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February/March 2014

QUAKE CONUNDRUM The risk is real, but are Canadians prepared for the big one?

Official Journal of the Canadian Indeépendent Adjusters’ Association

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Contents FEBRUARY / MARCH 2014 • VOLUME 8 • NUMBER

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Cover Feature 12 Quake Conundrum The risk of a major earthquake in certain regions of Canada is real, according to geoscientists and catastrophe modelers. However, the awareness level of residents in vulnerable zones, as measured by take-up rates of private insurance, is low.

Independent adjusters say that while it is difficult to truly prepare for a major earthquake in an urban area, there are some lessons that can be gleaned from recent events in Japan, New Zealand and Chile.

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BY CRAIG HARRIS

Spotlight 20 On the Leading Edge Fonthill, Ontario’s Jeff Edge started Leading Edge Claims Services Inc. in 2011 with a business plan that mirrors his systematic approach to handling claims.

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BY CRAIG HARRIS

Education Forum 40 The World Around You Assessing the external competitive environment means looking at a range of factors that could affect your firm.

News Features 22 Property Loss Trends An expert adjuster, who has taken on a surprising new role, highlights some important property cases.

BY GLENN GIBSON

28 Top Ten Insurance Decisions Some of the coverage-related cases that adjusters and claims professionals should know about from 2013.

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BY CHRIS DUNN and JOSIAH MACQUARRIE

32 Driving Efficiency How insurers and adjusters can capitalize on data insight and partnerships in collision repair.

BY DARCY GORCHYNSKI

34 End Game

Departments 4 First Notice 42 On The Scene

The three expectancies of damages quantification can make a significant impact on compensation in a life care plan.

Columns

BY MATTHEW ROSE and KATERYNA SHPIR

10 President’s Message

36 Settlement Privilege Understanding the latest developments in settlement opportunities may reduce the costs and delays of litigation for adjusters and their clients.

40 Education Forum

BY ALBERT WALLRAP

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• first notice FN IBC launches municipal risk assessment tool The Insurance Bureau of Canada recently launched the municipal risk assessment tool (MRAT), a web-based aid to help calculate the probability of municipal sewer backflows now and that may also serve as an underwriting tool to calculate risk in future.

IBC president Don Forgeron told attendees of a November 2013 conference that MRAT is being launched as a pilot project in partnership with the communities of Coquitlam, B.C., Fredericton, N.B. and Hamilton, Ont. “Insurers and municipalities have a key role to play in preparing their cities for a new era of severe weather and we are pleased to be partnering with these three forward-thinking cities,” Forgeron said.

Called the first climate adaptation technology of its kind, MRAT is designed to help municipalities identify vulnerabilities in their sewer and storm water infrastructure and to prioritize improvements to prevent sewer back-ups.

Changing weather, resulting in more torrential rain and flooding, is overwhelming vulnerable sewer and storm water infrastructure and causing sewer back-ups and basement flooding, Forgeron said. The genesis of MRAT “was the realization that infrastructure failure in Canada was responsible for the

majority of ever-mounting insured losses that accompanied rainstorms across the country.”

The initial three municipalities will be followed by six others. “The cities of Winnipeg, London, Bathurst, Moncton, Halifax and St. John’s have all collaborated with IBC in our developmental work on MRAT. In the months and years ahead, we will be partnering with them to integrate MRAT into their infrastructure analysis,” Forgeron reported.

And there are more municipalities waiting in the wings, he said, suggesting that the events of 2013 may have “provided even more motivation to municipalities.”

That motivation was likely enhanced by the severe flooding in Calgary and Toronto, events that significantly contributed to Canada’s almost $3 billion in insured losses from natural disasters so far in 2013. The hefty tab follows four years of natural cat-related insured losses close to or exceeding $1 billion, and which is considerably more than the average insurance payout for storm damage of less than $400 million annually from 1983 to 2008.

“You don’t need a calculator to see that in the past four years insurance payouts for storms have more than doubled the annual average of the 25 years that preceded it,” Forgeron said. l

Desjardins buys State Farm’s Canadian business Desjardins Group entered into a definitive agreement announced January 15 to acquire State Farm Canada’s property and casualty and life insurance business, as well as its mutual fund, loan and living benefits companies.

The transaction is expected to close in January 2015, subject to regulatory approval, according to a statement from Desjardins.

Following the closing, Desjardins said it will operate the State Farm Canada businesses under the State Farm brand for an agreed license period.

The deal would make Desjardins the second largest P&C insurance provider in Canada, with annual gross written premiums of approximately $3.9 billion, up from approximately $2 billion.

It would also become the fourth largest life and health insurer in Canada.

