Claims Canada December 2011/January 2012

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December/January 2012

Balancing Act Independent Adjusters

Official Journal of the Canadian Indeépendent Adjusters’ Association

Discuss Challenges

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Contents DECEMBER/ JANUARY 2012 • VOLUME 5 • NUMBER

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Cover Feature 12 Balancing Act Ten executives from CIAA member firms discuss the claims challenges they faced in 2011 and what they foresee as being the biggest challenges they face going into 2012.

Spotlight 24 Continued Growth Canadian Claims Services has gone from being a one-office adjusting firm, to a four-office firm serving Western Canada — all in less than three years.

BY LAURA KUPCIS

Education Forum

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54 Counting Catastrophic Costs One of the main tools used to calculate accurate future care costs and quality of life for the catastrophically injured claimant is the life care plan.

News Features 26 The Moving Target

44 Recovering Costs

An insurance policy typically insures the actual cash value of an item, but does not articulate a definition of what ACV is.

Certain policies are designed to include compensation for overheads, with rates defined and an additional premium paid.

Business income coverage is often not included in these policies.

BY GREG MERRITHEW

32 Meet the Presidents The Ontario regional presidents for both the CIAA and the CICMA are focused on education during their two-year tenure.

BY LAURA KUPCIS

36 Game Changers Both the environment and the economy will force changes within the insurance industry.

BY ROWAN SAUNDERS

38 The Right Focus Implementing the appropriate engineering principles and regulatory requirements in an environmental claim can save money in the long run.

BY LORI FESTARINI and NEIL BUTLER

42 The Threat of Punitive Damages Revisited

With the escalating costs of fraud on the insurance industry, identifying and proving fraud in the courts is essential.

BY LAUREN BLOOM

BY LORNE MONTGOMERY

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48 Spinal Cord Injury Understanding the spine’s component parts can go a long way in effective spinal cord injury management.

BY ANGELA VERI and JUDY FARRIMOND

50 Subrogating Against Subcontractors

Departments

The Ontario Court of Appeal opens the door for subrogating subcontractors under a builders’ risk policy.

4 First Notice

By PAMELA D. PENGELLEY

56 On The Scene

52 Beyond Power Surge

Columns

Equipment operation loss is often wrongly attributed to a power surge — a term used to describe issues with electric power quality.

BY MARK J. BRYS

54 Education Forum

• first notice FN Ontario Anti-Fraud Task Force interim report suggests working groups look into licensing health-care clinics, creating dedicated fraud investigation unit The steering committee of the Ontario Auto Insurance Anti-Fraud Task Force has asked its working groups to consider the licensing and regulation of health-care clinics, plug current gaps in regulation (such as the introduction of a regulatory regime for tow truck drivers, for example) and the establishment of a dedicated fraud investigation unit.

In addition, the working groups have been asked to develop a consumer engagement and education strategy so people will be aware of the claims system and thus not susceptible to misinformation provided by fraudsters.

Finally, the working groups will consider the development of a single web portal for Ontario auto insurance claimants. The portal would be a source of consumer information and education on matters such as approved protocols for treatments on specific auto related injuries.

These and other recommendations are part of an extensive report issued by The Ontario Auto Insurance Anti-Fraud Task Force, which the Ontario government established in July 2011 to determine the scope and nature of automobile insurance fraud and make recommendations about ways to reduce it.

Insurance Bureau of Canada (IBC) issued a press release saying it was “pleased” with the interim report.

“To have a real impact on Ontario’s efforts to eliminate insurance fraud, we need to address the underlying factors that contribute to the problem,” said Ralph Palumbo, IBC’s vice president of Ontario. “The Task Force has accurately identified those factors, as well as other issues that require further examination.”

In addition to endorsing the recommendations in the Task Force report, IBC is advocating for the imposition of tougher criminal and civil penalties for

identity fraud and theft.

The recommendations in the task force will go now go to three separate working groups for further review. The Task Force established a working group to look at each one of the following topic areas related to auto insurance fraud: • prevention, detection, investigation and enforcement; • regulatory practices in the automobile insurance system; and • consumer engagement and education.

The steering committee overseeing the work of the Task Force and its three working groups will issue a final report due by Fall 2012.

The full interim report can be viewed at: http://www.fin.gov.on.ca/en/autoinsurance/interim-report.html l

B.C. public auto insurer must pay for massage therapy

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Claims Canada

December/January 2012

Massage therapy recommended by a family physician and provided by a registered massage therapist is a benefit for which the Insurance Corporation of B.C. (ICBC) has a legal obligation to pay, the B.C. Court of Appeal has ruled.

The appellate court upheld a ruling from the Supreme Court of British Columbia, which found ICBC was obligated to pay a total of $742 to two infant plaintiffs for soft tissue injuries they sustained in a 2003 motor vehicle collision.

The issue turned on whether massage therapy is a discretionary benefit, or one that the insurer is required to pay under s. 88(1) of Part 7 of the province’s Insurance (Motor Vehicle) Act regulation. The insurer is obligated to pay for benefits listed in s. 88(1) of the act. ICBC notes massage therapy is not included in that section of the act. It therefore argued massage therapy is a discretionary benefit under s. 88(2)(f), which says the insurer “may” provide “funds for any other costs the corporation in its sole discretion agrees to pay.”

Specifically, s. 88(1) says the corporation “shall . . . pay as benefits all reasonable expenses incurred by the insured as a result of the injury for necessary medical, surgical, dental, hospital, ambulance or professional nursing services, or for necessary physical therapy, chiropractic treatment, occupational therapy or speech therapy or for prosthesis or orthosis.”

ICBC says that since “message therapy” is not listed in s.

88(1), the intent of the legislature was to exclude it. The Appeal Court, on the other hand, found that when the regulation was read together with the Health Professions Act and its related regulations, “physical therapy may properly be interpreted as including massage therapy.”

The full court decision can be read at: http://www.courts. gov.bc.ca/jdb-txt/CA/11/04/2011BCCA0482.html

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• first notice FN Quebec P&C insurers list top risks related to severe weather and climate change Severe weather and climate change can call insurers’ pricing assumptions into question, create work overloads in response to large claims events and potentially lead insurers to cut back on offering certain forms of coverage, according to a survey conducted by Quebec’s insurance regulator.

L’Autorité des marchés financiers (AMF) released the study, Managing Climate Change Risk, on Nov. 24. The study includes results of a 2010 survey conducted on the impact of climate change on property and casualty insurers in Quebec. Nine insurers in Quebec answered the survey, representing a market share of 61 per cent in the province.

When asked to list and briefly discuss risks associated with severe weather and climate change, seven respondents observed that unfavourable climatic ex-

periences could call their pricing assumptions into question. Some respondents noted their pricing structures were not necessarily suited to the increased frequency of water damage claims.

Six respondents cited operational issues related to climate change patterns. “This risk centres primarily around a potential work overload to respond to claims for compensation in the event of a catastrophe and the lack of manpower to cope with such a situation,” the report says.

Three respondents cited concerns about the impact of climate change on marketing and business development.

For example, the escalating frequency and severity of water damage claims could “lead some insurers to cut back on offering specific forms of coverage or coverage in specific markets, which will affect their business regardless of wheth-

er or not they elect to cover these risks through anti-selection and according to their ability to distribute the risks,” the report says.

Also, one respondent observed that severe weather events are putting pressure on insurers to cover overland flood, which isn’t currently covered in Canada.

Respondents also cited the following as risks related to climate change: • Higher reinsurance premiums (3).

• Reputational Risk (3), which includes an inability to service customers during a crisis, and also partnering with organizations not perceived to be good corporate citizens.

• Moral hazard (1), which characterizes a situation in which policyholders rely on insurers to fix damage rather than take responsibility for acting on their own to mitigate damage.

The full report can be viewed at: http://www.lautorite.qc.ca/files//pdf/ publications/professionnels/assurance/ AMF-climate-change-web.pdf l

Consolidating two actions can’t lead to consolidated arbitration being statute-barred: Ontario court Consolidating a court case concerning income replacement benefits (IRB) with a related arbitration matter on catastrophic injury determination, each of which was filed within their respective limitation periods, cannot result in the consolidated arbitration being statutebarred, the Ontario Superior Court has ruled.

The claimant, Julia Gordyukova, was injured in a motor vehicle accident on Nov. 9, 2001. She filed an action in the Ontario Superior Court on Sept. 16, 2002, which the insurer agreed included a claim for continuation of her IRB benefits.

Gordyukova’s med-rehab benefits ran out on Oct. 28, 2005, at which time she made an application for a catastrophic impairment determination. The insurer rejected this application, and Gordyukova filed for arbitration on the catastrophic impairment determination issue on Nov. 28, 2008.

Certas Direct Insurance Company was named the priority insurer in December 2009. Certas argued on Mar. 29, 2010 that the scheduled arbitration on catastrophic impairment determination should be added to the court action for 6

Claims Canada

IRB benefits instead. The insurer wanted to make sure the findings were consistent in the IRB court action and in the arbitration on cat determination.

The claimant said the arbitration and the IRB actions should be allowed to proceed separately and concurrently.

An Ontario arbitrator ruled that the causation issues raised by Certas required that issues of entitlement to specific accident benefits (IRB) and cat impairment should be heard in arbitration, on condition that the claimant gave notice to discontinue the court action, which she did.

But on the eve of the arbitration, Certas said Gordyukova’s claim for IRB benefits, now combined with the cat determination issue, was statute-barred from being arbitrated. The insurer noted IRB benefits were the focus of the 1992 claim, which was filed more than two years prior to the cat determination arbitration for which the claimant filed in 2008.

An Ontario Director’s Delegate agreed with the insurer’s position on appeal, but the court overturned this decision in favour of the claimant.

December/January 2012

“It is clear and not disputed by Certas that each of the court action and the arbitration was commenced within the limitation period required,” the Superior Court ruled. “If the court action and the arbitration proceeded independently, no issue of limitation would arise.

“By seeking to consolidate all of the claims in one proceeding, Certas has itself created the limitation issue.”

The court rejected the notion that the IRB claim (in the court process) could not be added to cat determination claim (in the arbitration process) unless the cat arbitration commenced within two years of when the IRB action arose. “That interpretation does not, in my opinion, comply with the letter and the spirit of [s. 281.1 of the Ontario Insurance Act.],” Ontario Superior Court Justice John Jennings ruled. l www.claimscanada.ca

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• first notice FN Injured claimant’s adaptive ability should be based on more than just an inability to return to work: Ontario arbitrator An injured person’s ability to adapt to stressful circumstances is broader than just whether or not a person can return to work, an Ontario arbitrator has found.

Adaptability is one of four factors used to determine whether a person’s mental or psychological impairments due to an auto collision qualify as “catastrophic.” A catastrophic injury designation in Ontario qualifies the claimant for substantially increased accident benefits.

In reaching her conclusion, Financial Services Commission of Ontario (FSCO) arbitrator Rosemary Muzzi found in favour of Intact Insurance Company, which submitted that claimant Carrie Leach had not sustained a catastrophic impairment.

Leach was injured in motor vehicle accident in 2003. Her assessors found she had a moderate impairment in three out of four categories of function used to determine a catastrophic impairment.

The four categories of function include an assessment of: • activities of daily living, • social functioning, • concentration, persistence and pace and • deterioration in work or work-like settings, or repeated failure to adapt to stressful circumstances (adaptation).

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A bi-monthly magazine (6x per year), Claims Canada is published by BIG Magazines LP, a div. of Glacier BIG Holdings Company Ltd. Business Information Group is located at: 80 Valleybrook Drive, Toronto, ON, M3B 2S9.

Claims Canada magazine is the Official Publication of the Canadian Independent Adjusters’ Association [CIAA] and through its editorial content and circulation brings together the ‘entire property & casualty insurance claims market nationally’ with information and insight into the profession, business and people of insurance claims and loss adjusting.

All key claims process stakeholders are reached as part of our readership community – including: both CIAA member and non-member independent claims adjusting firms; insurance and reinsurance company executive, claims management

8

Leach’s assessors said Leach showed a “marked” impairment in the adaptation area of function. This was based on Leach’s inability to complete a work placement at a local school as a teaching assistant in a vocational hair styling course.

Leach’s marked impairment in the adaptive category alone was enough to have her classified as catastrophically impaired, the assessors argued.

Intact argued a marked impairment must be present in more than just one of the four areas used to assess the effects of psychological impairment.

But Muzzi found Leach did not even have a marked impairment in the area of adaptation, saying consideration of a person’s adaptive ability should go beyond an inability to return to work.

“Ms. Leach’s assessment team focused on Ms. Leach’s ability to tolerate work as demonstrated in her unsuccessful work placement at a local school as a teaching assistant in a vocational hair styling course,” Muzzi wrote. “I considered her work placement experience from a broader perspective and also examined her ability to tolerate stress in her other life activities and found her to be reasonably capable and flexible and only moderately impaired in this regard.” l

Claims Canada

December/January 2012

Gary White Production Manager (416) 510-6760

and claims adjusting personnel; corporate risk managers and loss control professionals; insurance brokers; insurance law firms; forensic engineers and accountants; appraisal, restoration, rehabilitation and collision repair professionals; Insurance Institute chapters; insurance associations, regulators and related claims market recipients.

The contents of this publication may not be reproduced or transmitted in any form, either in part or in full, without the written consent of the copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without prior written consent.

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Message from the President La Plume du Président GREG MERRITHEW

Since taking over the helm of the Canadian Independent Adjusters’ Association (CIAA), my travel schedule has certainly ramped up. In September I travelled to the Risk and Insurance Management Society Canada (RIMS Canada) conference and AGM in Ottawa. CIAA was well represented by many members in attendance. I found it to be a very worthwhile experience, not only as the president of CIAA, but also as an individual owner of an independent adjusting company. I made some very good contacts both for the CIAA and my own firm and I strongly recommend to members of CIAA that if they have the opportunity, they should certainly attend a RIMS Canada conference and AGM. I travelled through Atlantic Canada this fall and met with members both in New Brunswick and Nova Scotia. Luc Aucoin has put quite a bit of time and effort in leading the New Brunswick chapter of CIAA, both through their educational programs as well as through their EMO agreements. Congratulations Luc. Regional president, Grant King in Nova Scotia, as always, puts significant time and energy into CIAA’s objectives. I also had the opportunity to meet with Richard Van Horne our chair of emergency measures committee. Richard was kind enough to explain to me the relationship of the federal government to the provincial government with regards to the disaster financial assistance arrangements. Richard then provided a briefing note for CIAA national, which will be of significant assistance in guiding us forward through our relationships with the provincial and territorial EMO offices in Canada. Thanks Richard.

Thanks to Miles Barber who was instrumental in negotiating with the Government of Manitoba respecting their 2011 Lake Manitoba financial assistance program.

Miles successfully negotiated an agreement on behalf of CIAA member firms. Manitoba CIAA member firms are in the process of conducting the financial assistance program in that province. Miles, your efforts for CIAA do not go unnoticed. I thank you for all your hard work on behalf of Manitoba members as well as the national membership.

A teleconference with our regional presidents across Canada was very productive in brainstorming ideas to10 Claims Canada

December/January 2012

Depuis que je tiens la barre de l’Association canadienne des experts indépendants (ACEI), le nombre de mes voyages a certainement augmenté. En septembre, je me suis rendu à Ottawa où se tenaient la conférence et l’assemblée générale annuelle de la Société de gestion des risques et d’assurance du Canada (RIMS Canada). L’ACEI y était bien représentée par la présence de plusieurs de ses membres. J’ai trouvé l’expérience très enrichissante, non seulement comme président de l’ACEI, mais aussi comme particulier propriétaire d’une compagnie d’experts indépendants. J’ai établi quelques très bons contacts, tant pour l’ACEI, que pour ma propre compagnie. Je recommande fortement aux membres de l’ACEI, s’ils en ont l’occasion, d’assister à la conférence et à l’assemblée générale annuelle de RIMS Canada dans l’avenir.

Cet automne, j’ai voyagé à travers les provinces atlantiques et rencontré les membres du Nouveau-Brunswick et de la Nouvelle-Écosse. Luc Aucoin, de la section de l’ACEI du Nouveau-Brunswick, n’a ménagé ni temps ni effort en s’investissant dans les programmes de formation et les accords avec l’Organisation des mesures d’urgence. Toutes nos félicitations Luc! Comme toujours, Grant King, notre président régional en Nouvelle-Écosse, s’est dépensé sans compter pour poursuivre les objectifs de l’ACEI. J’ai également eu l’occasion de m’entretenir avec le président du Comité des mesures d’urgence, Richard Van Horne, qui a eu l’amabilité de m’expliquer la nature des liens qui existent entre le gouvernement fédéral et le gouvernement provincial relativement aux Accords d’aide financière en cas de catastrophe. Pour l’exécutif national de l’ACEI, Richard a rédigé des notes qui seront très utiles dans nos pourparlers avec les bureaux de l’OMU provinciaux et territoriaux. Merci Richard!

Miles Barber a joué un rôle-clé dans les négociations avec le gouvernement du Manitoba au sujet du Programme d’aide financière pour le lac Manitoba en 2011, et nous l’en remercions.

Miles a négocié avec succès un accord au nom des sociétés membres de l’ACEI. En effet, ces sociétés sont en voie de gérer le Programme d’aide financière du Manitoba. Miles, les efforts que vous avez déployés en faveur de l’ACEI n’ont pas passé inaperçus à nos yeux. Au nom des membres de l’ACEI du Manitoba et de tous les membres de l’association, toute notre gratitude!

Une téléconférence tenue avec les présidents régionaux du Canada a donné lieu à une séance de remue-méninges intéressante en vue de créer des bases régionales pour les secteurs www.claimscanada.ca

wards moving forward on a regional basis in areas such as membership development, CICMA/CIAA meetings, EMO strategies and, catastrophe claims response effectiveness. These teleconferences will be held quarterly and will allow us to share ideas and visions across the regions.

In October, Patti Kernaghan chaired a meeting with the CIAA National Insurance Industry Advisory Board.

I want to thank all of the members of the board for sharing their expertise and experience, providing our national organization with focus on industry trends and needs.

I read with interest some excellent articles in our last issue of Claims Canada. The quality of these submissions is first rate. In fact, the Ontario Superior Court of Justice quoted an article by Glenn Gibson in Reasons for Judgement. The court used the contents of Mr. Gibson’s article to support the judgement. Obviously, the bench thinks highly of Mr. Gibson and Claims Canada articles to use them in this way. Well-done Glenn.

