5 November 1997 GST/HST Interpretation HQR0000405 - Application of the GST/HST to Recipients of Insurance Premiums

Dear XXXXX

This is in response to your letter in which you request clarification of our comments in our letter of August 21, 1996, with respect to the above-noted subject.

You ask us to advise whether it is correct to conclude that because the various dealerships and other members of the XXXXX are listed as "named insureds", that we consider them to be the recipients of a supply made by the insurer, notwithstanding that they do not appear to be liable to pay the premium to the insurer.

You also ask, in terms of insurance generally, if it is acceptable, when responding to clients' queries, to advise that where a person is listed as a "named insured", that they are the recipient of a supply of insurance, notwithstanding that they may not accept liability to pay.

Our Comments

Our comments in our letter of August 21, 1996, were based on a thorough analysis of the facts of the case and the documents provided. The position taken by the Department is that XXXXX is acting as an agent for the arrangement of the insurance policy and that XXXXX is acting as an agent for the payment of the premiums and that the insurance expense was incurred as agent.

An analysis on agency utilizing policy paper P-182 - Determining The Meaning Of The Terms "Agent" And "Agency" concluded that XXXXX is acting as an agent for the arrangement of the insurance policy. XXXXX received detailed billing from the insurer outlining the billing for each of the named insureds. Each of them has an insurable interest. XXXXX does not have an insurable interest in all the named insureds' assets. When filing a claim, each of the named insured deals directly with the insurer and any moneys for losses incurred are paid directly to each named insured rather than to XXXXX Therefore, all the persons who are liable to pay the consideration under the insurance policy are considered to be recipients. We are in the presence of several recipients under one agreement which is actually a cost-sharing arrangement. The insurer is supplying an insurance policy to all the recipients. The supply of insurance is an exempt financial service.

Therefore, when the insured names are paying their portion of the insurance premiums, no GST should be added. XXXXX is not re-supplying insurance to the named insureds. The insurer is supplying insurance directly to the named insureds. XXXXX and XXXXX are only the agents facilitating the transaction. Please note that we do consider the named insureds to be liable to pay the premium to the insurer in this case.

We do not believe that it is advisable to conclude, based solely on the fact that a person is listed as a named insured, that they are the recipient of a supply of insurance. The facts and the insurance documents should be examined on a case-by-case basis.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9577 or Duncan Jones at (613) 952-9210.

Sincerely,

Marilena Guerra, C.M.A.
Rulings Officer
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate
Policy and Legislation Branch