As part of the agreement, State Farm will make a $450 million investment in non-voting preferred shares into Desjardins Group’s post-closing P&C insurance business, which will include the newly acquired State Farm Canada P&C operations, according to the announcement. Crédit Mutuel, a major European cooperative financial group and long-term partner of Desjardins Group, will also invest $200 million as part of the deal.

Once the deal has closed, State Farm’s 1,700 Canadian employees and roughly 500 agents will continue to serve about 1.2 million customers in Ontario, Alberta and New Brunswick. Desjardins added that its expects the deal to lead to job creation in the coming years, including in Quebec. l

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• first notice FN Canadian Crime Service signs deal with analytics firm Canadian National Insurance Crime Services (CANATICS), a non-profit organization focused on fighting insurance crime, has closed a five-year deal with an analytics service based in the United Kingdom to examine pooled industry data.

“We chose BAE Systems Detica as our partner because they have the knowledge, skills and services to give the Canadian auto insurance industry superior intelligence from analytics on industry-pooled data,” says Ben Kosic, CEO of CANATICS. “By working with Detica, we will ensure our member insurers’ investigators focus on the right claims to reduce organized and premeditated fraud in Canada.”

The U.K. firm Detica also has an office in downtown Toronto.

First launched last October, CANATICS’ mandate is to analyze pooled auto insurance industry data to find suspicious claims that individual insurers can then investigate.

The Insurance Fraud Bureau in the U.K. and the National Insurance Crime Bureau in the U.S. have analyzed

CANATICS

pooled industry data for years to identify organized fraud activity, CANATICS noted.

“By uncovering networks of connected claim activity across insurers we will help ensure that investigators focus their investigations on the right claims,” according to Kosic.

Kosic is a former partner at KPMG Canada and has more than two decades of management and information technology consulting experience, with industry knowledge in business intelligence and data analytics.

In a report prepared for the Ontario Auto Insurance Anti-Fraud Task Force, KPMG estimated that the insurance industry pays out as much as $1.6 billion per year responding to fraudulent or inflated claims. The task force’s final report released in 2012 recommended that “insurers should move aggressively to establish an organization that would pool and analyse claims data in order to identify potential cases of organized or premeditated fraud.”

CANATICS also includes a board of directors comprised of senior insurance industry executives representing a cross-section of the Canadian market. l

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DETICA

“Interconnectivity” of risks facing insurers: Allianz report Natural catastrophes are a major risk affecting Canadian companies, but there is a broader range of risks in 2014 than in the past that demand attention, suggests Kevin Leong, CEO of Allianz Global Corporate & Specialty SE (AGCS) Canada.

Natural catastrophes, business interruption(BI)/supply chain, pollution, legislative and regulatory changes, and loss of reputation/brand value represent the top risks for Canadian companies in 2014, notes the third annual Allianz Risk Barometer, issued in mid-January.

“We are seeing an increased interconnectivity and dependency of different risks. Thus, client’s business continuity plans must prepare for different risk scenarios that reflect hidden incidental effects,” Leong notes in a statement from AGCS, Allianz Group’s carrier for corporate and specialty insurance business.

“For example, a natural catastrophe such as the floods we experienced last year in Alberta and Toronto or the recent ice

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storm can result in BI, IT-systems failure and power blackouts, among other perils,” he points out.

The barometer is based on feedback from an AGCS survey of more than 400 corporate insurance experts from 33 countries.

Specifically, 50% of Canadian respondents identified natural catastrophes as the number one risk for 2014. Swiss Re recently reported that, globally, insured losses from natural catastrophes totalled about $41 billion in 2013.

AGCS reports that BI/supply chain losses – accounting for 50% to 70% of all insured property losses, or as much as $28 billion annually in Canada (based on 2013 data) – followed nat cats.

BI/supply chain was cited by 42% of Canadian respondents, but topped the global list. In the United States, for example, more than 60% of survey participants identified the risk as their number one, notes the AGCS statement.

Pollution, changes in legislation and regulation, and loss of reputation/brand value tied for third place at 25% in Canada. l

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• first notice FN Industry posts record year for CAT losses The $3.2 billion in insured losses from severe weather represents the highest ever in Canadian history, the Insurance Bureau of Canada (IBC) reports.

The late-year ice storm - which wreaked havoc on parts of southern Ontario and eastern Canada - generated an estimated $200 million in insured losses and was enough to push the annual total for severe weather to a record high.

The new record - data about insured damage is from PCSCanada - follows four consecutive years of natural disaster losses for the insurance industry that hit the $1-billion mark.