Remember; be safe in your vocation and daily activities. Your individual health plays a very large factor in your profession. Encourage those around you to work safe and play safe. Be careful out there! n

comme le recrutement des membres, les réunions ACDSA/ ACEI, les stratégies de l’OMU et l’efficacité de la réaction aux réclamations en cas de catastrophe. Ces téléconférences seront tenues tous les trois mois, et nous permettront d’échanger des idées et des visions avec toutes les régions.

En octobre, Patti Kernaghan a présidé la réunion du Conseil consultatif national de l’industrie de l’assurance. Je tiens à remercier tous les membres du conseil qui nous ont fait partager leur expertise et leur expérience. Ils ont ainsi fourni à notre organisme national la possibilité de faire le point sur les tendances et les besoins actuels de l’industrie.

J’ai lu avec intérêt quelques excellents articles dans le dernier numéro de Claims Canada, articles qui sont d’une qualité exceptionnelle. De fait, la Cour supérieure de Justice de l’Ontario a cité un article de Glenn Gibson dans des attendus de jugements, ce qui signifie qu’elle s’est basée sur le contenu de cet article à l’appui d’un jugement. Il est clair que la magistrature a une très haute opinion des écrits de M. Gibson et de Claims Canada, puisqu’elle s’y réfère. Bravo Glenn!

Souvenez-vous que vous devez être toujours prudents dans vos activités professionnelles et quotidiennes. Votre santé joue un rôle de premier plan dans votre profession. Encouragez ceux qui vous entourent à travailler et à s’amuser prudemment. De la prudence en tout, s’il vous plaît! n Translation provided by Henry Arcache, Themis Translations, Montreal, Que.

NATIONAL EXECUTIVE 2011-2012 2011-2011 PRESIDENT Greg G. Merrithew, CIP, FIFAA Arctic West Adjusters Ltd. 401 – 5204 – 50 Ave. Yellowknife, NT X1A 1E2 Phone: (867) 920-2212 Fax: (867) 873-2244 E-mail: gregm@arcticwest.ca

SECRETARY Marie C. Gallagher, FCIP, CRM Granite Claims Solutions 71 King Street, Suite 204 St. Catharines, ON L2R 3H7 Phone: (905) 984-8282 Fax: (905) 984-8290 E-mail: marie.gallagher@graniteclaims.com

1ST VICE-PRESIDENT Delores Thorbourne, BA, FCIP Granite Claims Solutions Suite 103 Greystone VII 4208 - 97 Street Edmonton, AB T6E 5Z9 Phone: (780) 442-3077 Fax: (780) 466-0325 E-mail: delores.thorbourne@graniteclaims.com

TREASURER Randy P. LaBrash, CIP, CFE, CFEI Crawford & Company (Canada) Inc. 300 – 191 Lombard Avenue Winnipeg, MB R3B 0X1 Phone: (204) 947-2340 Fax: (204) 943-9168 E-mail: Randy.Labrash@crawco.ca

2ND VICE-PRESIDENT John D. Seyler, AIIC ProFormance Group 2 Robert Speck Parkway, Suite 700 Mississauga, ON L4Z 1H8 Phone: (905) 270-1723 Fax: (905) 272-7486 E-mail: jseyler@prospecialty.ca

PAST PRESIDENT Mary Charman, CIP Crawford & Company (Canada) Inc. 1 – 120 Mulock Drive Newmarket, ON L3Y 7C5 Phone: (905) 898-0008 Fax: (905) 898-1705 E-mail: Mary.Charman@crawco.ca

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EXECUTIVE DIRECTOR Patricia M. Battle Canadian Independent Adjusters’ Association/ L’Association Canadienne des Experts Indépendants Centennial Centre, 5401 Eglinton Avenue West, Suite 100 Etobicoke, ON M9C 5K6 Phone: (416) 621-6222 Toll Free: 1-877-255-5589 Fax: (416) 621-7776 E-mail: pbattle@ciaa-adjusters.ca DIRECTOR James B. Eso, BA, CIP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Phone: (519) 578-5540 Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca DIRECTOR John Jones, BA Granite Claims Solutions Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 E-mail: john.jones@graniteclaims.com

December/January 2012

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22/12/11 2:47 PM

Balancing Act Executives from 10 Canadian Independent Adjusters’ Association member firms were asked to discuss the biggest claims challenge they, as independent adjusters, faced in 2011 and what they foresaw as being the biggest challenge of 2012.

W

hile every firm, whether small, medium or national, will face its own set of unique challenges, for many the issue of staffing dominates.

How to ensure that there are enough trained staff to replace those retiring?

Where to find good, quality adjusters to handle an influx of weather events?

Do we have the capacity to handle an extreme surge of events, such as those that have plagued the industry on a global level?

Here are the challenges faced by 10 independent adjusting firms, presented in alphabetical order by company name.

Blair Boilard, senior adjuster, Algom Insurance Adjusters An insured paid for installation of a propane line on their premise when a loss occurred to the line a week later.

The contractor had initially charged a lump-sum price.

We attempted to secure a repair estimate from the contractor, requesting cost details for materials, labour and identifying sub-contractor’s pricing (including landscaping, as some digging was required), but this proved to be quite a challenge. In the end, the contractor did not comply with our request. That’s usually when “the spiwww.claimscanada.ca

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dey sense” starts tingling.

Initially, competitors were not interested in attending as the insured had a contract in place with a particular supplier.

In the end, adjusting skills were put to the test, competitive estimates eventually secured and the insured realized they significantly overpaid on original work.

No doubt this will affect the relationship with the original contractor.

I remember reading an article written by Fred Plant, which expressed the need to “verify, verify, verify.”

I couldn’t agree more. Some basic principles include verifying the proximate cause of the loss, the scope of the emergency work required and the scope of repairs, ascertaining that

spoliation does not occur (in the event that there is an opportunity for subrogation) and addressing the potential for any salvage.

Controls are needed and quality adjusting is an important service that we provide as independent adjusters.

We often wonder what would be the consequences if the police no longer patrolled the highways?

We have many examples of realizing savings for our principals of $2,000 to $20,000 or more on a loss.

Such examples are the result of experience, ongoing education and the use of technology, along with common sense.

Be accountable and challenge yourself and staff to learn something new everyday.

December/January 2012

Claims Canada

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David Riddell, president, Canadian Claims Services The biggest challenge for 2011 was an overall shortage of good, qualified people. This was not only an issue for us as independents, but for the industry as a whole, including service vendors, such as contractors.

The summer of 2011 was another

year that saw significant weather events, as well as the devastating wildfires in Slave Lake.

The weather events were spread out all over the Prairies, and Slave Lake was a considerable draw on insurance company, independent adjusters and contractors’ resources.

The sheer number and severity of the claims suffered in each of these catastrophes taxed the human resources to the maximum, and required all parties to come up with creative solutions

Coming Through For You!

on how best to use those resources.

Slave Lake was an eye-opening event for many parties, on what a large-scale major catastrophe — which displaces thousands of residents — will look like, and the logistical challenges that an event like this presents.

Overall, I think the industry as a whole responded and adapted to these challenges very well.

The shortage of good qualified people will continue to be a significant problem, not only for this coming year, but for the foreseeable future. More people leave the industry each year than join it for a variety of reasons.

Regardless of the reason, this has created a huge loss in claims handling experience and expertise. This presents a considerable problem for the industry as a whole.

Insurance still appears to be a career that the majority of people fall into, rather than choose.

As an industry we need to do a better job of communicating that insurance is a rewarding, honorable and viable long-term career choice.

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December/January 2012

This past year presented many challenges for independent adjusters and the industry in general. The one that concerns me most is capacity, and our industry’s ability to handle the large events that have plagued our counterparts in overseas events.

In Canada, we have seen our share of surge events in 2011 and we have responded admirably. The reality is, none of what we have seen here approaches the magnitude of global events.

In underwriting/loss control there is much modeling discussion, but are we doing enough to follow through on what claims resources would be needed to respond? Events of this nature require a heightened sense of urgency and customer response and tax resources over lengthy periods of time. Are we ready? www.claimscanada.ca

22/12/11 2:47 PM

CIAA has begun to liaise with our industry counterparts. Setting aside the ever-present debate around external/internal and allocated/unallocated expense, we, as a collective industry, require more dialogue and pre-loss planning to make sure we are there when the time comes to do what we do best — help people attach to the policy promise when they need it most.

As independent adjusters we invest heavily to help drive our business and deliver leading customer-centric technology solutions. Over the last 18 months the proliferation of I.T. solutions, both hardware/software, and the pace of change in this space, is remarkable.

We see internal operational-dashboards, external performance-dashboards, predictive analytics and a real push on fraud solutions using relational databases to gather and analyze data from multiple sources.

There are a myriad of process improvement technologies designed to

reduce cycle-time/expenses, manage indemnity and improve customer experience.

Our challenge as independents is where do we invest our dollars when getting it wrong could have disastrous consequences? And once we chose, how do we make sure the technology delivers the results our clients want and need? As if that’s not enough, how do we connect systems with client/industry databases functionally and in real-time?

How far are we from virtual industry-wide connectivity?

Peter Hammill, senior partner, Delong & Associates Inc. As a partner in a small, eight employee, independent adjusting firm, the greatest challenge of the past year — and indeed the past number of years — has been building capac-

ity for busy periods, then struggling to keep those employees busy, motivated and challenged during periods of lower claims volume.

Accepting that claims volume can be driven by seasonal factors, insurers need to appreciate that the capacity we have created to handle their overflow during December to March needs to be supported through the spring, summer and fall, as well.

I am not suggesting insurers do this on purpose; they clearly have their own capacity issues to deal with, and most attempt to level the workload on their employees. Insurers must understand that if we are going to be here when they really need us, they must provide year-round support so that we are able to maintain adjusting staffing levels. We do not want to lower the peaks, but we need to level the valleys.

The challenges going forward will be similar as in the past. We need to continue to show insurers the benefit and importance of a healthy indepen-

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www.claimscanada.ca

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December/January 2012

Claims Canada

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dent adjusting industry. More must be done on our part to reduce the adjusting activities being performed by restoration companies, but that can only happen if insurers can see the value we bring to both them and their insureds as a professional and truly independent set of eyes and ears.

Michael C. Holden, president & CEO, Granite Claims Solutions

A major challenge faced by independent adjusters in 2011 was the attraction of adjusters in a shrinking pool of human resources. While various industry associations provide awareness and career-focused educational programs to attract new talent into the field of claims adjusting, we are seeing a definite void in the intermediate and senior adjuster categories. To be viewed as a desirable place of employment, Granite Claims Solutions has developed various employee-engagement initiatives that assist all colleagues in achieving a desirable work/life balance. New and enhanced employee engagement programs offering flex hours, virtual offices, corporate share options, relocation packages, as well as continuing education and training programs, have greatly contributed towards establishing a positive workplace climate and culture.

16 Claims Canada

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December/January 2012

As we, as an industry, strive to attract new adjusters into the field of claims management, we must also make available to them increasingly interactive and leadingedge technology. Entrants into the field of adjusting will look for independent adjusting firms that offer both flexible work environments, as well as technologically-driven claims management tools such as touch-screen reporting devices with mobile internet access, “on demand� training programs and 24/7 online resources. Therefore, we believe a major challenge for 2012 is the need to allocate the necessary I.T. resources to the development of increasingly sophisticated and user-centric claims management and reporting tools.

Russ Fitzgerald, Edmonton branch manager, Kernaghan Adjusters Looking back at the past year, I would have to say the biggest challenge we faced was staffing. Being one of the busiest years in some time, the challenge was complicated by claims volume. Our company recognizes the difficulty we confront when hiring qualified independent adjusters and supports the managers nationally.

But, as anyone who is in a position of trying to hire in today’s market knows, attracting competent staff is extremely tough. There are very few adjusters with twenty or more years of experience.

On top of the challenges associated with hiring new staff is that many qualified seasoned adjusters are close to retirement. As we hire new staff, it creates an ever-increasing need for training to replace the retirees. Unpredictable claim volumes complicate our smaller markets.

During the Slave Lakes fires, and the weather-related volume this summer, we dispatched a number of our adjusters to deal with volume needs. Taking experienced adjusters away from the day-to-day business further accentuates the need for expertise on the job and in the field.

There seemed to have been a drop in staffing new adjusters in the early nineties, which created a hole in the twenty-plus-year adjuster resources. With the approaching retirements in the next five to 10 years, and the unpredictability of claim volumes, independent adjusting companies will have to change their philosophy regarding the staffing of new adjusters.

I believe 2012 must be the year independent adjusting companies start looking at hiring new adjusters as an investment in the future. We need to build training and mentorship programs for new employees or graduates of the Insurance Institute. These programs need to start now to preserve our profession and guarantee that the great wealth of knowledge our soon to be retirees have will be passed along to the up and coming young adjusters.

www.claimscanada.ca

22/12/11 2:47 PM

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J.R.(Jim) Matheson, vice president and general manager, Marsh Adjustment Limited The challenges Marsh Adjustment Limited faces are not unique to 2011, nor are they to the claims adjusting profession. Like many industries, ours has a unique workforce, and a multi-generational workplace needs flexibility and innovative methods to accommodate younger employees who present varied demographics as they balance work with their personal lives. Through detailed and effective planning for both ownership and management, we are attempting to address these issues.

The lifeblood of an independent adjustment firm is regular support from our clients. We, like other businesses, also face escalating costs in running our company. There continues to be pressure from clients not to increase our fees, hence we face a

challenge in maintaining not only our current staff but also the hiring of new employees.

Originally incorporated in 1956, our firm underwent a name change in 2011. We firmly believe the quality of our product has resulted in the ongoing support from our clients. We are proud to be employee owned and to provide adjusting staff, who live in the communities where our offices are located. This results in prompt response times when claims are received and is appreciated by the insured, their broker and the insurance company. Our goal is to continue to stay on the cutting edge of technology, and expanding our staff to ensure our firm remains young, vibrant, and professional.

We are broadening our knowledge base to offer experience in a multi-diverse culture to ensure we are prepared to deal with an ever-changing claims environment. Our commitment to quality control and education remains a strong focal point going forward. We

remain confident we will be able to continue to weather the storms from not only Mother Nature, but also the ever-changing insurance industry.

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December/January 2012

Restoring Peace of MindÂŽ

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Rob Johnston, claims representative, Midwest Claims Services The biggest challenge Midwest Claims Services faced in 2011 was trying to find and acquire trained and qualified individuals to assist with claims handling. Even when posting positions, we found that, locally, we were unable to find individuals that fit the criteria we were looking for in an adjuster. As a local firm, it is hard for us to justify moving someone across the country to fill that position. However, in order for us to continue growing and moving forward, that day may come.

In addition, we are finding that the age of the adjuster who is qualified is increasing. This presents a challenge when you are looking to, and planning for, the future. The hope is that the new insurance program currently being run at the Saskatchewan Institute of Applied Science and Technology will assist in the re-population of the insurance workforce in Saskatchewan.

The biggest challenge facing Midwest Claims Services in 2012 will be keeping up with a fast-paced and growing Saskatchewan population and economy. As mentioned, the issue is finding qualified and competent people to assist with an increasing and rapidly growing Saskatchewan marketplace. In addition, the types of claims that we are seeing in the province are diversifying, therefore the need for continued training and education is a must in order to be able to continue to provide service to our clients growing needs.

Miles Barber, president, Network Adjusters Ltd.

When I first learned that Network Adjusters had been selected to participate in Claims Canada’s cover feature for December/January I was

20 Claims Canada

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both surprised and grateful.

I immediately began the process of examining all that had occurred in 2011 for both my company — Network Adjusters — and for me.

Foremost, this was the year Network Adjusters would celebrate its four-year anniversary, while also opening a branch in Brandon, Man. I was fortunate to have been able to engage Craig Shanks as my branch manager in Brandon. Craig is a longtime friend and respected colleague.

Interestingly, it seemed that during this past year, no matter the venue I have been in – industry function in Winnipeg or boardroom in Toronto — I had participated in discussions on personnel.

“Where can we find quality people for our company?”

Thus, the biggest challenge I faced this year was one that I dare say all of

December/January 2012

the p&c industry faced: finding the right person with the right skill set to bring into your organization.

I believe this was not only the challenge of 2011, but of 2012 and beyond.

To attract quality employees I believe you need to provide your employees with security and the resources they need to do their jobs in an environment that is respectful. Allow them independence and the ability to prosper and watch how they grow.

The profession of independent adjusting is a rewarding one. A career in the p&c industry can be fulfilling.

We should all be grateful for what our industry does for its policyholders in their time of need and for what we draw from our industry through our own careers.

Maybe we should loosen the lid on this secret; that just might open up new possibilities.

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David Cernak, president, PCA Adjusters Limited This past year brought us four large weather-related events in our geographical territory, and, with them, the challenge to successfully meet the clients’ service expectations, despite the volume of claims!

As is widely known, our industry faces a shortfall in experienced claims people, and, coupled with this, companies continue to seek out ways to reduce expenses. So the pressure builds, whether it is in an under-staffed claims department, or examiners with exceedingly high fi le loads. It is often customer service, and therefore peace of mind (the very item an insurance policy is expected to provide), that suffers.

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We are all still feeling the ongoing effects of the 2008/2009 financial meltdown, and, given the present situation being played out in the European financial markets, people are on edge. This requires that we, as independent adjusters, focus even more on providing the customer service, reassurance and expertise that the policyholder needs. We must remember that although we may have many fi les on our desk, the policyholder has one claim they want properly handled.

Looking ahead to 2012, the challenge will continue to be customer service in tough economic times. We must continue to balance excellent customer service with a thorough and proper investigation to ensure that both the policyholder and the insurer get what they paid for. We can only do our very best to keep all lines of communication open, clear and concise in order to confirm to insurers the value of the independent adjuster, and confirm to the policyholder of their value as a client.

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• spotlight S

Continued Growth

Canadian Claims Services has gone from being a one-office adjusting firm, to a four-office firm serving Western Canada — all in less than three years.

BY LAURA KUPCIS

A

now-or-never moment prompted David Riddell to start Canadian Claims Services

(CCS).

