in favour of the AMF against RBC Life Insurance Co., formerly known as Westbury, ordering it to pay $32,520.30. The judgment represents the amount that an insurance rep embezzled from a client by requesting a cash withdrawal from her policy, taking possession of the cheque, forging her signature on it, and depositing it in his own account.

In 1998, the client filed a claim with the contingency fund, Fonds d’indemnisation des services financiers, that is now part of the AMF. FISF granted her claim and paid her an indemnity of $32,520.30 in compensation for the harm incurred as a direct result of the rep’s fraudulent conduct.

FISF then obtained a judgment against the rep and subsequently pursued the claim against RBC Life. The AMF says that the dispute “essentially focused on whether an insurance company may be held liable in the event a representative embezzles for his own personal benefit sums of money intended for an insured”.

“The judge concluded that an insurance representative who receives from the insurer sums of money on behalf of an insured thereby acts as the representative of the insurer,” the AMF says. “The court therefore ruled that an insurer is liable for any fraud committed by its representatives in the performance of their duties and ordered RBC Life Insurance Co. to pay back the amounts embezzled by its representative.”