“In 2013, the terrible effects of the new weather extremes hit Canadians hard” and the “bad weather hit insurers hard, too,” IBC president and CEO Don Forgeron says in the statement. Some of the largest events include the following: • the first most expensive severe weather event was the torrential rainfall that flooded towns in southern Alberta last June, with insured damage of more than $1.74 billion; • the second most costly was the record rainfall last July that caused flash flooding in Toronto, resulting in about $940 million in damages; • the December ice storms in southern Ontario and eastern Canada spurred $200 million in claims, most of which was for homes damaged by trees that fell as a result of ice buildup (Ontario-based insurers also paid more than $25 million in claims for vehicles damaged);

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www.claimscanada.ca Produced by the publishers of Canadian Underwriter magazine

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

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• the severe thunderstorm last July that hit central and southern Ontario and southwest Quebec, causing about $200 million in damage; and • a band of powerful thunderstorms that hit Quebec and Ontario in June, producing damage amounting to more than $50 million.

“Canadian communities are seeing more severe weather, especially more intense rainfall. This overburdens our sewer and stormwater infrastructure, resulting in more sewer backups in homes and businesses,” Forgeron said. “Property and casualty insurers are collaborating with all three levels of government to help Canadians adapt to these new weather realities,” he adds. l

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February/March 2014

Mike Wells Account Manager • (416) 510-5122 mike@canadianunderwriter.ca

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 MARIE GALLAGHER

The first week of February in Toronto is always a busy time for both Ontario CIAA members and those who have travelled from across the country to attend the many back to back events and this year was no exception.

The week kicked off with CIAA’s National Insurance Industry Advisory Board meeting followed by CIAA’s Mid-Year meeting. Further advancements are being made on CIAA’s on-going initiative regarding temporary licensing harmonization for “insurable claims events”, in large part due to the relentless efforts of Chairperson Patti Kernaghan. Sincere thanks to our stakeholders on the board for their commitment and invaluable contribution addressing issues of mutual concern within the claims community.

Our Education Committee is making headway in moving the development of our new CLA designation program forward. While the last few courses of the program are currently in the works, I encourage members to check out CIAA’s on-line education program at www. ciaa-adjusters.ca for a complete course listing and program registration at a great value of $125 per member per year. Currently there are 30 courses available with many of these courses being a requisite towards the CLA designation which will depict expertise specific to the profession of loss adjusting.

Following CIAA’s consultations with the Department of Finance regarding their current examination of the GST/HST treatment of financial services, a formal position paper outlining CIAA’s observations and recommendations has been submitted to CRA. CICMA/CIAA Ontario Chapters’ Annual Joint Conference was another well planned, well attended, successful event. I noted the unique and special relationship that exists between CICMA and CIAA, not only in Ontario but in other jurisdictions across the country.

For 47 years, Ontario members from both associations have come together to organize this conference for the benefit of its members. This year’s theme was Technology Supporting Claims. The four guest speakers focused on various topics ranging from how we use technology for fraud detection, trend analysis as well as how it impacts our investigation and settlement of claims. Key10 Claims Canada

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À Toronto, la première semaine de février est toujours une période très chargée aussi bien pour les membres de l’ACEI Ontario que pour ceux qui ont voyagé à travers le pays pour assister aux nombreux événements parallèles et cette année n’a pas fait exception.

Le début de la semaine a été marqué par la réunion du Conseil consultatif national de l’industrie de l’assurance de l’ACEI qui a été suivie de la réunion de mi-année cette association.

D’autres progrès ont été réalisés dans le cadre de l’initiative progressive de l’ACEI relative à l’harmonisation des licences temporaires pour les « cas de sinistres assurables ». Cet exploit est dû essentiellement aux efforts inlassables de la présidente Patti Kernaghan. Nous exprimons nos sincères remerciements à nos intervenants du conseil d’administration pour leur dévouement et leur précieuse contribution à la résolution de questions d’intérêt commun pour la communauté des sinistres.

Notre comité d’éducation a fait d’énormes progrès pour le développement du nouveau programme de désignation des experts en sinistre. Bien que quelques cours soient toujours en cours de développement, j’encourage les membres à consulter le programme d’éducation en ligne de l’ACEI (www. ciaa-adjusters.ca) pour connaître la liste complète des cours et s’inscrire au programme à un prix abordable de 125 $ par membre et par mois. À l’heure actuelle, 30 cours sont offerts, dont un grand nombre est obligatoire pour l’obtention de la désignation d’expert en sinistre, qui est une expertise propre à la profession. À la suite des consultations de l’ACEI avec le service des finances au sujet de l’examen du régime fiscal actuel de la TPS/ TVH dans le secteur des services financiers par le ministère des Finances, nous avons a présenté un document de position officielle contenant les observations et les recommandations de l’ACEI à l’Agence du revenu du Canada.