After working for 20 years for one company, Riddell found himself reevaluating the direction of his career when the adjusting firm he worked for was acquired by another firm. Insurance companies and brokerages approached him, but Riddell realized he had only ever worked as an independent adjuster and he enjoyed that side of the industry.

A partner offered to finance the start-up costs for a small independent adjusting firm, and Riddell jumped at the chance. So, on Jan. 5, 2009, CCS was launched.

Little did he know that the initial plan to just start a small oneoffice firm in Edmonton would soon evolve into something much larger, as the company expanded to four locations in Western Canada within a short amount of time. CCS was able to bring on talented staff that Riddell had worked with over the years. “If we weren’t going to make them part of our organization, then somebody else was,” Riddell said. “I thought, if we are going to do this, then we should be thinking bigger. I spoke with my partner, he said yes, let’s look at this, so we found ways to make it all happen.”

Part of the growth was the purchase of Triad Claims Service in May 2010. “That was an opportunity that came to us as we were looking to get 24 Claims Canada

a presence in Calgary,” he said. “We acquired Triad, which gave us instant presence and credibility. They had five adjusters, so away we went.”

In all, CCS has 19 adjusters in Edmonton, Calgary, Vancouver and Winnipeg.

Cautious expansion While growth remains a focus of the firm, the team focuses on “smart growth” rather than expansion for the sake of expansion. If the right opportunities present themselves, Riddell will consider them as they come, but they must make good sense for the company and for the customer base.

“Our goal is that we just really want good quality people and we are not going to just go into a location because somebody asked us to,” he said. “If we can’t put a talented person in that location, we won’t be there.”

Expansion is expensive, not to mention challenging. Part of the challenge is to ensure consistency among the branches, in addition to guaranteeing quality in all avenues of the business.

As a relatively new organization who is expanding quickly all while letting customers — both potential and existing — know what they can expect from the firm, which includes delivering on a promise. “Delivering on the promise is always the challenge when you are in a constant state of growth,” Riddell said. “So, for the last little while, we just said, ‘We’re in the four locations, things have settled down a little bit, let’s make sure the infrastruc-

December/January 2012

ture is in place.’ As a result, we have taken the time to put a lot of systems and infrastructure in place that allows us to do the things that we need to do and measure our business — the quality and all the things that are important to us and to our customers.”

Staffing struggles To boot, finding the right staff to fit in with the company’s value system and goals has been tricky. Riddell is very thankful for the staff he had in the early stages of the company, pointing out that they were the reason the company was so successful right from the start.

It was people Riddell had worked with for many years and he knew what they were capable of and what to expect in terms of work flow and work ethic.

“I knew that I could count on those people to do what I needed them to do because I had such a long-standing history with them,” he said.

“When we are as new as we are, we have very high expectations, we do expect a lot and we need to be able to deliver what I am out there selling,” he said. “The staff need to be able to do that; I can’t do it all.”

So, CCS faces the same hurdle that many other adjusting firms face: A lack of highly skilled adjusters to choose from.

Client services But what does attract adjusters to the firm is the continuous growth — always a draw for those looking for www.claimscanada.ca

As a society, people are demanding quicker response times, lending to a need for immediacy when claims handing.

CCS is able to deliver that.

long-term potential. Not to mention, because the company is smaller, it is able to offer flexibility to both its staff and its customers, Riddell said.

Drawing on his experience working for a large company, Riddell ensures that as an employer, he is able to offer his staff all that he appreciated as an employee. This is meshed with ensuring that the technology and staff are in place in order to deliver on the promises made to clients. CCS strives to offer a personalized-type of business, both for its staff and its clients.

“Clients are looking for relationshipbased, high quality type adjustment, with specialized knowledge. Those kinds of things are what we are delivering,” Riddell said. www.claimscanada.ca

“Everybody has got challenges; this is a tough business,” Riddell said. For CCS, one of the bigger challenges is obtaining the opportunity to prove that there is a difference in the quality of service that the firm delivers. “We do deliver on what we are saying, we do deliver on the promise,” he said.

“When we go out there, we are delivering quality and service.”

As a society, people are demanding quicker response times, lending to a need for immediacy when claims handling. CCS is able to deliver that.

As a flexible firm, they are able to ask customers how they would like things done instead of telling a client how it will be done. The firm’s claims man-

agement system allows clients to log in and see the file. “We don’t have to put the square peg in the round hole,” Riddell said. “We can create the hole.”

A key decision for the company was to join the Canadian Independent Adjusters’ Association (CIAA).

Having always been a member of the CIAA, when Riddell started up CCS, ensuring the company was a member was essential. “It provides an excellent infrastructure and a great opportunity to share ideas,” he said of the organization. “There are great opportunities for us, as an organization, particularly when legislative changes are happening. To have a voice, that’s important.” 

December/January 2012

Claims Canada 25

The Moving

Target Settling a claim based on actual cash value

BY GREG MERRITHEW

Settlement of an insurance claim requires the agreement of both the insurer and policyholder on the measure of recovery as agreed upon within the contract of insurance. Typically insurance policies insure the actual cash value (ACV) of the item on which coverage has been provided. Policy wordings do not, in the normal course of construction, articulate a definition of ACV. Policies can provide replacement cost endorsements, as well as guaranteed replacement cost and stated value agreements. These are normally defined. Notwithstanding these other terms of settlement clauses, in the vast majority of policies issued by insurers, the ACV is the usual terms of settlement. At least in the interim stage of the claims process, if not the final stage.

To achieve ACV settlement, the adjuster must be aware of exactly what is meant by actual cash value. In some cases it can mean the cost to the policyholder to replace the item with exactly that which was lost. This must take into consideration age, condition, size, and all other measurable dynamics that the item in question is gauged by when a person initially purchases the item. Take, for example, a vehicle.

If the policyholder lost a 2004 Ford 26 Claims Canada

F150 4x4 long box, with a 5.0 litre engine, complete with box liner, leather seats, with 75,000 km on the odometer and in good condition. Then the cost to purchase the exact same vehicle FOB the policyholder’s location would be perfect indemnity.

To achieve this perfect indemnity would, of course, require finding this exact vehicle described above, available for sale within reasonable proximity to the policyholder’s domicile. The price to purchase this vehicle would be considered the ACV. As we all know, this fictitious vehicle rarely exists. We can always find a 2004 Ford F150 for sale, but need to add or subtract options to arrive at what we believe is a reasonable comparable valuation of ACV. Further, the asking (published) price by the vendor is not necessarily the final price open for acceptance. So assessment of ACV is nebulous.

In property losses, the valuation process is more problematic. After the total loss of a structure, assessment of the ACV needs a more pragmatic approach. Buildings are so different that finding comparable structures for sale in the area of the insured structure is highly unlikely. Plus, the sale of structures is almost always tied to the value of the underlying land. Thus, the adjuster must utilize some other methodology in valuation of the building’s

December/January 2012

ACV. In most cases, replacement cost less reasonable deduction for depreciation based on age and condition is utilized.

Respecting ACV, on review of jurisprudence by Canadian courts, recent cases reported includes Ollerhead v.

Ecclesiastical Insurance1 heard in the Supreme Court of Newfoundland and Labrador. This judgement, given Aug. 31, 2005, restated the principals of interpretation of insurance contracts as laid out by the Supreme Court of Canada. The courts take the position that in interpreting an insurance contract, the rules of construction relating to contracts are applied as follows: • The court must search for an interpretation from the whole of the contract, which promotes the true intent of the parties at the time of entry into the contract.

• Where words are capable of two or more meanings, the meaning that is more reasonable in promoting the intention of the parties will be selected.

• Ambiguities will be construed against the insurer • An interpretation, which will result in either a windfall to the insurer or an unanticipated recovery to the insured, is to be avoided.

From current jurisprudence, it is the court’s position that it would dewww.claimscanada.ca

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pend on the intention of the parties at the time of the execution of the insurance contract to ascertain what the intent of actual cash value is.

The adjuster should, when necessary, enquire to the broker who sold the policy of insurance as to what their understanding of ACV is. This can be critical especially if the issue of ACV is headed to litigation or the appraisal process. Most brokers I have discussed ACV with, tend to articulate it to be replacement cost plus or minus appreciation or depreciation.

That being the case, it is more likely than not that courts in Canada would identify the actual cash value of a building (or other insured property) to reflect replacement cost less depreciation based on current jurisprudence.

To complicate matters somewhat, in the United States, courts, according to IRMI.com, have defined ACV through three different approaches: 1. Replacement cost minus depreciation.

2. Fair market value.

3. According to the “broad evidence” rule which is a judicious combination of one and two above.

In the USA, method number one is the traditional insurance industry definition. Over the years, courts have upheld this meaning and interpretation. According to IRMI.com, a Kansas court summed up ACV as follows: “The definition of ‘replacement cost’ stated in the policy as the ‘full cost of repair or replacement (without deduction for depreciation)’ implies that replacement cost is greater than actual cash value, and that actual cash value must mean ‘full cost of repair or replacement (with deduction for depreciation).” Fair market value also seems to be a rather straightforward method, as it has always been thought of as “what a willing buyer will pay to a willing seller,” IRMI.com noted.

So given the above, ACV certainly can be elusive. For the most part however, in Canada, ACV is generally defined as replacement cost less reasonable depreciation for age and condition.

So with that focus, an adjuster must complete all necessary research and evaluation to ascertain the replacement cost, the age, the pre-loss condi28 Claims Canada

tion and the obsolescence, if any. This, of course, can be challenging if the item has been completely destroyed such as in a fire. Especially if all the policyholders records documenting the structure happened to be in the structure at the time of the loss! Or the property under coverage has been stolen, such as art or jewelry.

Art and jewels made of precious metals and stones can, in fact, appreciate in value over the original purchase price. Therefore, ACV could in fact be valued by determining the original purchase price plus appreciation, based on the value of the precious metal (such as gold) at the time of purchase appreciated by the percentage of change in increased value as of the date of loss.

On contents claims, the quantity of items lost such in a residential house fire can make ACV valuation arduous, but the process is still the same.

Many paths can lead to proper investigation of the condition of the item under exploration. Buildings generally have documentation available at municipal building inspections departments, land title offices and law firms involved in the transaction of the sale.

Property appraisal reports can be obtained from the appraiser who generated the report, from lending institutions who have the chattel as security or from previous owners of the property. PIPEDA, or provincial/territorial privacy legislation, will require the

December/January 2012

policyholders authorization for the adjuster to obtain this information.

On contents claims, the quantity of items lost such in a residential house fire can make ACV valuation arduous, but the process is still the same.

Generally the policyholder completes a Schedule of Loss that inventories all items destroyed. The ACV of each item is usually assessed based on information provided by the policyholder. The utmost good faith maxim applies. The adjuster must accept the information provided by the policyholder, unless evidence obtained by the adjuster shows, on a balance of probability test ,that the information provided is not accurate.

With the age of each item provided by the owner, the adjuster must then determine the design service life (DSL) of the item. DSL is the lifespan of the item that the manufacturer has taken into consideration when the selection of materials was made and the quality of fabrication was selected. A manufacturer usually has a price point in mind that they target when the decision on DSL is made. For instance, if a manufacturer is targeting volume sales at a price point below their competitors, they will reduce the manufacturing costs by selecting lower quality materials and cheaper fabrication costs.

The item built, therefore, will not last as long as an item which has higher quality, more robust, materials constructed with tighter tolerances and a more rigorous production inspection of the final product.

For example, two couches may look generally the same, but the higher quality couch has a hardwood frame affixed with brass screws and the lower quality couch has a softwood frame fastened with staples. The higher quality one has memory foam padding covered with leather while the lower quality has batting covered with cloth.

Clearly, under the same conditions of use, it is reasonable to expect the higher quality couch will have a longer DSL than the lower quality one.

Given the above, on determination of ACV, if the policyholder purchased both couches at the same time, then the depreciation of the higher quality couch should be less than the www.claimscanada.ca

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lower quality couch. Unfortunately, it seems, from my experience, most ACV schedules of loss have the same depreciation factor applied to both.

This is unfair to either the policyholder or the insurer.

The depreciation factor typically would be the age of the item in question divided by the DSL. Then condition adjustments must be applied.

This adjustment is, in most cases, a judgment call by the adjuster and will ultimately be a negotiable factor. Obsolescence may also have to be factored in. Obsolescence is the state of being which occurs when an object is no longer wanted even though it may still be in good working order. For example, a monochrome computer monitor collecting dust in the basement. Although the DSL may not attract significant depreciation, the value of the object to the policyholder through resale or use may be diminished. Of course, if the monochrome monitor is still in use by the policyholder, then that is a different story from the insured’s point of view.

Adjusters must be able to defend the methodology utilized to arrive at the ACV on each and every item claimed.

Far too often adjusters have applied a 50/50 approach (either half full or half empty) on contents schedules, taking the position that in the end it will all balance out. I, for one, doubt this balance is achieved. I suspect either the insurer achieves a windfall or there is an unanticipated recovery by the insured.

It is uncommon that even with proper research into all the factors mentioned above, a settlement can be achieved just by providing the policyholder with a valuation set by the adjuster. Some negotiation has to be anticipated. When preparing for settlement discussions, the adjuster must be adequately prepared. Review all research and documents obtained to establish ACV. Ascertain the most supportable position (MSP). For the adjuster, the MSP would be the lowest valuation supportable by evidence that can be offered to the policyholder. It must be supported by documentation of replacement 30 Claims Canada

Adjusters must be able to defend the methodology utilized to arrive at the ACV on each and every item claimed. valuation with a fair application of the DSL towards ascertaining the depreciation on the item(s) in question.

The adjuster must as well set the valuation for which is the least acceptable result (LAR) from valuation research. The LAR would be, from the adjuster’s point of view, the highest valuation supported by study.

Because of the complexity of arriving at ACV in most situations, it is unrealistic to believe that the valuation determined by the adjuster can be cast in stone. For an equitable conclusion, a valuation range between the MSP and LAR must be established. The more

December/January 2012

research and evidence obtained, the narrower the range between the two positions can be achieved. With the policyholder’s valuation range intersecting the adjuster’s range, the settlement of the ACV can be achieved.  Greg Merrithew is the managing director of Arctic West Adjusters Ltd. and the president of the Canadian Independent Adjusters’ Association.

1. Ollerhead v. Ecclesiastical Insurance Office PLC 2005NLTD145

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INTRODUCING The Ontario Chapter Presidents Canadian Insurance Claims Managers Association’s Ontario Chapter President: Jo-Ann Eccleston, CIP

Canadian Independent Adjusters’ Association’s Ontario Region President: Teresa (Teri) Mitchell, FCIP, CRM, FCLA, FCIAA, FIFAA

BY LAURA KUPCIS

Teresa (Teri) Mitchell believes in giving back to the insurance industry in which she has worked for more than 26 years. This includes 18 years of active involvement with the Canadian Independent Adjusters’ Association (CIAA) as a member of its Ontario region executive.

“I have held every position on the executive,” Mitchell said. “Getting to president was the inevitable conclusion after having served for all those years.”

Mitchell says numerous benefits accrue to being a member of the CIAA, but having a say in the future direction of independent adjusting is reason enough to join the association. “It’s about having our voices heard when it comes to our jobs and the future of our profession, rather than having new regulations, procedures and laws imposed without our participation on how it may impact professional loss adjusters,” she said.

Over the course of her two-year tenure as Ontario region president, Mitchell’s number one goal is to increase the visibility and exposure of the CIAA. Because education is so important to Mitchell, she sees two specific ways to accomplish this: attend the CIAA/CICMA joint conference, and attend as many Insurance Institute of Ontario convocations as possible. She will not only be there to congratulate the graduates and award recipients, but also to raise awareness in the next generation of industry professionals about the CIAA. “Education has always been my forté, what propels me forward,” she said. “Whether it be insurance-related education, or even just personal growth, I have been taking night school courses since I finished high school.”

This comes as no surprise when one looks at the impressive number of designations noted on her business

Learning is essential to continued success, and being a part of the Canadian Insurance Claims Managers Association (CICMA) provides a perfect opportunity to participate in education, says CICMA member JoAnn Eccleston. She started volunteering her time with the Ottawa chapter back in 1994. She held every position with that chapter until 2002, including serving as a national delegate. She was eventually transferred to the Greater Toronto Area and took a step back from the executive.

Another transfer brought her into Toronto’s downtown core. Once again she became involved in the executive, this time for CICMA Toronto. She started off as program director four years ago, before jumping right to vice president of the Ontario chapter. A switch in the executive made Eccleston president a year earlier than anticipated. But that doesn’t mean she isn’t ready to take on the role.

One of Eccleston’s primary objectives during her two-year tenure as president is to showcase the benefits of CICMA membership. She laments missed opportunities to tell the industry about all the good things the association is doing, including charitable work. CICMA’s largest fundraiser is the annual golf tournament, which raises money for Camp Oochigeas — a camp for children living with cancer. The Ontario chapter has been supporting the camp for the past 16 years, raising $26,000 during the 2011 tournament alone.

Beyond its charitable work, the CICMA sponsors two Insurance Institute chartered insurance professional awards. And differentiating itself from any other association in the industry, the CICMA promotes arbitration, mediation and the resolution of claims through

Continued on page 34 32 Claims Canada

December/January 2012

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card. Mitchell joked when she was recently introduced at a convocation, they rhymed off her designations by quipping, E I E I O. “I know, from CIAA’s perspective, it is extremely important that CIAA’s designations [FCLA, CLA, FCIAA] are promoted and widely recognized in the industry,” she said. “They are prestigious designations depicting top-notch adjusters and they differentiate CIAA members in the eyes of our clients.”

And because education is such a key focus for Mitchell, she is working on augmenting the education currently offered to CIAA members. The association’s Ontario region hosts an important seminar for adjusters in the spring and, beginning in 2012, the executive wants to add a second seminar in the fall. The seminars are free all members; non-members pay only a nominal fee. Anybody is welcome to attend, including other independent adjusters, insurance company staff, brokers and contractors. The seminar usually runs for half a day and covers two different topics affecting the claims industry.

The CIAA/CICMA joint conference is to be held in Toronto on Feb. 7, 2012. The theme, Auto Reform; Did it Perform? is relevant to both claims managers and adjusters alike, she said.

The joint conference provides claims managers and adjusters a forum in which to share ideas. “It is of mutual benefit for CIAA and CICMA members to meet each other, as they work together frequently,” Mitchell said. ●

34 Claims Canada

December/January 2012

the Canadian Inter-Company Arbitration Agreement.

“I feel so passionate about good claims service and education and the CICMA is such a great forum for claims adjusters,” Eccleston said. One of her goals is to make companies more aware of the value of association membership.

For Eccleston, networking opportunities are a key benefit to being a member of the CICMA. “It is so important to exchange information and discuss matters of common interest with our peers in the industry,” she said. “It’s also great to develop relationships among people engaged in the direction, the investigation and adjustment of claims. That’s what we do. We all do the same thing, we just work for different companies.”

The CICMA promises a high standard of ethics, and that requires continued education, Eccleston says. The Ontario chapter holds four educational seminars a year; each includes a guest speaker or a panel of experts. The meetings, including lunch, are free for members. “It’s all about providing that good quality education for our membership,” she said.

The joint CICMA/CIAA conference is held in Toronto in February every year. “We are bringing two organizations together and we are sharing education,” she said. “And who better to be involved, since claims managers deal with third party adjusters? They are doing work for us. We want to make sure that they are getting that same education, that same understanding and line of sight as to claims adjudication.”

Partnering with the CIAA is key, she says. The joint conference is a way to open discussion between the two associations, which in turn allows for a better understanding of what the other needs and wants. ●

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Game Changers: Environment and Economy Bad weather and economic pressures will force insurance change

BY ROWAN SAUNDERS

The growing frequency and severity of catastrophic weather events resulting from climate change has had a major impact on the Canadian insurance industry. The industry is also currently facing a variety of pressures from the global economic environment. From my view, economic and environmental forces are pushing insurers to an inflection point from which the industry will either adapt and grow, or risk a steep decline in profitability. To adapt, it’s important to have an in-depth understanding of how these factors are affecting our businesses and what we can do from an operational standpoint to lessen this impact and increase profitability.

Economically, Canada is faring pretty well relative to the rest of the world, having emerged from the 20082009 recession somewhat unscathed with a strong credit rating and currency appreciation against its peers.

However, this does not mean that we are immune to global developments, with recent forecasts predicting miniscule GDP growth and a long-term, low-interest rate environment. Additionally, regulators are proposing new and more stringent capital regimes, requiring insurers to hold more financial resources to protect solvency.

These factors place the p&c industry under a great deal of pressure given our ability to generate a profit and sustain a reasonable return on equity is reliant on two sources of income: underwriting profit and investment income. A 36 Claims Canada

soft market has resulted in the industry running at an underwriting loss with a combined operating ratio above 100 per cent, and low interest rates have forced fixed income yields to levels lower than those seen in the last recession.

With the recovery of interest rates largely out of our control, there is now a great need to focus on the underwriting result. However, compounding this challenge is the increasing severity and frequency of catastrophic weather events. Weather and catastrophe management are at the forefront of our minds as the industry has been hit with significant claims activity from intense weather including earthquakes, flooding, hurricanes, hailstorms and snowstorms in recent years.

Consider this: 2010 was the 33rd consecutive year of above average global temperatures. The correlation between greenhouse gases and greater severity of heavy rain and flooding has increased. There were 167 natural catastrophic events including the New Zealand and Chile earthquakes, European winter storm and Australian floods, in 2010.

Severe weather patterns have continued into 2011, with major catastrophic events around the world. Approximately 26,000 people lost their lives in catastrophes in the first six months of 2011, most of them in Japan.

With more than $70 billion in insured catastrophic losses in the same time-

December/January 2012

frame, 2011 already ranks as the second most expensive year according to Swiss Re’s sigma statistical records. This figure was only surpassed in 2005 when total catastrophe claims amounted to $120 billion, with hurricanes Katrina, Wilma and Rita causing claims of more than $90 billion. With an increased population moving into coastal regions, the potential for significantly higher claims activity is even further amplified.

If there’s one takeaway from all these statistics, it is: Expect intense weather events to escalate and become ever more frequent.

Shaping our response to catastrophic weather events by enhancing our weather modeling has been a key element to our continued progress. Modeling is one way insurers try to predict catastrophic outcomes by applying demographic, geographic and weatherrelated data to their underlying portfolios. There are, however, limits to what these models can predict. For example, they can only predict damage based on known hazards, such as wind speed and ground movement, and not the resulting ‘secondary loss agents’ that may arise, such as the tsunami following the www.claimscanada.ca

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needed for periods of time in excess of their contract period; • Be aware that contract wording and clauses will be tested; 5) Be ready for fraud; • Understand and manage accumulation; • Insureds should not underestimate the potential for business interruption losses, as recuperating from a major catastrophe can take much longer than the indemnity period.

The gap between strong and weak industry players will continue to in-

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Japan earthquake, levy failure in Louisiana after Hurricane Katrina, or postcatastrophe inflation due to supply issues. It’s important to remember that modeling is only a tool — a deep understanding of the underlying portfolios is still needed in order to anticipate complications arising from secondary loss agents and the effects of aggregation.

We also take the time to learn from previous catastrophic events, the most recent of which was the 2010 Chilean earthquake, an 8.8 magnitude disaster resulting in a gross loss of £1.4 billion for RSA. As a result, we’ve been able to apply this learning to our preparation for weather-related catastrophes in Canada.

Our key takeaways from Chile were many: • Preparation is key: With the resulting structural damage and power outages following the earthquake, our people on the ground needed to know how to react, as normal modes of communication were not viable.

Within four hours of the earthquake our claims handlers were starting to survey the damage; within 48 hours our Concepcion office leased a suitable command center, and within four days, systems were back up and running; • Catastrophes are complicated and flexibility is key. RSA flew in 30 of the company’s best claims people from around the world to assist local employees. A specialized catastrophe team was mobilized in order to manage the process of servicing the 32,000 claims received (equivalent to 10 years worth of claims), in addition to the support functions of finance, HR and IT divisions. Essentially, an entire business unit needed to be mobilized in a short period of time in order to deal with the complexities arising out of a major disaster, while ensuring that this was done in a cost effective manner; • Consider whether third party claims adjuster and vendor contracts will still work in the extreme. With an earthquake of this magnitude, many vendors were unable to fulfill contracts given damage to their own operations, while those that could were

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The Right Focus

BY LORI FESTARINI AND NEIL BUTLER

The stories about quick and cheap — and sometimes miraculous — resolutions to environmental claims, in addition to the lawsuits, are endless.

However, the practice of suspect resolution of environmental issues raises many questions for the experienced practitioner.

The biggest concern is the potential injustice that flawed remedial implementations have on the insured and the insurance companies in the form of “dragged out” unclosed files that leave the insured

frustrated and feeling helpless. Such outcomes can be avoided by engaging an experienced professional team that can communicate and implement the necessary engineering principles and regulatory requirements to provide an effective resolution to the claim.

The story usually goes like this: A leak from a furnace oil tank occurs at a house in small town Ontario. The spill results in soil and groundwater contamination under the house. The typical remediation estimates may include the relocation or underpinning of the house to expedite the removal of the contamination.

Then the consultant makes the recommendation to implement a nonintrusive approach involving the in-

troduction of “a proprietary solution” to the ground to stimulate the natural organisms with the intendant promise to clean-up the site in three months for a fraction of the cost. An adjuster or claims manager is often faced with having to determine the most reasonable remediation approach relative to a defensible solution to obtain closure of the file, while ensuring a reasonable approach to amount of effort and cost incurred.

Cost is typically the key factor that can dictate the selection of the approach to remediation. However, does a cheaper approach make sense if it does not incorporate good science? The objective of the clean-up

and subsequent claim resolution is to understand the dynamics of the loss, and provide an effective permanent resolution at a manageable cost that results in a closed file with no call backs. Where ineffective site remediation has been implemented, the claim is not resolved, and in many cases, the result includes reopening the file and perhaps the lengthy and arduous task of a second remedial effort. This not only incurs additional costs, but creates even greater frustration for the insurer and insured.

Preventative measures to ineffective remediation do exist. There are a number of factors that an the adjuster or claims manager must consider when dealing with an environmental claims.

• Has the consultant adequately assessed the subsurface conditions and impacts to soil and groundwater? In other words, is there a clear understanding of the forensics of the spill?

• Are the site stratigraphy (subsurface soil conditions) and preferential pathways for contaminant migration clearly understood?

• Have the impacts been fully delineated, both vertically and horizontally?

• Is contaminant impact to the bedrock a potential issue due to the presence of fractures that can complicate the selected remediation strategy?

• Does the insured rely on potable water (drilled or dug well) for their drinking water supply?

There are a number of factors that an adjuster or claims manager must consider when dealing with an environmental claim.

• Is free product an issue if considering bioremediation?

• What are the appropriate regulatory standards that should be implemented?

• Are there any triggers that may result in “non-coverage issues” or that may complicate coverage, such as an

adjacent property with a problem, or another contaminant source or historical release at the site?

The questions above need to be asked. Project details need to be considered by the consultant prior to and during the Phase II Environmental Site Assessment (ESA). A complete and thorough Phase II ESA, with scientifically defensible information will allow the consultant to advise the insurer of the factors that will affect the financial reserves and the schedule required to complete the program.

From a regulation standpoint, the Ontario Ministry of the Environment (MOE) recently amended an important environmental regulation in Ontario that resulted in more stringent soil and groundwater standards for contaminated sites. The requirements are included within the Ontario Brownfield Act, Ontario Regulation 153/04 – Records of Site Condition, Part XV.1 of the Act, as amended (O.Reg.153/04). The amendments detail more prescriptive and comprehensive requirements for environmental

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However, the adjuster or claims manager, needs to be confident that the approaches taken to assess the site, to evaluate potential remedial options to complete the remediation and to confirm the remediation, have, in fact, taken place and are technically sound and defensible. site assessment and remediation programs, ultimately resulting in a more robust “standard of care.� While the regulation specifically applies to the submission of a Record of Site Condition (RSC), insurance claims do not typically require an RSC. However, the increased standard of care has raised the bar of generally accepted engineering and scientific practices across the environmental consulting industry in Ontario.

The Technical Standards and Safety Authority (TSSA) fuels safety program administers the Technical Standards & Safety Act 2000, providing fuel-related safety services associated with the safe transportation, storage, handling and use of hydrocarbon fuels (such as gasoline, diesel, propane and natural gas). Under this Act, TSSA regulates 40 Claims Canada

fuel suppliers, storage facilities, transport trucks, pipelines, contractors and equipment or appliances that use fuels, including residential heating oil tanks.

The TSSA, through its environmental management protocol, has adopted portions of the amendments to OÂ Reg. 153/04. The draft Environmental Management Protocol for Fuel Operating Sites in Ontario, May 2011, in accordance with O.Reg. 153/04, requires that a qualified person (P. Eng. or P. Geo.) sign submissions of a technical nature to the TSSA. Regardless of the changes to the applicable regulations that guide the assessment and remediation of fuel spills, the approach to remediation must be designed and undertaken in a manner consistent with a thorough understanding of the site conditions and the clean-up objec-

December/January 2012

tives that are understood and agreed upon by the concerned parties. The use of bioremediation (the introduction of microorganisms or nutrients to the subsurface to breakdown petroleum hydrocarbons to non-toxic byproducts) in the example presented above is not an unreasonable remediation option. However, the adjuster or claims manager, needs to be confident that the approaches taken to assess the site, to evaluate potential remedial options, to complete the remediation, and to confirm the remediation have, in fact, taken place and are technically sound and defensible. Simply forging ahead with a remedial technology without a good understanding of the subsurface conditions will typically, and in most cases, prove to be unsuccessful. For example, microorganisms www.claimscanada.ca

don’t “swim,” so they need to be strategically introduced and they are typically not comfortable being placed in an environment that is not conducive to where they were developed. Consultants are responsible for communicating the limitations of a chosen remediation technology to ensure the insured and insurer have a reasonable expectation of success based on any limitations, either with the site or with the technology. The communication will be less effective to the affected parties when after two years have passed the only thing that has changed on the file is the reserve amount.

Consultants will continue to develop site assessment and remediation strategies for environmental insurance claims. Like the insurance industry, the environmental industry is governed by regulations that can be complicated. Successful claims resolution requires the incorporation of sound engineering practices within the required regulatory process. But more importantly, the clear commu-

nication and discussions between the consulting/contractor team, the insurance company representative and the insured will certainly reduce complications associated with complex engineering solutions and within the regulatory framework.

On a go-forward basis, it is imperative that consultants engaged in environmental claims have a complete understanding of the changes to the applicable regulations and comply accordingly, otherwise closure reporting, and subsequent claim resolution, will get bogged down in regulatory noncompliance related issues. Consultants that do not possess a thorough understanding of the changes to the applicable regulations, as well as how they are to be implemented, risk additional costs and pose more challenges than solutions. 

Lori Festarini is the practice lead for the insurance sector within the environmental remediation group. Neil Butler is a project manager in the environmental services group. They are both with Stantec Consulting Ltd.

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December/January 2012

Claims Canada 41

The Threat of Punitive Damages Revisited

BY LAUREN BLOOM

Insurance fraud is an intentional act on the part of an insured, designed to gain an undeserved benefit. It can be opportunistic or premeditated. Claims professionals walk a proverbial tightrope when navigating suspicious claims. The high risk nature of fraud claims should not dissuade adjusters from properly adjusting, assessing and even denying skeptical claims.

Fraud is an increasing problem in our industry. The incidence of fraudulent claims measured in 2005 is almost double the 15 per cent figure of claims containing some element of fraud reported more than a decade ago by the Insurance Bureau of Canada.1 Statistics show that of the $20 billion paid out in 2005 in property and casualty claims, 20 to 30 per cent contained some element of fraud.2 That’s $4 to $6 billion dollars of insurance dollars lost to suspicious claims!

Unfortunately, many Canadians don’t see insurance fraud as a serious problem. A poll conducted by the Canadian Coalition Against Insurance Fraud revealed that 46 per cent of Canadians believed it was easy to submit fraudulent claims, and 5 per cent said that “padding” a claim was acceptable.3 The direct correlation between increasing insurance premiums and the incidence of fraud is somehow lost on the general public.

Risks The “swing” value of a fraud case is large. Appellate courts have recently held that nothing is to be awarded to a plaintiff if “any” aspect of the claim is proven fraudulent, even if part of the claim is legitimate.4 On the other hand, unproven allegations of fraud can lead to significant punitive damages awards for bad faith claims handling. In the 2002 Whiten v. Pilot Insurance Co.5 decision the Supreme Court of Canada upheld the jury’s $1 million punitive damages award against Pilot in a situation where it failed to prove that the insured had committed arson.

Proving fraud The test for proof of fraud in a civil case was established by the Supreme Court of Canada in 19246 wherein it was held that “fraud is proven when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, carelessly whether it be true or false.”

This test continues to be cited by Canadian Courts as the accepted standard for proof of fraud, although in reality it can be much more difficult to prove. There are virtually no reported decisions where fraud has been proven on the basis of recklessness or carelessness. Practically speaking, 42 Claims Canada

December/January 2012

fraud must be shown to have been committed intentionally.

Fraud, therefore, is an intentional misrepresentation of the insured.

Proving intention Most provinces have legislation permitting courts to provide an insured with ‘relief from forfeiture’ in situations where the claim details may not be entirely accurate and, as many of us are (painfully) aware, this is often used as a convenient technique to circumvent a legitimate denial of a fraud claim that cannot be strictly proven. A 1985 Nova Scotia decision was more recently quoted by the Ontario Court of Appeal wherein it was stated: I doubt that there are many Proofs of Loss filed in insurance claims that are exactly accurate. Some leeway must be made in allowing for puffery or establishing a negotiating position.

When it is determined that the claimant is indeed indulging only in puffery or in attempting to establish a negotiating position, fraud should not be imputed to the claimant.7 On the other hand, outright lies on a proof of loss will not be tolerated by the court. Adjusters must ensure that there is a way to distinguish the difference between intentional dishonesty and honest mistakes.

Credibility of the insured The claims handling strategy in a suspected fraud case has to focus on the insured. A successful defence will depend on whether the insured’s credibility can be challenged or destroyed. Trial judges have been directed by appellate courts to make specific findings of credibility and to provide reasons for either accepting or rejecting the claim on that basis. In Sagl, the Ontario Court of Appeal directed a new trial after setting aside a $500,000 punitive damage award because the trial judge failed to adequately consider the issue of the insured’s credibility and whether Sagl was able to prove the loss of her fine arts collection. Sagl was an avid art collector. When she ran out of wall space, she stored fine works of art in every “nook and cranny” of her home.

Before it was destroyed by fire, her home was overflowing with works listed on her proof of loss to be in excess of $10 million. This, despite the fact that the proof of loss did not contain the authentic Cézanne painting and Fabergé egg as Sagl forgot to include them.

On credibility, Sagl had been criticized in other courts to have appeared “to be completely dishonest and evasive” and her “financial disclosure was incomplete and untruthful.”8 Sagl’s credibility was considered in the 2011 trial decision where it was held that “it is not helpful to make a blanket statement concerning credibility . . . Rather, one has to look at the extent to which Ms. Sagl’s evidence is confirmed by www.claimscanada.ca

other evidence.”9 The misrepresentation on the proof of loss did not invalidate the policy because the Court looked at her motives and compared them to other evidence in order to determine intentional fraud.10 The authenticity of each contentious item was considered and the credibility of the plaintiff, appraisers and witnesses were assessed as it related to each specific item.

The 2011 trial decision in Sagl did not order punitive damages, however the Court did award substantial indemnity costs for both trials against the insurer. It was stated that the insurer, “was entitled to take steps to protect itself from someone whom it reasonably believed was a renegade insured.”11

Identity of the perpetrator The insurer must prove that it was, in fact, the insured that committed the fraud. In a car theft claim, where the insured’s Porsche was recovered by police in an entirely stripped condition, the insurer suspected fraud when a salvage purchaser put the exact same tires on the recovered Porsche that was claimed to have been stolen. The Court concluded there was fraud involved but the insurer still had to pay the insured’s claim because there was insufficient proof that the insured himself was involved with the fraud.12

fraud allegation is strongly recommended. This should be done regularly and at different stages of the claim process.

The retention of an independent claims professional to do a file review or attend at mediation or pre-trial conference is also an effective strategy. Any appearance of impropriety is diminished with fresh eyes and an objective outlook.