La conférence annuelle conjointe ACDSA/ACEI des sections régionales de l’Ontario a été une fois encore un événement bien organisé et réussi qui a vu la participation d’un grand nombre de personnes. J’ai découvert la relation exceptionnelle et spéciale qui existe entre l’ACDSA et l’ACEI, non seulement en Ontario, mais aussi dans d’autres provinces et territoires du pays.

Pendant 47 années, les membres de l’Ontario des deux associations ont combiné leurs efforts pour organiser cette conférence au profit de ses membres. Cette année, la conférence avait pour thème « Technology Supporting Claims » (La technologie au service des sinistres). Les quatre conférenciers ont mis l’accent sur un éventail de sujets portant notamment sur l’utilisation de la technologie pour la détection de la fraude, l’analyse des tenwww.claimscanada.ca

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note speaker, Amber MacArthur’s fast paced and entertaining presentation on the evolution of technology brought back memories of the days of typing reports on an IBM typewriter then switching from word-processors to computers and new apps and social media etc. I realize how far we’ve come and how much more there is to learn! And I’m sure it will always be that way.

I was pleased to receive such positive feedback on CIAA’s 2014 National Claims Manual as well as our special 60th anniversary edition of Claims Canada. Additional copies of the CIAA Claims Manual can be obtained by contacting our National office.

I am looking forward to attending AESIQ’s annual Sugar Shack event followed by the arrival of spring and the upcoming Joint CICMA/CIAA events that I will be attending in Edmonton and Vancouver in April. I know first-hand the amount of time and effort that goes into planning these types of events, as well as arranging for accreditation of the educational seminars and I thank each of the respective organizing committees in advance for all your hard work. Members are encouraged to actively participate and support their local chapter at every opportunity.

As always, I invite you to contact me anytime should you have any questions, comments or suggestions. n

dances et son incidence sur nos enquêtes et nos règlements des sinistres. La conférencière principale, Amber MacArthur, a fait une présentation rapide et enrichissante au cours de laquelle elle a jeté un regard rétrospectif sur l’évolution de la technologie, allant de la période où les rapports étaient tapés sur une machine IBM, passant par les logiciels de traitement de texte et les ordinateurs, jusqu’à l’avènement des nouvelles applications et des médias sociaux. Cela m’a permis de constater que nous avons parcouru un long chemin, mais qu’il nous reste beaucoup à apprendre! Aussi, je suis persuadée qu’il en sera toujours ainsi.

J’ai eu le plaisir de recevoir des commentaires positifs sur le « National Claims Manual » 2014 de l’ACEI et également sur le 60e anniversaire de Claims Canada. Il est possible de se procurer des exemplaires supplémentaires de ce manuel auprès de notre bureau national.

J’ai hâte d’assister à l’événement annuel de la cabane à sucre organisé par l’AESIQ qui sera suivi de l’arrivée du printemps; je suis impatiente aussi de participer aux prochains événements conjoints de l’ACDSA et l’ACEI qui auront lieu à Edmonton et Vancouver en avril. Je sais d’expérience qu’il faut beaucoup de temps et d’efforts pour panifier ce genre d’événements et obtenir l’agrément pour l’organisation de séminaires éducatifs; aussi, je remercie d’avance tous les comités organisateurs respectifs pour leur dur labeur. J’encourage tous les membres à participer activement et à soutenir leur section régionale à chaque occasion.

Comme toujours, je vous invite à communiquer avec moi en tout temps pour poser des questions, présenter des suggestions ou faire des commentaires. n

NATIONAL EXECUTIVE 2013-2014 2011-2011 PRESIDENT 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 David Porter, LL.B., FCIP, CRM Granite Claims Solutions 400 – 4370 Dominion Street Burnaby, BC V5G 4L7 Phone : (604) 659-6559 • Fax : (604) 659-6570 E-mail : david.porter@graniteclaims.com 2ND VICE-PRESIDENT Albert Poon, CIP Cunningham Lindsey Canada 1102 – 50 Burnhamthorpe Rd. W., Mississauga, ON L5B 3C2 Phone: (905) 896-8181 • Fax: (905) 896-3485 E-mail: apoon@cl-na.com SECRETARY Dara Banga, FCIP, CFEI DSB Claims Solutions Inc. 204 Main Street North, Brampton, ON L6V 1P1 Phone: (416) 400-8933 • Fax: (905) 915-4685 E-mail: dara.banga@dsbclaims.com