Document management protocol is crucial when investigating a potentially fraudulent claim. Courts expect that insurers will investigate and assess claims in a balanced, objective and reasonable manner and make decisions based on evidence, not suspicion and innuendo. Be aware that the entire file may be subject to production at some point during the litigation. Be professional and careful about what is written in notes and e-mails and what is included in the files of independently hired claims professionals.

Conclusion In suspected fraud claims it is advisable to establish and follow prudent claims handling practices. Don’t be intimidated by the threat of a bad faith claim. The claim for punitive damages will undoubtedly be advanced but with proper investigation and management of the file, you can proceed with confidence.Insurers can begin to contemplate a collective sigh of relief with the 2011 Sagl decision wherein it was stated “care must be taken to avoid hindsight determinations when considering whether to order punitive damages. Such an analysis would simBe professional ply make [the insurer] liable for punitive and careful about damages because a belief that it reasonably held turned out to be wrong.”14  what is written in

Objective investigation Objective investigation and proper file handling protocols are crucial in order to safely prove the intentional misrepresentation of an insured without generating exposure to punitive damages. notes and e-mails Experienced claims handlers and Lauren Bloom is a senior associate with crime investigators agree their first hint and what is included Blouin, Dunn LLP. a claim is fraudulent generally involves a in the files of gut feeling, or instinct that something is independently hired 1. Insurance Bureau of Canada, (1993). Initial not right. The importance of that early, of Property and Casualty Insurance subjective feeling cannot be over-emphaclaims professionals. Estimates Fraud in Canada: Evidence from a Review of sized in identifying potentially fraudulent Closed Claims Files. claims although, once identified, it is crucial to have an objective, claims handling framework within 2. Canadian Underwriter, December 2006 article which the examiner can gather the evidence to prove the 3. Canadian Coalition Against Insurance Fraud website, citing number from poll “Canadians and Personal Injury Fraud: A fraud.

Survey of Canadians”. Poll conducted in 2000 by POLLARA for A company-wide claims handling protocol, with pre-deInsurance Bureau of Canada termined procedures and guidelines, can prevent missteps 4.

Alavie v. Chubb Insurance Co. of Canada [2005] O.J. No. 776 and avoid a subsequent allegation of the adjuster being “out 5.

Whiten v. Pilot Insurance co. 2002 SCC 18. to get” the insured claimant and thus breeching its duty to conduct itself in good faith.

6. Redican v. Nesbitt [1924] S.C.R. 135 at 157.

Obtaining a non-waiver agreement or a reservation of 7. Credit Foncier v. Halifax Insurance Co.( 1985), 67 N.S.R. (2d) rights letter is often a prudent step, and, indeed, may be a 142 (C.A.) legal requirement when a claim is expected to be denied. In 8. Sagl v. Chubb Insurance Co. of Canada, [2011] O.J. No. 3974 Rosenblood Estate v. LSUC, the Court held that, in a case of 9. Ibid, par.55. questionable coverage, the insurer should advise the insured 10. Sagl v. Chubb Insurance Co. of Canada, [2011] O.J. No. 3974, that it is investigating “at once”, and obtain a non-waiver par 53. agreement or deliver an adequate reservation of rights letter.

11. Ibid, par.282.

Otherwise, it may be estopped from denying the claim at a 12.Hariri v. Allstate Insurance Co. [1998] I.L.R. 1-3500 later date.13 Frequent peer, supervisor, claims committee and senior 13. [1989] O.J. No 240 management review of a coverage denial file based on a 14. Ibid, note 8, par. 284. www.claimscanada.ca

December/January 2012

Claims Canada 43

Recovering

Costs

When are salaries and overheads recoverable?

BY LORNE MONTGOMERY

The policyholder was a manufacturer with several locations.

Some locations had unutilized production capacity. There was an accidental fire in one production plant.

Repairs were completed by use of various outside contractors. The insured also used corporate resources to assist with the repairs, including various vehicles, inventory and equipment.

Special skilled hourly paid employees, such as electricians and technicians, were enlisted to work with contractors to repair important and complicated installations. The insured also used its salaried engineering staff to help coordinate damage assessments, reinstatement, engage and direct contractors, issue purchase orders (PO’s) and work orders (WO’s) and generally supervise the fire repair work. The controller and 44 Claims Canada

accounting staff organized incoming invoices to PO’s, made payments to contractors and submit invoices to the loss adjuster.

Claim In addition to the invoiced expenses from outside contractors and suppliers, the policyholder claimed time and expenses for all of the labour utilized to complete repairs, including hourly and salaried personnel along with a component of plant overheads, plus costs for use of its equipment and the parts drawn from its own inventory.

The individual pieces of equipment were charged at a daily rate, comparable to rental rates from rental companies, plus the cost of fuel used. The stores inventory was charged at replacement cost.

The fire caused a partial interruption of production at that location.

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Operations generating revenue were immediately moved to other available plants with excess capacity and to the undamaged area of the plant. Excess inventory was used to continue sales and satisfy customer orders. Apart from some increased costs of working, no sales were lost over the course of the restoration.

Policy The coverage under which the claim was made consists of an all risk property policy covering property of every description (POED) with time element business interruption and extra expense and containing typical policy terms and conditions.

Adjustment As to the physical assets used in the restoration, the reasonable cost to the policyholder was recoverable from insurance, but that aspect of the claim is www.claimscanada.ca

not the primary purpose of this discussion.

The issue was whether the policyholder was entitled to recover for use of its personnel and calculated overheads chargeable to the business.

The insured said that the cost of its hourly workers used to make emergency, temporary and permanent repairs would normally have been used to make production. Had the workers not been involved in the post fire restoration, and because they were unable to work in production, at least some of them would have otherwise been sent home and not paid. Therefore the cost of the hourly labour used in repair was a cost for which no production benefit was received.

The policyholder also said that the salaried engineering staff involved in the repair work had other work to do and their work was delayed, thus a portion of their salaries should be recovered from the insurance. The insured admitted there was no replacement engineering staff hired to continue the normal work, which was in progress prior to the fire. It was also reported that the salaried accounting staff, including the controller, put in a lot of time organizing information, paying contractor invoices and submitted the claim to the adjuster and, but for the fire, they had other work to do, but again, no substitutes were hired.

Further, in addition to the calculated rates for the labour, both hourly and salaried, payroll benefits were added, plus a rate for overheads. The insured explained that in the normal conduct of its business, those overheads are built in to the product pricing, and since the insurer had the benefit of this labour, they should pay that share of the overhead.

In determining the amount payable under the policy for repairs, there was no issue with the logged time of the hourly workers and it was agreed that had these workers not been added to the repair workforce they would have been temporarily laid off. Therefore, the adjustment reflected the cost of the labour plus the paid payroll benefits.

The adjustment excluded the addition of overheads to the labour but the insured protested. www.claimscanada.ca

Should the policyholder be entitled to collect the value of overheads from the policy?

Overheads (OH) are the fixed costs of the business which are allocated on a pro-rata basis to the cost of the labour force. (Fixed or non-variable costs = all those in-direct costs which continue regardless whether production is achieved.) For example, say the annual fixed or non-variable expenses of the business are $10 million, not including the labour expense. There is a labour

force of 240 hourly and salaried men and women on a 40-hour work week, plus paid vacation.

The simple theoretical calculation used is based on the total paid hours over the course of the year in order to achieve the hourly OH value applicable to the various labour rates (indirect costs / direct costs - i.e payroll expense). See chart 1.

In the claim submitted, the policyholder calculated the real cost of the hourly labour, then added the OH rate

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to determine the total charge-out cost per hour for the use of the hourly employee. The same method was used for salaried employees that participated in one way or another to the restoration work.

Are overhead values recoverable for the hourly workers?

As a general rule any new cost incurred by the policyholder to reinstate or repair insured physical damages to insured property is claimable from the insurance. Even where overheads are included as a contribution to the value of labour for the purposes of valuing the insured’s products, they are still fixed costs and immediately recognizable as a time element or business interruption loss component. In simpler terms, in the event of a sales loss during the indemnity period, business interruption insurance covers the insured’s unavoidable or fixed costs, plus any lost profit.

In this case, there were no sales losses, so the revenue of the business that normally covered fixed costs and profit continued to be received. Therefore, overheads were not a new cost to the insured and had they been allowed in the claim they would have been recovered twice by the insured (once from the original sale of products and once from insurance).

If the policyholder did not have business interruption coverage, would overheads then be payable under the property damage feature of the policy?

The answer is no. The insurer will not pay because the insured did not buy the time element coverage designed to cover such time element expenses, nor should they, because it would amount to free insurance. The regular hourly wage and payroll benefits used for the purposes of repair is all that is payable.

Any overtime paid could be considered as an expediting expense and payable under the policy if such coverage was provided.

What of the salaried employees?

The engineering staff made valuable contributions to enable a timely repair and, but for their efforts, the policyholder would have had to engage outside engineering consultants to do the same work. Clearly this would 46 Claims Canada

Calculation of Hourly Contribution to Overheads Annual Fixed Costs 240 x 40 h/wk x 52 wks Calculated OH

$ 10,000,000 499,200

$ 20.03

In-direct Costs Annual Paid Hours Hourly OH

Regular Hourly Wage Assigned OH Rate Charge Out Labour Rate

$ $ $

25.00 20.03 44.04

Including Benefits

Salaried Employee A 40hr/wk x 52 wks Calculated Hourly Rate Assigned Hourly OH Charge-out Staff Rate

$ 100,000.00 $ 2,080.00 $ 48.08 $ 20.03 $ 72.12

Annual Salary Annual Paid Hours Including Benefits

Hourly

per Hour

Chart 1

have increased the loss payable by the insurance. The insured said that had its staff not been tied up with the fire, they would have been working on their other projects, however it admitted no outsiders were engaged to take up those projects and also agreed the projects were delayed. Further, such projects could not be seen to have otherwise increased revenues.

Salaries are considered a fixed cost of the business and typically are taken into account in determining insurable business income losses. In order to obtain policy benefits to pay for salaried workers assigned to repair the damage, the expense must be seen to be a new cost to the policyholder. It is presupposed salaried employees would have been paid whether they did or did not work on the restoration project, as if no loss event had occurred.

If there was no business interruption insurance, there could be another way to find a policy benefit for the value of salaried employees utilized for repairs. On extremely rare occasions the sales or revenue of the company might be reduced during the repair period because salaried workers were assigned to the repair project.

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Sometimes highly specialized technical personnel are not immediately available elsewhere and such specialists assumed responsibility for repair.

Their absence from production could impact the insured’s ability to make planned sales. Even if this turned out to be the case, the claim for the salaries could not exceed the contribution to salaries from the lost sales. In any event, however, the overheads attached to the cost of those salaries are not recoverable because the insured’s products were not being purchased by the insurer.

In the theoretical fire case the insured had purchased business interruption coverage but no sales losses resulted. Salaries and overheads are time element or business interruption issues and since the insured did not lose the revenue stream it ordinarily expected, the income was available to pay the fixed costs and no contribution to salaries is required by the insurer.

The all risk property insurance is intended to indemnify the policyholder for new costs resulting from an insured event and it is only reasonable that all available policyholder resources are utilized to reduce its loss. Using www.claimscanada.ca

Labour Related Adjustment Item Hours Reg Rate Regular OH Rate Hourly 9000 $ 25.00 $225,000 $20,03 Salaried 4800 $ 48.08 $230,784 $20,03

salaried employees for such purpose is expected as a means of loss mitigation and insurers expect the policyholder will do what it can to minimize the loss. Coverage only applies to any additional costs experienced in consequence of the fire, such as purposemade travel expenses, meals, etc.

The argument that the normal work of the engineering and accounting staff was delayed does not have any value. During the loss investigation it was demonstrated the work these staffers were doing did not impact the revenue of the business in the short term (or even the long term).

The delay of such work was ultimately of no particular consequence to the business, which was contingent on the overall productive activities of that plant(s). In effect, the fire put certain administrative activities in suspension until the staff could resume normal activities at a later date. This was the labour related adjustment. See chart 2.

Again, because the cost of the salaried labour paid by the insured business during the period of restoration was not new, it is not compensable under the policy. The insured warned that if they ever had another loss they would engage outside consultants for all the clean-up or repair work of its staff and charge it to the insurance claim. Fair enough, but it is an illogical argument because given the same circumstances the insured would still not collect any compensation for the idled salaried employees unless business interruption was insured and a sales loss resulted. The variance between claimed and adjusted was not a real loss to the policyholder.

Some manuscript policies are designed to include compensation for overheads when the policyholder uses its own labour resources to restore its property damage by an insured loss www.claimscanada.ca

Claimed $ 405,288 $ 326,938 $ 732,226

event. Such rates are usually defined and an additional premium paid. Typically such additional coverage is restricted to policies that do not include business income coverage.

Adjustment $225,000 $ 225,000 Chart 2

Lorne Montgomery is an executive general adjuster international with Crawford Canada’s Global Technical Services. 

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December/January 2012

Claims Canada 47

Spinal Cord Injury

Understanding the spine’s component parts can go a long way in effective spinal cord injury management

BY ANGELA VERI AND JUDY FARRIMOND

By far, spinal cord injury (SCI) is one of the most complex rehabilitation issues — right up there with acquired brain injury — because the spinal cord plays a critical role in making all of our everyday functions possible. Protective bone segments, called the vertebral or spinal column, surround the spinal cord, the largest nerve in the body.

The spinal cord is made up of nerves that act as the communication system for the body.

The nerve fibers within the spinal cord carry messages to and from the brain to other parts of the body like a fiber-optic cable carrying electrical impulses to areas of the body allowing us to do things like move our arms and legs and experience the sensation of touch or temperature.

When a client experiences a SCI, although muscles may not be damaged, the nerve fibers that send messages to the muscles are often damaged — and no longer able to send the right signals. As a result, due to SCI, a client may experience loss of a variety of functions because the nerve fibers cannot repair themselves. By understanding the interrelation between type of SCI and potential loss of function, a claims handler can more effectively anticipate the types of issues an SCI client may need to address.

Region The spine is made up of regions with each region responsible for different functions. Accordingly, the type of SCI a client experiences—and in turn, how a client’s functioning is affected—depends on which region of the spine is injured, as well as the severity of the injury.

• Cervical spine: made up of seven cervical bones or vertebrae that are designed to allow flexion, extension, lateral bending and turning of the head. It extends from the base of the skull to shoulder level and also contains the cervical nerves that supply movement and feeling to the arms, neck, and upper trunk.

• Thoracic spine: made up of 12 vertebrae and attaches to the ribs in the chest region. Its main motion is rotation as the ribs prevent bending from side to side, and only allowing a small amount of bending forward and backward.

It contains the thoracic nerves that supply movement and feeling to the trunk and abdomen.

• Lumbosacral spine: made up of large, wide, and thick vertebrae and extends from the waistline down the lower back to the base of the spine. Its main motion is bending 48 Claims Canada

December/January 2012

forward and backward as well as side to side. It contains the lumbar and sacral nerves that supply movement and feeling to the legs, bladder, bowel and sexual organs.

Function If a client experiences what is known as “complete SCI,” this means damage to the spinal cord, which results in complete and usually permanent loss of function below the level of the injury. By contrast, if a client experiences “incomplete SCI,” this refers to damage to the spinal cord that is partial, so there are still some motor and/or sensory functions. For instance, there may be some ability to feel but an inability to move or, conversely, there may be the ability to move but limited feeling.

The degree of loss in function varies because the amount of damage differs from person to person. A client may not have the ability to move or feel known as paralysis, however, the degree of paralysis depends on where the spinal cord is injured and the severity of the injury. Paralysis can be classified as: • Paraplegia: the impairment or loss of movement or feeling in the thoracic, lumbar, or sacral (but not cervical) segments of the spinal cord. Depending on the level of injury, the trunk, legs and pelvic organs are affected to varying degrees.

• Tetraplegia also known as quadriplegia: paralysis of the four limbs due to cervical (neck) injuries. Depending on where injured, a client may require a ventilator or electrical implant for breathing, or may have shoulder and bicep control, but no wrist or hand function, or hand function but no wrist control.

Occupational therapist Developing a solid understanding of the parts of the spine can be helpful in gaining insight into the functional “Of the current estimated 86,000 Canadians living with some form of SCI, 51 per cent—or 44,000—are living with SCI as a result of traumatic causes. It is estimated that of the 4,300 new cases of spinal cord injury in Canada each year, about 1,785 are as the restful of traumatic injury from causes such as care accidents.”

Source: Rick Hansen Institute http://www.rickhanseninstitute.org/images/stories/SCI_press_ release_15dec10.pdf

www.claimscanada.ca

Physiological Complications of SCI: Depending on the client’s specific injury, physiological complications may include the following: • Automaic Dysreflexia: a medical emergency where the nervous system is overstimulated resulting in a range of symptoms like high blood pressure, throbbing headaches, seating, anxiety and cognitive impairment.

• Flaccid Paralysis: no muscle movement because no muscle tone.

• Clonus: ongoing muscle contraction such as ‘jumping leg’ on footrest or wheelchair.

• Postural Hypotension: blood flow problems like pooling of blood in abdomen and legs.

• Decreased vital capacity: such as limited chest capacity, decreased ability to cough, respiratory infections, and low energy.

• Pressure Sores: sensory loss and loss of blood supply that result in death of the body tissue.

• Flaccid Bladder: weak bladder due to reduced muscle tone. limitations your client may experience, but no one knows the spine better than an occupational therapist (OT). Due to the OT’s focus on assessing and treating a person’s functional abilities and limitations related to completing daily activities, the spine is central to their work in assessing and treating motor vehicle accident clients. After the acute stage of injury when a client has been treated in hospital and is now ready for rehabilitation, the OT assists with a range of activities, everything from organizing discharge planning to attending rehabilitation team meetings to assessing the

• Poor Body Temperature Regulation: cannot regulate own body.

• Sexual Dysfunction: decreased fertility, spontaneous or inability to have erections. ability to conduct activities of daily living, as well as return to work options and the need for assistive devices. Understanding the basics about the spine and spinal cord injury provides a good foundation for effective communication as the claims adjuster liaises with the OT to effectively assess and treat SCI clients.

Judy Farrimond is technical advisor catastrophic and legal services and Angela Veri is national director of customer relations at Sibley Inc. 

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December/January 2012

Claims Canada 49

Subrogating Against Subcontractors

Recovering from subcontractors under a builders’ risk policy: Ontario Court of Appeal opens the door for subrogation

BY PAMELA D. PENGELLEY

Until recently, Canadian builders’ risk insurers have been unable to maintain subrogated actions against subcontractors who have caused a loss. Builders’ risk policies have traditionally been treated as a unique insurance contract whose practical purpose can only be served if subcontractors are considered unnamed insureds.1 Since an insurance company cannot bring a subrogated action against its own insureds, subcontractors are usually protected from subrogated actions.

Nevertheless, it is incorrect to assume all subcontractors automatically obtain the unnamed insured status under a builder’s risk policy. A recent Ontario Court of Appeal decision created an important exception to this rule. Subrogation professionals should be alert to the circumstances in which it may be possible to challenge the “unnamed insured” defence.

When a subcontractor is an unnamed insured In any construction project, there is always a risk that a subcontractor will damage another’s property or the project as a whole. Canadian courts often regard the purpose of builders’ risk policies to ensure available funds for a construction’s completion, without various sub-trades resorting to protracted litigation upon negligence by anyone involved. The practical purpose of extending insurance to cover all subcontractors is that they are spared the necessity of fighting between themselves. Courts have held that this is a risk accepted by insurers at the outset.2 However, the issue of whether subcontractors are included as insureds in a policy, which does not expressly name them is one of contractual interpretation. Courts look at the wording of the construction contract and the insurance policy to make this assessment. In fact, it is largely irrelevant whether a contractor has agreed to obtain insurance for the subcontractor’s benefit. The intention of the contractor to insure the subcontractor under the builder’s risk policy is not determinative of how an insurance policy will be interpreted.3 There are two features of builder’s risk policies that give rise to the unnamed insured defence: 1. Property owned by others Where an insurance policy insures an entire construction project, including “property owned by others,” Canadian courts have interpreted this as insuring parties other than just the named insureds.4 In construction contracts, subcontractors are seen as having such an “identity of interest” with the general contractor (in that it will stand to 50 Claims Canada

December/January 2012

gain from the project’s existence and will lose from any damage to it), that they are considered unnamed insureds by necessary implication.5 Thus, a subcontractor’s interest in the project may be considered insured even when he is not named as an insured on the policy and his interest is not disclosed.

However, there has been an important new development.

In May 2010, the B.C. Court opined, in Brookfield Homes v.

Nova Plumbing, that where property damage coverage for contractors and subcontractors is limited “to the extent of the insured’s legal liability for insured physical loss or damage to such property,” the unnamed insured defence may not apply.

Where a subcontractor is insured only to the extent that the named insured is found legally liable for the loss or damage, it may be that a subcontractor cannot be regarded as an unnamed insured, even in the context of a builder’s risk policy.6

2. Waivers of subrogation for any “interest with respect to which insurance is provided by this policy” Where a policy provides that no subrogation lies against a “corporation, firm, individual, or other interest with respect to which insurance is provided by this policy,” courts have held that, in regard to the special nature of builder’s risk policies, judicial pronouncements on the commercial necessity for including subcontractors; and the clause language itself, subcontractors must be unnamed insureds by necessary implication.7 Any doubt on this issue is resolved against the insurance company.8 Case examples Two cases illustrate the application of these principles: Janeland Developments Inc. v. Michelin Masonry Inc.9 A general contractor’s insurer brought a subrogated action against a defendant masonry subcontractor who negligently caused the collapse of a building’s wall. The construction contract contained a hold harmless clause in favor of the homebuilder and required that a subcontractor must obtain its own comprehensive general liability insurance. There was no corresponding obligation on the general contractor to attain insurance of any kind. The general contractor had obtained a Builder’s Risk Broad Form policy, which contained “property insured” and “waiver of subrogation” wording referred to above. The Ontario court found that the subcontractor was an unnamed insured under the policy: • The policy wording, stating that it covered “property owned by others,” extended coverage to the masonry subcontractor as an unnamed insured. www.claimscanada.ca

• The fact that the agreement for masonry services did not • Although the Court’s decision did not set out the policy’s require the general contractor to insure the subcontractor subrogation clause wording, the policy provided that the was not sufficient to convince the court that the subconinsurer’s subrogation right was preserved and required the tractor was not intended to be an unnamed insured under home builder to cooperate in any subrogation proceeding. the policy.

The Court concluded that the construction agreement • The waiver of subrogation clause wording constituted and policy allocated the risk of loss caused by a contractor a general waiver of all claims by the insurer against the to the contractor, rather than the homebuilder. As such, the subcontractor, who was an “interest with respect to which plumbing subcontractor could not be regarded as an uninsurance is provided by this form.” named insured.

• Finding the subcontractor was an unnamed insured was Conclusion in keeping with the court’s desire to reduce the litigation, Although subcontractors may often be regarded as unwhich flowed from losses of this type. It also recognized the reality of complex industrial life and provided com- named insureds with respect to property policies providing fort and security to owners, builders and subcontractors coverage for construction projects, this is not always the case. The issue of whether a subcontractor can rely on an involved in commercial projects.10 “unnamed insured” defence to a subrogated action requires 11 Brookfield Homes v. Nova Plumbing an analysis of the construction contract and the policy. As The Ontario Supreme Court of Justice was asked to decide noted in Brookfield Homes, a subcontractor may not be able in May 2010 whether a subrogated action could be brought to utilize this defence where the property coverage for subby a home builder’s insurer against a plumbing contractor contractors has been expressly limited to amounts for which whose negligence with a welding torch caused fire damage the named insured is legally liable.  to several homes under construction. The Court permitted a subrogated claim against the subcontractor ­— a deciPamela D. Pengelley is an associate in sion that was subsequently upheld by the Cozen O’Connor’s subrogation and recovOntario Court of Appeal. Although only ery department.

The issue of whether binding in Ontario, the decision is significant as it presents a persuasive new basis a subcontractor can 1.Sylvan Industries Ltd. v. Fairview Sheet Metal for advancing subrogated claims against Works Ltd., [1994] B.C.J. No. 468 at para. 6. rely on an (B.C.C.A.) [“Sylvan”]. negligent subcontractors in all provinces. “unnamed insured” 2. As stated by Grandpre J. in Commonwealth ConIn Brookfield, a homebuilder contractstruction Company v. Imperial Oil Limited, [1978] ed a plumber to provide services for a new defence to a 1 S.C.R. 317 (S.C.C.), at p. 328: “Whatever its label, subdivision undergoing construction. its function is to provide the owner the promise that subrogated action the contractors will have the funds to rebuild in case Although the construction contract conof loss and to the contractors the protection against requires an analysis tained a hold harmless clause in the home the crippling cost of starting afresh in such an event, builder’s favor and required the plumbing the whole without resort to litigation in case of of the construction negligence by anyone connected with the construcsubcontractor to obtain liability insurcontract and the tion, a risk accepted by insurers at the outset. This ance, and to waive the subrogation rights purpose recognizes the importance of keeping to a policy. of its insurers against the home builder, minimum the difficulties that are bound to be created by the large number of participants in a major there was no corresponding obligation on construction project, the complexity of which needs the home builder’s part to obtain insurno demonstration. It also recognizes the reality of industrial life.” ance or provide any subrogation waivers.

The homebuilder argued that it did not take out builder’s 3. See for example, Sylvan Industries Ltd. v. Fairview Sheet Metal Works Ltd., (1994) 89 B.C.L.R. (2d) 19 (C.A.). risk policies on behalf of its contractors. Rather, it obtained all perils property insurance, and contractually required its 4. Madison Developments Ltd. v. Plan Electric Co.,[1997] O.J. No. 4249 (Ont. C.A.) [“Madison”]. contractors to obtain liability insurance. The subcontractor 5. For example, in Madison, ibid, the Court of Appeal stated: “…the described the policy as a builder’s risk policy. policy insures property owned by others, suggesting that others than The Court, determining that the subcontractor was not those named in the policy are insured. The contractor obtained that an unnamed insured, made the following findings: insurance, a loss occurred, and payment was made under the policy.

The insurer must be taken to be aware of the contractor’s contracts • The policy label, be it “builder’s risk,” “all-risks” or “all with subcontractors, or to have some control over them if not yet perils,” is not determinative. It is the policy language that entered, because the insurer’s subrogation rights can be eliminated by matters. such a contract…” The Court concluded that the subcontractor was an unnamed insured by necessary implication.

• The “property damage” coverage for contractors was explicitly limited, stating that the policy “also insures the 6. Brookfield Homes v. Nova Plumbing, 2010 ONSC 2131 (CanLII). interest of contractors and subcontractors . . . during con- 7. Sylvan, supra note 16 at para. 17; Esagonal, supra note 21 at p. 9 of 10. struction of an insured location . . . to the extent of the 8. Ibid. insured’s legal liability for insured physical loss or damage to property.” The subcontractor was insured only to the 9. 1996] O.J. No. 513 (Ont. Gen. Div.). extent that the homebuilder was found legally liable for 10. Ibid at para. 15.

11. Supra, note 6. the loss or damage. www.claimscanada.ca

December/January 2012

Claims Canada 51

Beyond

Power Surge

Bad weather and economic pressures will force insurance change

BY MARK J. BRYS

A loss of equipment operation is often attributed to power surges in electric power distribution systems. Whether or not we can see or definitively understand the cause, many conveniently use the broad term power surge to describe the cause of a wide variety of occurrences. This is mostly due to the lack of certainty related to the reason for the loss of operation.

Although many experts on the subject have reached a consensus not to use the combination of words power surge, their usage continues as a way to commonly describe problems with electric power quality and associated solutions.

The main problem with the term is that a power surge is indeed not a physical phenomenon. It is a result of the transient over-voltage referred to as the surge voltage and the resultant surge current that can be caused by either a lightning strike or utility switching on the supply utility grid. However, experience has shown that the loss of equipment operation, which has been found to originate with such events, actually occurs due to issues related to the cause such as ground potential rise, flashover and voltage sag.

When lightning strikes Lightning strikes are environmentally-related events that occur at random in air surrounding the earth. They occur when the negative charge of the clouds and the induced positive charge on the earth below the clouds exceed 52 Claims Canada

the dielectric breakdown strength of the air. The result is a ground-tocloud discharge current referred to as a return strike. This ranges from a few thousand amperes to a few hundred thousand amperes for the duration of a few ten microseconds to a few hundred microseconds.

Most lightning strikes commonly hit high buildings and structures rather than the earth. Direct lightning strikes to overhead power and telecom conductors rarely occur, due to the shielding effect of lightning protection grounding. If properly selected and installed, the lightning protection grounding will intercept and divert lightning strikes to the earth so as to prevent the disruptive damage that commonly occurs when in close proximity to a lightning strike. When a return strike current flows through the earth, a voltage that is equal to the product of the return strike current and ground resistance between the grounding connection and remote ground will increase significantly. Subsequently, the ground potential rise could appear on the grounded parts of the equipment resulting in a breakdown of its insulation or flashover of air on or near the terminals or components of the affected equipment. When investigating causation, consideration should be given to ground potential rise that can cause electronic equipment to fail.

away, can induce the transient overvoltage that can produce a wave of the induced surge current within the power and telecom conductors. While the induced surge current moves away through the power lines, the lightning induced surge voltage will be discharged by the lightning surge arrester installed throughout the power lines.

Lightning surge arresters are protective devices that limit the lightning induced surge voltage on the power lines and transformers by conducting the lightning induced surge currents to the ground. As a result, if properly selected and installed, the electric power distribution system connected to these power lines is unlikely to be exposed to the full lightning induced surge voltage.

When the lightning arrester is activated due to the lightning induced surge voltage, a partial or complete loss of the voltage will occur momentarily at the lightning surge arrester. Consequently, the electric power distribution system will encounter voltage sag, referred to as a voltage, that lasts from a few milliseconds to a few seconds. Whether or not a power interruption occurs to the electric power distribution system will depend on the coordination of protective devices used in substations.

Nevertheless, the lightning induced surge current within telecom lines can travel for an extended distance because there are no lightning surge arresters installed throughout the telecom lines.

Lightning strike arresters It must also be noted, however, that lightning strikes, even at some distance

Utility switching Utility switching, as opposed to lightning strikes, is frequently and

December/January 2012

www.claimscanada.ca

deliberately carried out to sustain the supply of electrical energy over the supply utility grid. Whenever the power lines are closed following tripping and subsequent clearing, the ground fault or the power lines are then connected or disconnected to an alternate supply source, and a transient over-voltage will occur due to inductance and capacitance of the load connected to the power distribution system. Waveforms of the voltage and current through the power lines cannot be changed instantaneously.

Although the switching surge overvoltage is of moderate magnitude and duration, from a few milliseconds to a few seconds, lightning surge arresters are designed and approved for the intended use of limiting both lightning and switching surge voltage. Subsequently, either lightning or switching surge voltages will be limited to the level that the power lines and transformers can withstand without failure or damage.

Loss of equipment operation A loss of equipment operation can be caused by indirect lightning strikes, which frequently cause power disturbances, including predominately momentary voltage sags and interruption. Furthermore, utility switching can result from clearing the surge voltage by the lightning surge arrester.

The protective devices of the power distribution system can detect the voltage drop across the lightning surge arrester as abnormal ground fault conditions and isolate or initiate the isolation of the affected power lines.

Voltage sags can result in degradation of performance or reduction in the expected service life or even in complete failure of the equipment. The loss of equipment can occur despite the fact that lightning surge arresters for power conductors and surge suppressors for all control and telecom conductors were properly selected and installed at the service entrance of the premises served. While it does matter whether the loss of equipment operation occurs subsequent to the lightning strikes that are environmentally generated or due to the utility switching that are artificially-generated, it Y

is imperative to determine with the highest degree of certainty the cause of loss of the equipment. Due to the complexity of interference between lightning and switching surge voltages, a final determination of the loss of equipment operation should be preJohnWelton-ClaimsCanada-halfpagePag 1 12 pared and stated in engineering terms by a recognized, independent third party. Qualifications should include experience, education and credentials

that demonstrate knowledgeable and responsible techniques and methods to determine the cause. Moreover, a final determination should go beyond the term power surge, which is ill defined. î — 3:3 J. Brys P Mark is a senior consultant and project manager with Newtron Engineering Services, a division of Newtron Group.

Henderson Structured Settlements

CM

MY

WELCOMES JOHN C. WELTON, B.A., C.I.M. The Henderson name has been, throughout its 30-year history, associated with the very highest standard of professionalism and civility. These values extend throughout our organization and are characteristic of the people we look to employ.

CMY

K

www.claimscanada.ca

With this in mind, we would like to present our newest consultant, John C. Welton, B.A., C.I.M. John’s extensive and progressive experience in casualty claims management and consumer centric knowledge of structured settlements is something we invite all clientele, both present and prospective, to draw upon.

1-800-263-8537 www.henderson.ca

Please join us then in welcoming John Welton to the Henderson team.

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Your Partners in Service Since 1981

December/January 2012

Claims Canada 53

EF

• education forum

A SERIES OF ARTICLES PROVIDED BY THE INSURANCE INSTITUTE OF CANADA

Counting Catastrophic Costs:

The Life Care Plan

C

ourt-awarded damages in catastrophic injury claims have been on the increase lately, in a few cases reaching as high as $20 million. Future care costs represent the largest component of these damage awards. As costs rise, claims professionals will need to be particularly careful in their approach to catastrophic injury claims.

Handling catastrophic injury claims can involve a delicate balancing act for insurers and adjusters. The goal is to ensure that claimants receive the treatment, care and compensation they are entitled to. But insurers and adjusters also have to recognize the trend of rising personal injury damage awards and an increasing sophistication on the part of plaintiff lawyers when it comes to future care costs.

One of the main tools used to calculate accurate future care costs and quality of life for the catastrophically injured claimant is the life care plan.

The plan has become increasingly prominent in tort cases involving serious bodily injury claims within the last ten years, where it is often used to assist plaintiff or defence lawyers in identifying the total costs of future care.

Customized, comprehensive plan A life care plan is a comprehensive, detailed plan that identifies the current and future medical and nonmedical needs of an injured or disabled person and estimates the costs 54 Claims Canada

of meeting these needs over the injured person’s expected lifespan. The emphasis in the plan is on helping the person to achieve maximum independence, providing replacement services for tasks the person is no longer able to complete, and preventing functional deterioration.

The plan is customized to the individual’s situation and can cover a wide range of needs and supports, such as • home care and/or facility care • diagnostic testing • projected therapeutic treatments • medication • medical supplies and equipment • medical services and future medical care • wheelchairs and other mobile assistance devices • orthopedic equipment • orthotics and prosthetics • aids for independent functioning • home furnishings and accessories • architectural home modifications • transportation • non-medical support services • vocational and/or educational plans • leisure or recreational equipment and programs • counselling or support groups

Expenses on the increase Several factors are contributing to higher expenses flowing from life care plans in catastrophic injury claims, including inflation-based increases, increases in the market value of health care services and equipment, and an increase in the use of private clinics

December/January 2012

and agencies for treatment instead of government health care facilities and services.

Another factor is the trend to take a more expansive view of quality-oflife issues for the catastrophically injured claimant, as opposed to focusing strictly on medical treatment and care.

The two most contentious areas of life care plans seem to be attendant care and transportation, both of which can make significant contributions to total costs. Modification to housing is another increasingly costly issue.

Planning professionals Life care plans are usually completed by registered nurses, occupational therapists, vocational consultants or rehabilitation management firms.

Recently, courts have recognized the Certified Life Care Planning (CLCP) designation, which started in the U.S. but has expanded into Canada (the Canadian designation is CCLCP).

Future care vs. life care While sometimes referred to interchangeably, future care cost reports and life care plans are similar but not necessarily the same. Life care plans focus on catastrophic and permanent injuries which the claimant will not recover from, while future care cost reports may involve serious but less-catastrophic injuries and treatment over a prescribed time period.

www.claimscanada.ca

Custom care A life care plan may identify a range of specific supports tailored to the individual’s needs and circumstances; for example: • doctors, dentists, optometrists/ ophthalmologists, opticians, chiropractors, psychologists, therapists, nurses, nursing home care, hospital services • lab tests, ambulatory surgery, plastic surgery • audiology, vision screening, dietary assessment, swallow studies • physical therapy, speech therapy, occupational therapy

Adjusting appropriately Adjusters can respond appropriately to a catastrophic injury claim by requesting a comprehensive life care plan by a qualified professional, either at the outset or in defence. It’s worth taking the time and trouble to get the right plan conducted by the right planner. The experience of the claims professional involved is thus another critical element in managing these claims.