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TREASURER Russell Fitzgerald, CIP Kernaghan Adjusters Limited 203 – 4246 97 Street N.W. Edmonton, AB T6E 5Z9 Phone: (780) 488-2371 Fax: (780) 488-0243 E-mail: rfitzgerald@kernaghan.com PAST-PRESIDENT John D. Seyler, CIP ProFormance Group Inc. 5080 Timberlea Blvd., Suite 214 Mississauga, ON L4W 4M2 Phone: (905) 238-4985 Fax: (905) 238-2735 E-mail: jseyler@prospecialty.ca 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 Albert Poon, CIP Cunningham Lindsey Canada 1102 – 50 Burnhamthorpe Rd. W., Mississauga, ON L5B 3C2 Phone: (905) 896-8181 • Fax: (905) 896-3485 E-mail: apoon@cl-na.com 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 DIRECTOR Craig J. Walker, CIP, FCIAA, FIFAA Maltman Group International 3550 Victoria Park Ave., Suite 301 Toronto, ON M2H 2N5 Phone: (416) 492-4411 • Fax: (416) 492-5657 E-mail: cwalker@maltmans.com

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• cover story

QUAKE

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CONUNDRUM

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The risk of a major earthquake in certain regions of Canada is real, according to geoscientists and catastrophe modelers.

However, the awareness level of residents in vulnerable zones, as measured by take-up rates of private insurance, is low.

Independent adjusters say that while it is difficult to truly prepare for a major earthquake in an urban area, there are some lessons that can be gleaned from recent events in Japan, New Zealand and Chile. The question looming ahead: will Canada be ready for the big one?

BY CRAIG HARRIS

T

he earthquake threat in Canada is rising to the surface. Several recent studies have identified the exposure in regions of the country and provided detailed economic loss scenarios. A study by catastrophe modeling firm AIR Worldwide, released in October 2013 and commissioned by Insurance Bureau of Canada (IBC), put the total economic loss of a “realistic” earthquake event in coastal British Columbia at $75 billion.

Another report published in January 2014 in the Bulletin of the Seismological Society of America suggested that the sedimentary nature of the Georgia Basin underneath Vancouver could make the ground shake three to four time greater if a quake occurred within 100 km of the city.

“The shaking in (Metro) Vancouver would be greater because of the presence of the Georgia Basin, especially when the earthquake occurred to the south or southwest,” lead author Sheri Molnar, of the University

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of British Columbia Civil Engineering department, told the Canadian Press.

Even the Canadian federal budget released in February got in on the action, pledging $200 million over five years to create the National Disaster Mitigation Program, including $11.4 million to upgrade earthquake monitoring.

Mid-January also represented the 20th anniversary of the Northridge earthquake in 1994, the most devastating example of a tremblor close to home. That 6.7-magnitude quake in Los Angeles killed 57 people, injured thousands and cost $42 billion in total damages – still the second costliest disaster in U.S. history after Hurricane Katrina.

More recently, of course, there was the March 2011 magnitude 9 Tohoku earthquake and tsunami in Japan, which resulted in more than 18,000 deaths and a worldwide record total economic loss of $300 billion, of which $40 billion was insured. In Feb-

ruary 2011, a powerful 6.3 magnitude quake in Christchurch, New Zealand caused widespread damage to buildings and left 185 people dead. The ongoing costs of rebuilding amount to over $40 billion. And a magnitude 8.8 earthquake that struck central Chile in February 2010 claimed more than 500 lives and led to total losses of about $30 billion.

“As adjusters, we need to be prepared for a ‘worst case’ scenario, such as was seen most recently in Japan, New Zealand and Chile,” notes Jim Eso, senior vice president, property & casualty, Crawford and Company (Canada) Inc. “Crawford has specialized adjusters with significant experience responding to earthquakes. We also have our own business continuity plans to do what we can to ensure that our own operations in an earthquake zone can recover quickly after an event.”

Albert Poon, director of operations for Cunningham Lindsey Canada Claims Services Ltd., says

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his firm was heavily involved in helping to handle the more than 40,000 claims from the Christchurch quake.

“We have a relatively high level of EQ risk awareness in Canada because of our deployment to assist with the losses in New Zealand,” Poon notes.

“Cunningham Lindsey Canada provided assistance through 25 adjusters, with an average stay in Christchurch of three months; some staying up to a year. Our adjusters handled 9,000 out of the 40,000 claims, of which 50% was commercial.”