The ability to appropriately assess the file, engage the right experts and manage the settlement process (with or

without litigation) plays a major role in the outcome.  This article is based on excerpts from ADVANTAGE Monthly, a series of topical papers on emerging trends and issues provided to members of the CIP Society.

The Chartered Insurance Professionals’ (CIP) Society is the professional organization representing more than 15,000 graduates of the Insurance Institute’s Fellow Chartered Insurance Professional (FCIP) and Chartered Insurance Professional (CIP) programs.

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• walkers, standing or tilt tables, crutches, prostheses • beds, ramps, lifts, floor coverings, reaching aids, hearing aids • dressings, whirlpools, vaporizers, specialty foods • auto repair, wheelchair maintenance, maintenance of wheelchair lifts • vocational counseling, job coaching, tutors

Cost control No matter who completes the plan, the life care planner’s first duty is to create an appropriate plan for the injured person. But planners also need to be aware of cost constraints and look for ways to address cost issues without sacrificing the quality of the plan.

Adjusters and insurers can help by working closely with the planner: providing the planner with all the available medical documentation, enabling correspondence with all treating practitioners, allowing enough lead time for report completion and permitting the planner to meet with the client.

Adjusters and insurers may find that preparation of an appropriate life care plan requires a certain amount of time and expense. If the planner simply spends a couple of hours with the claimant and then writes a report, the plan may not be adequate for the claimant or the insurer. www.claimscanada.ca

National Provider of all types of Medical Assessments • Independent Medical Assessments (all types of specialties) • Certified Examinations • Medical Status Examinations • Functional Abilities Evaluation • Ergonomic Assessments • Document Review • Comprehensive Vocational Assessments • Occupational Therapy Assessments and Educational Plans • MRI’s and Diagnostic Imaging Services ➜ Fastest Turnaround Time in the industry ➜ Ability to perform assessments anywhere across Canada ➜ Appointments booked within hours of referral ➜ Ability to accommodate appointments outside of regular business hours ➜ Highest quality reports in the industry RIDM’s Secure Web-Based Claims Portal allows you to place and track orders as well as instantaneously move all documents associated with a claim between all parties involved, all at no cost.

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British Columbia (604) 929-9200 1-866-853-7007

RIDM.NET December/January 2012

Claims Canada 55

• on the scene OTS Every year Plant Hope Adjusters honours the Top CIP recipient in New Brunswick with the Brain D. Taylor Professional Award. In this photo Luc Aucoin of Plant Hope presents Kristina Scott, CIP of The Co-operators, Moncton, NB, with the 2011 award. l

Fred Plant

Fred Plant, President of Plant Hope Adjusters, was elected president of the International Institute of Loss Adjusters at that organization’s 55th Annual General Meeting held in Queenstown, New Zealand on Nov. 5, 2011. Other Canadians who have guided IILA over the years have included such distinguished adjusting leaders as Stewart Ponton, Bill Seaman, Skip Sutherland, Lee Stewart and Doug Holmes. l

Glenn Gibson, senior vice president of global strategy, projects and development at Crawford & Company (Canada) Inc. is the recipient of the Canadian Insurance Professional (CIP) Society’s ‘2011 Established Leadership Award.’

The award recognizes individuals who have shown exceptional leadership abilities and a strong commitment to upholding the CIP Society’s Glenn Gibson tenets of imparting knowledge and instilling professionalism within the insurance industry.

Gibson is the only recipient named this year, according to a Crawford release.

“Glenn is a very worthy recipient of the Established Leadership Award because of his dedication, the pride he has in his profession and the insurance adjusting community, and his affinity for mentoring others,” said John Sharoun, CEO of Crawford’s Canadian operations.

“His passion for learning extends to his colleagues and staff, and he has always been a strong advocate and member of industry associations.” l The International Institute of Loss Adjusters recently held its Annual General Meeting and Conference at Queenstown, New Zealand. Canadians attending the event included current CIAA national president Greg Merrithew (centre) and two former CIAA national presidents, Skip Sutherland (right) and Fred Plant. l

56 Claims Canada

December/January 2012

CSL Global has opened a new business operation in Canada.

CSL Global (Canada) Ltd will initially operate from key offices in Toronto and Vancouver, led by Captain John Hosty, effective Jan.1, 2012.

Other key members of the team include Andrew Rayner, Philip Vardon and Ken Rayner, based in Toronto, and Kaivan Chinoy in Vancouver.

CSL Global (Canada) Ltd provides a comprehensive range of specialist marine survey and claims handling services including cargo, transit, hull and machinery and P&I. l

On Sept. 16 to 17, 2011, GUS celebrated its 20th anniversary at the Hilton in Gatineau QC, with more than 275 Quebec and Ontario franchise personnel in attendance. It was a great evening of recognition and included a special tribute as to how the GUS brand began. (left to right) Louise Larochelle, Lorne McIntyre, Steven Chin, Pierre Bedard and Doris Landry.

l On Sept. 15, 2011, GUS held its annual golf tournament and raised $28,000 for their charity La Foundation. The charity raises money for families who have suffered a property loss and was under insured. Since its inception 10 years ago, GUS has raised $300,000 for those families in need. l

Granite Claims Solutions has purchased Vancouverbased Advance Claims Service Ltd. This is the company’s fifth acquisition in the past twelve months.

Advance Claims is an independent adjusting firm in British Columbia, with offices in Vancouver, Abbotsford, Chilliwack, Kelowna, Penticton, Vancouver Island and Squamish/Whistler. Known for providing innovative claims solutions to an impressive client roster, Advance Claims for the foreseeable future will continue to operate under the Advance name as a division of Granite Claims Solutions.

The founder of Advance Claims, David Porter, will assume the role of vice president, Western Region for Granite Claims Solutions. l www.claimscanada.ca

APPOINTMENT

The Canadian Insurance Claims Managers’ Association and the Canadian Independent Adjusters’ Association Alberta Chapters held its annual joint educational conference on Oct. 20, 2011. The event, held at Coast Edmonton Plaza, provided a broad spectrum of timely material through both an educational and a networking component. Nearly 100 guests attended the four educational sessions: • Condominium Losses – Working with multiple policies and reluctant property managers; Randal Carlson and Peter Gi bson, Field Law • Top Ten Property Coverage Issues – A review of recent case law developments; Jill Shore, Dolden Wallace Folick LLP • Priority of Liability Insurance for Rental Vehicles… reviewing the March 2011 legislative changes; Shawn Sipma and Galan Lund, Brownlee LLP • Recent Developments in Canadian Tort Law; Kathleen Duffield, Dolden Wallace Folick LLP The lunch hour included a meet and mingle, where local vendors were invited to join the delegates to network. l

Dennis Schembri Dennis Schembri has been appointed Executive Vice President of Relationship Management at Granite Global Solutions.

Murray Wallace, President and CEO of Granite Global Solutions said “With over 30 years experience, Dennis is a well known figure in the independent adjusting field. In 1993 he founded Vanler Insurance Adjusters Ltd, expanding to over 50 full time employees and multiple locations around Ontario. He has been with one of our divisions, Granite Claims Solutions (formerly McLarens Canada) since 2007 when we acquired his firm. During this time, he was involved at the senior management level with sales, marketing, strategic direction, most recently as Managing Director, Canada.

“As Granite Global Solutions grows, we needed someone who can assist all our divisions with their key client relationships and develop new group sales and service opportunities. With his existing relationships in the industry, Dennis is the ideal person.”

Wallace said.

The national directorate of the Canadian Insurance Claims Managers Association held its annual general meeting on September 17 and 18.

The meetings were held in beautiful Niagara on the Lake.

The AGM wrapped up with a Toronto Chapter meeting which included a panel discussion that included Wayne Ross, VP national property claims, Aviva Canada; Harold Hopf, senior VP claims, Swiss Re; Carol Jardine, senior VP claims, TD Insurance; Lyndon Friesen, VP claims, Red River Mutual. The discussion centered around “the status of claims” on a national perspective.

The CICMA executive for 2011-2012 term is: past president, Lyndon Friesen, Red River Mutual, (Manitoba); president, Robert Hertner, Allstate Insurance (Ottawa); vice president, Lynn Ross, Aviva (Nova Scotia); treasurer, John Russell, Aviva (British Columbia); secretary, Sharon Clark, CAA, (Toronto) l Kristel Doucet, representing CICMA’s Bluenose Nova Scotia Chapter, presented Tara Blenus with the Highest CIP award.

“I look forward to working with both existing and new clients in this expanded role,” says Schembri, who is now based in the downtown Toronto offices of Granite Global Solutions.

Headquartered in Toronto, Ontario, Granite Global Solutions is a Canadian corporation operating business lines that are leaders in their respective markets: Granite Claims Solutions (formerly McLarens Canada), the country’s fastest growing niche claims adjusting organization; Sibley & Associates, Canada’s largest disability management company; Canpro King-Reed, Canada’s largest private investigation and risk mitigation agency and Rochon Engineering, a leading specialized forensic engineering business, among others. www.graniteglobalsolutions.com

l

www.claimscanada.ca

December/January 2012

Claims Canada 57

• on the scene OTS CIAA New Members — October 2011

Photo courtesy of Louise May Photography

Queenstown, New Zealand was the site of the International Institute of Loss Adjusters’ annual general meeting and conference Nov. 5, 2011, which featured the election of the IILA’s 2011-12 executive board. Pictured are (left to right): Tom Moss (USA), secretary; Fred Plant (Canada), president and treasurer; Hakan Ileri (Turkey), first vice president; Ted Wheeler (Australia), director at large; Michael Hale (USA), immediate past president. Absent: Paul May (England), second vice president. l The International Federation of Adjusting Associations (IFAA), hosted its third International Claims Conference in London on Oct. 12, 2011. The seminar, held at the Association of British Insurers, focused on CAT claims and incorporated insightful presentations by Bob Wedoff of LWG International as well as independent adjusters.

Mark Ellis from Thornton Tomasetti spoke on the Christchurch earthquake catastrophes and the many complex issues associated with those events. Claims professionals from around the world attended the Conference.

Pictured (left to right) are immediate past president of IFAA and conference organizer Paul May of Concordia Consultancy with delegates Chad Hancock of Windsor Partners (London) and Fred Plant of Plant Hope Adjusters (Canada).

The next IFAA Conference is being planned for June 2012 to coincide with the NAIIA’s 75th convention in Puerto Rico.

Further details about the IFAA can be found at www.adjustersworldwide.org l Stephen Robb, current president of the CICMA New Brunswick chapter, presented the Top FCIP award to Sarah Gibson of TD Insurance at the annual convocation for the Insurance Institute. l

Correction: In the October/November 2011 issue of Claims Canada, a photo of Michael McLeod, which appeared on page 42, was incorrectly labeled. We apologize for the error.

58 Claims Canada

December/January 2012

ASSOCIATE MEMBERSHIP Totura & Company – Florida, USA INDIVIDUAL MEMBERSHIP Crawford & Company (Canada) Inc. Neal Jardine, CIP Toronto, ON Rebecca Johnson Vancouver, BC Gary Petrishen Brandon, MB

Level 3 Level 1 Level 1

Kernaghan Adjusters Limited Aht Khuensang Vancouver, BC Jo Kinasewich Vancouver, BC Mark Mullan, CIP Edmonton, AB

Level 1 Level 1 Level 1

Picano & Partners Claims and Risk Services Maurico Gaon Brampton, ON G. Anthony Magagna, CIP Brampton, ON Otilia Miranda, CIP Brampton, ON Clive Wayne, CIP, CRM Brampton, ON Geoff Lund, BA Oakville, ON

Level 2 Level 3 Level 3 Level 3 Level 3

CIAA New Members — November 2011 CORPORATE MEMBERSHIP Elliott Adjusting Services Limited – Middle Cove, NL Leading Edge Claims Services – Welland, ON INDIVIDUAL MEMBERSHIP Colonial Adjusting & Appraisal Services Jackie Noftall St. John’s, NL

Level 3

Crawford & Company (Canada) Inc. Michelle Contois Nanaimo, BC Kimberley Berg Edmonton, AB Shane Christensen Lethbridge, AB David Montgomery New Liskeard, ON Peter Zona Sudbury, ON Angie Haramis Toronto, ON David Smith, LL.B. Toronto, ON Nadine Dionne Whitby, ON

Level 1 Level 3 Level 1 Level 1 Level 1 Level 3 Level 3 Level 1

Elliott Adjusting Services Limited Anthony Elliott, CIP Middle Cove, NL

Level 3

Granite Claims Solutions Del-Anne Huber Patti Washuta, CIP Craig Ozog, CIP

Williams Lake, BC Level 3 St. Catharines, ON Level 3 St. Catharines, ON Level 3

J.P. Hamilton Adjusters Ltd. Barry Brown, CIP Winnipeg, MB

Level 3

Kernaghan Adjusters Limited Tony McVicker Vancouver, BC Paul McFee Toronto, ON

Level 3 Level 3

Leading Edge Claims Services Jeff Edge Welland, ON

Level 3

Midwest Claims Services Jordan Demarsh Nicole McClelland

Level 2 Level 3

Regina, SK Swift Current, SK

Picano & Partners Claims and Risk Services Stephen Follwell, BA, FCIP, FRM Brampton, ON

Level 3

G.R. South & Associates Insurance Adjusters Inc. Michael Epp Orillia, ON Level 3

www.claimscanada.ca

National Standing Committees 2011-2012 ADVISORY Delores Thorbourne, BA, FCIP, CRM Granite Claims Solutions Suite 103 Greystone VII 4208 - 97 Street Edmonton, AB T6E 5Z9 Phone: (780) 442-3077 Fax: (780) 466-0325 E-mail: delores.thorbourne@graniteclaims.com John D. Seyler, AIIC ProFormance Group 2 Robert Speck Parkway, Suite 700 Mississauga, ON L4Z 1H8 Phone: (905) 270-1723 Fax: (905) 272-7486 E-mail: jseyler@prospecialty.ca Mary Charman, CIP Crawford & Company (Canada) Inc. 1 – 120 Mulock Drive Newmarket, ON L3Y 7C5 Phone: (905) 898-0008 Fax: (905) 898-1705 E-mail: Mary.Charman@crawco.ca James B. Eso, BA, CIP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Phone: (519) 578-5540 Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca John Jones, BA Granite Claims Solutions Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 E-mail: john.jones@graniteclaims.com CIAA NATIONAL INSURANCE INDUSTRY ADVISORY BOARD Patti M. Kernaghan, FCIP, CRM Kernaghan Adjusters Limited 300 - 1575 West Georgia Street Vancouver, BC V6G 2V3 Phone: 1-800-387-5677 Fax: 1-800-387-5644 E-mail: pkernaghan@kernaghan.com Greg G. Merrithew, CIP, FIFAA Arctic West Adjusters Ltd. 401 – 5204 – 50 Ave. Yellowknife, NT X1A 1E2 Phone: (867) 920-2212 Fax: (867) 873-2244 E-mail: gregm@arcticwest.ca Delores Thorbourne, BA, FCIP McLarens Canada Suite 103 Greystone VII 4208 - 97 Street Edmonton, AB T6E 5Z9 Phone: (780) 442-3077 Fax: (780) 466-0325 E-mail: delores.thorbourne@graniteclaims.com Mary Charman, CIP Crawford & Company (Canada) Inc. 1 – 120 Mulock Drive Newmarket, ON L3Y 7C5 Phone: (905) 898-0008 Fax: (905) 898-1705 E-mail: Mary.Charman@crawco.ca Patricia M. Battle Canadian Independent Adjusters’ Association/L’Association Canadienne des Experts Indépendants 5401 Eglinton Ave. West, Suite 100 Etobicoke, ON M9C 5K6 Phone: (416) 621-6222 Toll Free: 1-877-255-5589 Fax: (416) 621-7776 E-mail: pbattle@ciaa-adjusters.ca John M. Sharoun, FIIC, CFE, FCIAA Crawford & Company (Canada) Inc. 300 – 123 Front Street West Toronto, ON M5J 2M2 Phone: (416) 867-1188 Fax: (416) 867-1925 E-mail: John.Sharoun@crawco.ca

www.claimscanada.ca

Dennis N. Schembri, CIP, CFEI Granite Global Solutions 133 King Street East, 3rd Floor Toronto, ON M5C 1G6 Phone: (647) 789-2438 Fax: (647) 789-2449 E-mail: dennis.schembri@graniteglobalsolutions.com

CONVENTION Karen Kuronen, CIP, Dip. Mech. Eng. Arctic West Adjusters Ltd. 401 – 5204 – 50 Ave. Yellowknife, NT X1A 1E2 Phone: (867) 920-2212 Fax: (867) 873-2244 E-mail: kkuronen@arcticwest.ca

Mary Charman, CIP Crawford & Company (Canada) Inc. 1 – 120 Mulock Drive Newmarket, ON L3Y 7C5 Phone: (905) 898-0008 Fax: (905) 898-1705 E-mail: Mary.Charman@crawco.ca

Jo-Ann Eccleston, CIP Aviva Canada Inc. 2206 Eglinton Ave. East Toronto, ON M1L 4S8 Phone: (416) 689-3328 Fax: 1-866-805-8585 E-mail: jo-ann_eccleston@avivacanada.com

DESIGNATION Paul W. Greening, CLA, FCIAA Greening Aviation Claims Inc. 26C Palliser Park, Box 190 Riverhurst, SK S0H 3P0 Phone: (306) 353-2000 Fax: (306) 353-2200 E-mail: pgreening@sasktel.net

IBC: LIAISON, LEGISLATIVE & FORMS Paul Hancock, B.Sc., CIP Crawford & Company (Canada) Inc. 300 – 123 Front Street West Toronto, ON M5J 2M2 Phone: (416) 867-1188 Fax: (416) 867-1925 E-mail: Paul.Hancock@crawco.ca

Bob Grouchy, BA, FCIP, CRM Allianz Global 1600 – 130 Adelaide Street West Toronto, ON M5H 3P5 Phone: (416) 915-4247 Fax: (416) 849-4555 E-mail: bob.grouchy@agr.allianz.ca

E. Brian Gough, FCIP, CLA, FCIAA Marsh Adjustment Bureau Limited 1550 Bedford Highway, Suite 711 Bedford, NS B4A 1E6 Phone: (902) 469-3537 Fax: (902) 469-2396 E-mail: ebgough@marshadj.com

Carol Jardine, FCIP, CRM TD Insurance 2161 Yonge Street, 4th Floor Toronto, ON M4S 3A6 Phone: (416) 486-2507 Fax: (416) 545-6022 E-mail: Carol.Jardine@tdinsurance.com

Robert V. Pearson, CLA, FCIAA AAL Alberta Ltd. 600 – 2424 4th Street S.W. Calgary, AB T2S 2T4 Phone: (403) 452-2195 Fax: (403) 452-3568 E-mail: bob.pearson@aaladjusters.com

Justin J. MacGregor Martin Merry & Reid Limited 3 Church Street, Suite 404 Toronto, ON M5E 1M2 Phone: (416) 366-3333 Fax: (416) 366-0730 E-mail: jmacgregor@mmr.ca

DISCIPLINE Mary Charman, CIP Crawford & Company (Canada) Inc. 1 – 120 Mulock Drive Newmarket, ON L3Y 7C5 Phone: (905) 898-0008 Fax: (905) 898-1705 E-mail: Mary.Charman@crawco.ca

Glenn F. Martin Aviva Canada Inc. 2200 Eglinton Ave. East Toronto, ON M1L 4S8 Phone: (416) 288-5280 Fax: (416) 288-5092 E-mail: glenn_martin@avivacanada.com Mark Stewardson, FCIP Royal & SunAlliance 2225 Erin Mills Parkway, Suite 1000 Mississauga, ON L5K 2S9 Phone: (905) 403-2333 Fax: (905) 403-2326 E-mail: Mark.Stewardson@rsagroup.ca Mark Weir Intact Financial Corporation 700 University Avenue, 13th Floor Toronto, ON M5G 0A1 Phone: (416) 341-1464 Fax: (416) 217-0562 E-mail: mark.weir@intact.net Peggy Wong, CIP The Economical Insurance Group 111 Westmount Road South Waterloo, ON N2J 4S4 Phone: (519) 570-8500 Fax: (519) 570-8690 E-mail: Peggy.Wong@teig.com CAREER RECRUITMENT PLANNING Richard Swierczynski, BA, CIP AZ Claims Services Inc. 1500 Upper Middle Rd., Unit #3 P.O. Box 76041 Oakville, ON L6M 3G3 Phone: (905) 825-0027 Fax: (905) 825-5543 E-mail: Richard@azclaims.ca COMMUNICATIONS Teresa Mitchell, FCIP, CRM, FCLA, FCIAA, FIFAA Crawford & Company (Canada) Inc. 14 – 431 Bayview Drive Barrie, ON L4N 8Y2 Phone: (705) 728-5597 Fax: (705) 728-2167 E-mail: Teresa.Mitchell@crawco.ca CONSTITUTION & RULES John Jones, BA Granite Claims Solutions Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 E-mail: john.jones@graniteclaims.com

EDITORIAL Fred Silvestri, BA, CIP Sedgwick CMS Canada Inc. 6725 Airport Road, Suite 300 Mississauga, ON L4V 1V2 Phone: (905) 293-7715 Fax: (877) 863-5678 E-mail: fred.silvestri@sedgwickcms.ca John M. Sharoun, FIIC, CFE, FCIAA Crawford & Company (Canada) Inc. 300 – 123 Front Street West Toronto, ON M5J 2M2 Phone: (416) 867-1188 Fax: (416) 867-1925 E-mail: John.Sharoun@crawco.ca Mary Charman, CIP Crawford & Company (Canada) Inc. 1 – 120 Mulock Drive Newmarket, ON L3Y 7C5 Phone: (905) 898-0008 Fax: (905) 898-1705 E-mail: Mary.Charman@crawco.ca EDUCATION David Porter, LL.B., FCIP, CRM Advance Claims Service Ltd. 206 - 2323 Boundary Road Vancouver, BC V5M 4V8 Phone: (604) 642-0660 Fax: 1-888-452-5246 E-mail: davidp@advanceclaims.com EMERGENCY MEASURES Richard Van Horne Action Investigations Inc. 2 Catelina Court Dartmouth, NS B2X 3G9 Phone: (902) 462- 1222 Fax: (902) 462-3688 E-mail: richardvanhorne@actioninvestigations.ca FINANCE Randy P. LaBrash, CIP, CFE, CFEI Crawford & Company (Canada) Inc. 300 – 191 Lombard Avenue Winnipeg, MB R3B 0X1 Phone: (204) 947-2340 Fax: (204) 943-9168 E-mail: Randy.Labrash@crawco.ca Greg G. Merrithew, CIP, FIFAA Arctic West Adjusters Ltd. 401 – 5204 – 50 Ave. Yellowknife, NT X1A 1E2 Phone: (867) 920-2212 Fax: (867) 873-2244 E-mail: gregm@arcticwest.ca

LICENSING J. Miles O. Barber, B.Comm. (Hons.), FCIP, CRM Network Adjusters Ltd. 67 Folkestone Blvd.

Winnipeg, MB R3P 0B4 Phone: (204) 897-5793 Fax: (204) 897-5797 E-mail: mbarber@mts.net MEMBERSHIP & QUALIFICATIONS Santo Carbone, CRM, FCIAA Crawford & Company (Canada) Inc. 300-123 Front Street West Toronto, ON M5J 2M2 Phone: (416) 364-6341 Fax: (416) 435-0546 E-mail: Santo.Carbone@crawco.ca NOMINATING Mary Charman, CIP Crawford & Company (Canada) Inc. 1 – 120 Mulock Drive Newmarket, ON L3Y 7C5 Phone: (905) 898-0008 Fax: (905) 898-1705 E-mail: Mary.Charman@crawco.ca Greg G. Merrithew, CIP, FIFAA Arctic West Adjusters Ltd. 401 – 5204 – 50 Ave. Yellowknife, NT X1A 1E2 Phone: (867) 920-2212 Fax: (867) 873-2244 E-mail: gregm@arcticwest.ca James B. Eso, BA, CIP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Phone: (519) 578-5540 Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca PRIVACY James B. Eso, BA, CIP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Phone: (519) 578-5540 Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca Keith P. Edwards, FCILA, CLA, FUEDI-ELAE CIAA Honorary Life Member c/o CIAA National Office 5401 Eglinton Ave. W., Suite 100 Etobicoke, ON M9C 5K6 Phone: (416) 621-6222 Fax: (416) 621-7776 E-mail: info@ciaa-adjusters.ca

CIAA REGIONAL PRESIDENTS 2011 – 2012 NEWFOUNDLAND & LABRADOR Marcel Pitcher, CIP, CRM Crawford & Company (Canada) Inc. 300 – 44 Torbay Road St. John’s, NL AlA 2G4 Phone: (709) 753-6351 Fax: (709) 753-6129 E-mail: Marcel.Pitcher@crawco.ca NOVA SCOTIA E. Grant King, BA, B.Ed., CIP Crawford & Company (Canada) Inc. 120 – 237 Brownlow Avenue Dartmouth, NS B3B 2C7 Phone: (902) 468-7787 Fax: (902) 468-5822 E-mail: Grant.King@crawco.ca NEW BRUNSWICK & PRINCE EDWARD ISLAND Luc Aucoin, BBA, FCIP Plant Hope Adjusters Ltd. 85 Englehart Street Dieppe, NB E1A 8K2 Phone: (506) 853-8500 Fax: (506) 853-8501 E-mail: laucoin@planthope.com QUEBEC/AESIQ Elaine Savard, LL.B., FPAA Les Expertises Richard Racette 1090, rue Principale Sainte-Agathe des Monts, PQ J8C 1L6 Phone: (819) 326-0012 Fax: (819) 326-2023 E-mail: elaine.savard@exprr.ca ONTARIO Teresa Mitchell, FCIP, CRM, FCLA, FCIAA, FIFAA Crawford & Company (Canada) Inc. 14 – 431 Bayview Drive Barrie, ON L4N 8Y2 Phone: (705) 728-5597 Fax: (705) 728-2167 E-mail: Teresa.Mitchell@crawco.ca MANITOBA Timothy W. Bromley J.P. Hamilton Adjusters Ltd. 125 Enfield Crescent Winnipeg, MB R2H 1A8 Phone: (204) 944-1057 Fax: (204) 944-1606 E-mail: tbromley@mts.net SASKATCHEWAN Lee Dixon Crawford & Company (Canada) Inc. 210 – 227 Primrose Drive Saskatoon, SK S7K 5E4 Phone: (306) 931-1999 Fax: (306) 931-2212 E-mail: Lee.Dixon@crawco.ca WESTERN Bea Boutcher, CIP Horizon Adjusters Ltd. #207, 9814 – 97 Street Grande Prairie, AB T8V 8H5 Phone: (780) 402-8383 Fax: (780) 402-7888 E-mail: bea.boutcher@horizonadjusters.com PACIFIC David Porter, LL.B., FCIP, CRM Granite Claims Solutions 206 - 2323 Boundary Road Vancouver, BC V5M 4V8 Phone: (604) 642-0660 Fax: 1-888-452-5246 E-mail: david.porter@graniteclaims.com

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• on the scene OTS Granite Claims Solutions, King-Reed Investigations, Canpro Global, Rochon Engineering and Sibley & Associates (Granite Global Solutions companies) held their annual RIMS Canada Ottawa Conference ‘Kick-Off’ reception on Sept. 17 at the Aulde Dubliner and Pour House in Ottawa’s ByWard Market, providing delegates with an opportunity to mingle and kick-start the conference. l

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More than 70 companies and organizations filled the Exhibit Hall at the 2011 RIMS Canada Conference in Ottawa. Exhibitors worked the show and showed their work, as delegates networked with colleagues and checked out the latest company offerings. l

www.claimscanada.ca

December/January 2012

Claims Canada 61

• on the scene OTS Crawford & Company (Canada) Inc. held its annual RIMS Canada Conference dinner on Sept. 17 at The National Arts Centre in Ottawa. l

ARC Group Canada hosted a reception at the RIMS Canada Conference in Ottawa at The Blue Cactus Bar and Grill on Sept. 19. The event included entertainment and a networking opportunity. l

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www.claimscanada.ca

“CIAA is dedicated to fair practice and integrity on all claims-related services” To contact the member firms below go to www.ciaa-adjusters.ca/find.asp BRITISH COLUMBIA Allmark Claims Service Kelowna All Points Adjusting Service Cranbrook Canadian Claims Services Inc. Vancouver Coast Claims Service Ltd. Campbell River Courtenay Duncan Nanaimo Port Alberni Powell River Vancouver Victoria Cornerstone Adjusters Inc. Abbotsford Vancouver West Vancouver Crawford & Company (Canada) Inc. Abbotsford Campbell River Cranbrook Kamloops Kelowna Nanaimo Surrey Vancouver Victoria CSC Canadian Specialty Claims Inc. West Vancouver Cunningham Lindsey International Vancouver

Granite Claims Solutions Abbotsford Burnaby Chilliwack Kelowna Penticton Squamish Vancouver Victoria Whistler Williams Lake Windermere Horizon Claims Terrace Kernaghan Adjusters Limited Courtenay/Comox Duncan Nanaimo Vancouver Victoria Kootenay Adjusting & Consulting Ltd. Nelson Trail D.W. MacLennan & Associates General Insurance Adjusters Ltd. Vancouver MAGC Insurance Adjusters Burnaby McAuley Claims Services Ltd. Vancouver Peninsula Adjusters (2007) Ltd. Sechelt Scott & Associates Insurance Adjusters Inc. Courtenay

ALBERTA All Task Adjusters Calgary Binns & Associates Insurance Adjusters Ltd. Grande Prairie Canadian Claims Services Inc. Calgary Edmonton Crawford & Company (Canada) Inc. Calgary Edmonton Lethbridge Medicine Hat Red Deer Granite Claims Solutions Calgary Edmonton Hans-On Claims Adjusting Red Deer Horizon Adjusters Ltd. Grande Prairie Kernaghan Adjusters Limited Calgary Edmonton Olds Laurin Adjusters Ltd. Peace River LSW & Associates Ltd. Calgary Townsend & Leedham Adjusters Ltd. Edmonton NORTHWEST TERRITORIES Arctic West Adjusters Ltd. Yellowknife

For more information about CIAA’s, professional standards, goals and objectives, please call one of our Regional Officers…

Pacific Region President – David Porter • 604-642-0660 • david.porter@graniteclaims.com Western Region President – Bea Boutcher • 780-402-8383 • bea.boutcher@horizonadjusters.com Canadian Independent Adjusters’ Association 5401 Eglinton Avenue West, Suite 100 Etobicoke, ON M9C 5K6 Phone: (416) 621-6222 Fax: (416) 621-7776 E-mail: info@ciaa-adjusters.ca Website: www.ciaa-adjusters.ca

• on the scene OTS FirstOnSite Restoration’s commercial team hosted a Meet & Greet reception at the Ottawa RIMS Canada Conference on Sept. 20 at Luxe Bistro Restaurant in the ByWard Market area. l

CSN Collision & Glass hosted the network’s 9th annual conference from Sept. 22 to 24, 2011. CSN members, insurance partners and vendors joined together at The Westin Ottawa for the three-day business conference to gain insight into today’s collision repair industry and the changes it will face in the future. l

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Delegates of the 2011 National Insurance Conference of Canada (NICC) held in Vancouver, BC enjoyed the opportunity to share refreshment and conversation during the opening night of the conference. The conference raised more than $21,000 through donations made in lieu of speaker gifts and a silent auction and raffle for WICC BC Chapter, the 2011 NICC’s charity of choice. l

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• on the scene OTS The ARC Group Canada held its 2011 Annual Seminar and Cocktail Reception on Oct. 27, 2011 at the St. Andrews Club & Conference Centre. The afternoon began with an educational component, where speakers discussed litigation and privacy challenges in the electronic age. The afternoon was rounded out with a cocktail reception, where guests had the opportunity to mingle. l

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www.claimscanada.ca

WICC Announces a New National Sponsor at the Platinum Level

www.wicc.ca

WICC is delighted to announce a recent addition at the Platinum Level to its National Sponsorship Program.

Medisys is honoured to be able to support the Women in Insurance Cancer Crusade (WICC) as a newly appointed National Platinum Sponsor. Medisys has enjoyed a close working relationship with WICC for several years now and traditionally our support has been provided at a regional level. With an overwhelming consensus, as a health care based organization, we believe that elevating our level of support and contribution to that of a National Platinum Sponsorship status will be a very rewarding opportunity and invaluable initiative. “We have always believed that it is important to give back to an industry that has shown Medisys so much support over the past several years and this is one very important way of doing so” says Medisys IMA Vice President, Donald A.J. Kunkel.

With a highly qualified and experienced roster of dedicated physicians and allied health professionals, providing medical assessment services on a truly national platform, Medisys’ Independent Medical Assessment Division (IMA) conducts over 30,000 assessments annually for a variety of referral sources. While servicing the P&C auto insurance markets across Canada, Medisys provides objective, credible and defensible Insurer’s Examinations, Independent Medical Examinations and Medical Legal reports. The Medisys IMA head

office in Toronto is supported by regional offices located in Vancouver, Edmonton & Montreal.

The Medisys family of professionals is fully committed to investing all the required time, effort and necessary financial resources needed to support this most dedicated of charitable organizations. Tremendous gains have been made over the years to fight this terrible life threatening condition and continued support for organizations like WICC will one day lead to a cure for even the most devastating forms of this disease.

At Medisys, as in many large organizations, several members of our family have been adversely affected by cancer. Our Assistant Vice President of the IMA Division, Erica Enstrom is one of those individuals – however her’s is a story of success as she is the proud mother of a vibrant young boy who is a cancer survivor. Knowing very intimately the great benefits achieved by organizations like WICC, Erica has stepped forward and has recently been nominated to the WICC Board of Directors in British Colombia. Based on her high level of perseverance and overall dedication to our own organization, we know she will be a very welcomed and significant asset to the WICCBC team.

Medisys is now a part of a very special group of WICC National Sponsors at the Platinum Level.

WICC is extremely thankful to this group of organizations which share the vision and desire to put an end to cancer!

WICC National Sponsors at the Platinum Level also include:

Design compliments of

• on the scene OTS On Nov. 3, 2011 Blouin Dunn LLP hosted an Open House to showcase their new office at 199 Bay Street in Toronto. More than 150 attended and enjoyed great food, drinks, music and a fabulous view of the Toronto Harbour, CN Tower, and downtown skyline. l

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www.claimscanada.ca

Our Team

150 Consumers Road, Suite 500, Toronto, ON M2J 1P9 Tel: 416-510-2468 Fax: 416-510-8766 Toll Free: 1-877-304-2239 Email: info@arsi.ca www.arsi.ca

APPOINTMENT

• on the scene OTS The Honourable Order of the Blue Goose held a martini night on Oct. 27, 2011. The Shuck Em & Shake Em evening, held at the C Lounge in Toronto, provided a wonderful venue for guests to mix and mingle over martinis. l

Jack Parsekhian Blouin Dunn is pleased to announce that Jack Parsekhian has joined the firm as an associate lawyer.

Jack received an Honours Bachelor of Arts degree from the University of Toronto in 1995, and with an LL.B. Honours from the University of Hull, United Kingdom, Faculty of Law in 1998. He obtained a Certificate of Qualification from the National Committee on Foreign Accreditation at Osgoode Hall Law School in 2001, and was admitted to the Law Society of Upper Canada in 2002.

Jack’s practice centers on civil litigation with an emphasis on personal injury, acting on behalf of defendants in motor vehicle accident, statutory accident benefits, insurance, and occupiers’ liability claims. He also has experience with property damage, subrogated interest, coverage and general negligence litigation.

Jack regularly appears at the Ontario Superior Court of Justice and the Financial Services Commission of Ontario. Jack has conducted both jury and judge alone trials, arbitrations at the Financial Services Commission, and an appeal at the Ontario Court of Appeal.

Blouin Dunn LLP is one of Ontario’s leading insurance defence firms whose members have been providing quality legal support to the insurance community for over 30 years.

We offer services in Ontario to property and casualty insurers throughout North America, at all levels of experience, at appropriate and competitive rates.

www.blouindunn.com

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www.claimscanada.ca

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