With the statistics and examples of earthquakes around the world, one might think that residents in B.C. and Quebec-Ontario would have a similarly high level of awareness of the threat in Canada and insurance options. Yet, according to the Office of the Superintendent of Financial Institutions (OSFI), the market penetration of earthquake insurance is low, even in the high-risk regions. In B.C., 45% of residential properties and 85% of commercial properties are insured against earthquake. In Quebec,

those figures are, respectively, 4% and 60%, according to OSFI. “Unless people perceive it has some value for them, they won’t pay the extra money for it (earthquake insurance)” says Fred Plant, president of Plant Hope Adjusters Ltd. “Most

There have been more than 100 quakes of magnitude 5 or higher off Vancouver Island in the past 70 years, including the 6.1 magnitude quake that struck off the B.C. coast in September 2013. people would say, ‘yes, earthquakes happen sometimes somewhere else, but nothing major has ever happened here.’ For many, it is ‘out of sight, out of mind.’”

Other factors may play into the relatively low take-up rates for earth-

quake insurance, such as recent premium increases, high deductibles (typically 10% of total insured value) and the possibility that fire following an earthquake could be covered even without quake insurance in place. But Eso agrees that the mindset of many Canadians is to not take the threat of a major tremblor too seriously.

“My own thought is that the reality is more likely a combination of ‘out of sight out of mind’ and ‘the government will cover it anyway’ as the reasons why people don’t want to pay the now significant cost of the optional coverage,” Eso observes. “There is a significant opportunity for increased education and awareness of the value of the optional coverage.”

There are many signs that the risk of a major earthquake is quite real in specific regions of Canada. Natural Resources Canada reports that Vancouver Island and parts of the St. Lawrence Valley are at a 30% risk of a significant quake in the next 50 years.

Other parts of B.C., Quebec and Ontario face a 15% risk of a major tremblor during the same period.

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R

e

In fact, Western Canada experiences more than 1,000 earthquakes a year. There have been more than 100 quakes of magnitude 5 or higher off Vancouver Island in the past 70 years, including the 6.1 magnitude quake that struck off the B.C. coast in September 2013.

To get a better handle on earthquake exposure in Canada, IBC commissioned the AIR Worldwide study, the first such report since a Munich Re analysis in 1992. AIR modeled two 1-in-500 year earthquake scenarios, both attributable to established seismic sources and similar to earthquakes known to have taken place in the past: • Western scenario ( a magnitude 9 Western Cascadia Subduction event); and • Eastern scenario (a magnitude 7 Eastern Charlevoix Crustal event.)

In the Western scenario, AIR modeled the impact of a major earthquake occurring 75 km off the west coast of Vancouver Island, 300 km from downtown Vancouver. In that event, the overall economic losses would to-

tal $75 billion, with $59 billion due to direct property damage and roughly $13 billion attributable to interruptions in supply chains and economic activity.

AIR also looked at insurance claims in this scenario, which amount

With the documented extent of the potential damage arising from a major quake, independent adjusters don’t have the luxury of complacency when it comes to preparation and awareness. to $20 billion or just over one-quarter of the total losses. Of the insured losses, 58% related to commercial coverage and 40% residential, with most of these losses linked to building (54%), contents (33%) and business interruption (13%). In this mock event,

shake is the leading cause of insured losses (85%), followed by liquefaction and landslide, tsunami (5%) and fire following (0.1%).

For the Eastern scenario, AIR examined a magnitude 7.1 earthquake 10 km beneath the St. Lawrence River and 100 km north of Quebec City. Overall economic losses in this model are $61 billion, of which only $12 billion would be insured (mainly because of low earthquake insurance penetration). While the distribution of losses is similar to the Western scenario (57% damage to commercial property, 42% to residential), virtually all of the insured losses would be due to ground shaking. The rest of the losses would be due to localized fire following.

In this model, AIR notes that the infrastructure and pubic assets are at risk, representing 7% of total direct losses. This means that roads, pipelines, bridges and tunnels in Quebec City and east along the St. Lawrence River would remain closed for weeks, and potentially months. Significant losses would also be experienced by

Restoration Industry

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the electricity and telecommunication sectors.

With the documented extent of the potential damage arising from a major quake, independent adjusters don’t have the luxury of complacency when it comes to preparation and awareness.

“I think adjusters in general and at Crawford specifically have a fairly high level of awareness of the risks of an earthquake,” Eso observes. “Some might say that adjusters are too often pessimistic or cynical about risk and damages, but in this case, the reality of ‘when, not if’ is one that adjusters see every day in their work. We understand the reality that a significant event could occur at any moment, and will most certainly occur eventually.”

One of the main reasons why earthquake risks are unique from other natural catastrophes is the devastating impact in a relatively small geographic area, according to Poon.

“EQ risks are different primarily because of their profound effect on infrastructure, namely bridges, tunnels, airports and roadways,” Poon notes. “Whether it be government imposed or physical damage restricting passage, damage to this type of infrastructure severely impacts our ability to get to the scene. Other unique attributes of EQ risk include government’s involvement with new rebuilding standards, restrictions to 16 Claims Canada

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The complex logistics, emergency response and coverage interpretation issues of a massive earthquake represent formidable obstacles to any working CAT plan for adjusters, according to Plant. building reconstruction and their prioritizing of reconstruction.”

Eso agrees that sending adjusters to an earthquake-ravaged region presents a range of obstacles. “The logistical issues will start with the immediate destruction of critical infrastructure such as roads, water mains, sewage and power distribution,” he says. “If we are talking about a major quake in the lower mainland of B.C., air traffic to YVR may also be disrupted. All of these factors will make insurance assessments a challenge and deployment of adjusters will be delayed while emergency workers deal with the immediate needs of the residents.”

Earthquake damage also presents specific coverage interpretation, assessment and investigation issues for independent adjusters and their clients.

“Coverage issues, especially relating to the ‘fire following’ that may occur, as well as application of deductibles and damage to property other than the insured building should be identified and prepared for as part of the catastrophe response plan” says Eso. “Earthquake damage caused by shaking has a significant ‘hidden damage’ component to it, as damage to supporting structures in a building may not be immediately apparent, but may be significant and require extensive engineering investigation.”

Poon also notes that factors like deductibles and cause of loss can muddy the waters of any earthquake loss event.

“Unique coverage issues pertain to deductible and the ability of the homeowner or business owner to cover the cost of the deductible,” says Poon. “In many regions of B.C., EQ deductible is a percentage of the total insured values with significant minimums. This can cause real issues with funding reconstruction. When you add business interruption to this mix, the problem is compounded.”

The complex logistics, emergency response and coverage interpretation issues of a massive earthquake represent formidable obstacles to any working CAT plan for adjusters, according to Plant.

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City caved in tomorrow because of an earthquake,” Plant notes. “You would have chaos at every level: municipalities, provincial governments, insurers. I am sure they would all do their best in terms of forecasting what their response would be, but in the end it would be every man for himself – at least for awhile.”

Plant argues that the best sources of information are the adjusters who have been through similar earthquake events. “Those are the people we need to go to, ask the questions and get some kind of idea of what we are dealing with,” he says.

In this case, global adjusting firms have an advantage in either taking

old historic buildings, which impacted the level of damage. In Chile, the wine industry was severely affected, with many of the losses involving business interruption and product loss. Other factors, such as local regulations and language, can also play a role in earthquake response.

“And then there was Japan, which was unlike anything else we have ever seen in the combination of tsunami, earthquake and damage to a nuclear power plant, “ Eso explains. “If you were scripting a worst-case loss scenario for a mock disaster, it couldn’t have been any worse than this. How do adjusters work when you have those kinds of conditions?”

• Spreading out specialized teams of earthquake-trained adjusters across the country; • Having senior, experienced adjusters who know about safety, building construction, by-laws and business interruption; • Setting up a command centre outside the major EQ zone that coordinates travel, communication, logistics; • Coordinating catastrophe response by someone not handling claims on a day-to-day basis; • Understanding coverage issues, damage, deductibles as % of total insured value, escalating deductibles; • Responding to earthquake with adjusters who are multi-or bi-lingual (i.e. adjusters in New Brunswick for Quebec EQ); • Committing to stay for duration of EQ event;

One of the key building blocks in any earthquake response and funding plan is a wider embrace of private insurance and a renewed emphasis on earthquake loss reduction programs.

lessons from adjusters in affected regions or sending over Canadian adjusters to experience the aftermath of an earthquake.

“We have had Canadian adjusters deployed to earthquakes in regions around the world,” Eso observes. “All of those people have collective knowledge about what works and what doesn’t work after a major earthquake. Our staff has experienced the response in action, in real time.”

Eso notes that some of the principles in claims response may be similar or the same, but there are key differences in local situations. For example, Christchurch had a number of

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For Eso, it comes down to two things. “You fall back on experience and a well-documented catastrophe response plan,” he says.

“Issues like employee safety, communications, logistics are the things you have to walk through one step at a time. You should have a plan in place ahead of time and be prepared to follow it.”

Poon says Cunningham Lindsey’s experience in the Christchurch earthquake imparted several critical lessons for the adjusting firm. These include: • Pre-planning for earthquake scenarios and response;

• Having an expectation period of 3-4 days before resources are in place in affected area; • Understanding that local restoration/construction will have limited resources.

For Cunningham Lindsey, several factors must come together in an effective earthquake response plan, according to Poon.

“We’ve already partnered with a number of our key commercial clients, both insurers and insureds, to develop a tailor-made earthquake catastrophe plan,” Poon says. “These plans include the appointment of a CAT Coordinator and key senior commercial lines adjusters, (as well as) experts and vendors such as contractors, engineers and accountants.”

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He adds that the firm has also arranged call centre details and protocols for reporting losses and applicable deductible and aggregate limit details, in addition to store/ warehouse/building locations and workflow/action plans.

In a severe earthquake scenario, it’s obvious that any working CAT response plan will be put to the test. It has to be flexible enough to adapt to local situations, foresee and accommodate workarounds and consider alternatives, such as bringing in international adjusters and specialists.

The question may be not just how to deal with the claims aftermath of a massive mega-thrust earthquake, but whether the insurance industry can financially weather such a catastrophic event. OSFI’s current regulatory standards require insurance companies to have sufficient capital and reinsurance to withstand a 1– in-500 year earthquake by 2022. But what if a massive earthquake exceeds that level?

OSFI’s 2012 Earthquake Stress Test estimated that a major quake in Vancouver could lead to about $30 billion in insured losses. In that scenario, 55% of insurers would fail their Minimum Capital Test (MCT) requirements and 35% would become insolvent. The potential for domino effects across the industry and systemic insolvency at that point could be real.

IBC is advocating a national funding model that would provide protection at a time of severe risk. The idea calls for a joint public-private costsharing plan for a mega-earthquake that exceeds a 1-in-500 year event.

The industry trade group is actively pushing for increased earthquake insurance penetration and a workable funding plan that anticipates this possibility. The response from governments, including at the federal level, has been cautious but open to discussion.

An interesting finding of the AIR Worldwide study was the substantial gap between insured and total

economic losses in both the Western and Eastern scenarios. If private insurance only accounts for 20-25% of losses in a major earthquake, that means government is on the hook for the remainder.

One of the key building blocks in any earthquake response and funding plan is a wider embrace of private insurance and a renewed emphasis on earthquake loss reduction programs.

The pursuit of such a framework must first address the conundrum of complacency and low public awareness of earthquake risk in Canada. And that may be a tall order for a country that has not experienced a major shake loss in recent memory.

In the meantime, independent adjusters can only prepare as well as they can and ensure their CAT response plans are thorough and flexible enough to cope with the potential of a “big one.”

Time, and the shifting plates of the earth, will tell if and when these plans are needed. 

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• spotlight S

On the

Leading Edge Fonthill, Ontario’s Jeff Edge started Leading Edge Claims Services Inc. in 2011 with a business plan that mirrors his systematic approach to handling claims.

BY CRAIG HARRIS

F

or Jeff Edge, the decision to launch his own independent adjusting business was a long time coming. After working at Crawford & Company (Canada) for 21 years, he took the leap of faith. And he hasn’t looked back.

“We had wanted to start a business and we looked at a few ventures,” he recalls. “But then I thought, ‘why don’t I do something I know I’m good at? Why reinvent the wheel?’

A light bulb went off. It has worked out exceptionally well.”

In October 2011, Leading Edge Claims Services Inc. (www. leadingedgecs.ca) opened its doors – initially a home based business near Fonthill, Ontario – close to St. Catharines and right in the heart of the Niagara fruit and wine belt. It was a lean firm initially, with Jeff ’s wife and business partner, Michelle, running the office and assisting with day-to-day operations. Jeff continues to be the lead adjuster on claims.

In July 2013, Leading Edge brought in another adjuster, Bob McCord, formerly a staff adjuster with a large national insurer, to help manage the flow of files and to begin expansion.

Jeff notes that like many others he “fell into” the world of adjusting when he went to pick up his wife after his last exam one day in 1990. She worked for Adjusters Canada at the time. He was graduating from Hamilton’s Mohawk College from the Business Marketing Program.

“Her boss asked me if I ever thought of insurance adjusting as a line of work,” he remembers. “And I said no, I didn’t want to sell insurance, I didn’t even know what an adjuster was. He explained what a claims adjuster did and asked me if I wanted to shadow him for a day. I finally agreed reluctantly - but when I actually saw what adjusters do – on the road investigating incidents, interviewing people, inspecting damages – I was hooked. I knew that I didn’t want to be behind a desk all day.”

His career at Crawford & Company included work experience in several branch locations in southwestern Ontario. He quickly grasped the essentials of adjusting and in 1993 was 20 Claims Canada

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Leading Edge Claims Services Inc’s team (from left): Jeff Edge, Michelle Edge, Bob McCord.

made a branch manager of a small branch in his hometown.

Seeking to further expand his experience and skills he moved his young family to the Niagara area in 1999 and a short time later advanced into the role of general adjuster and then senior general adjuster with the company’s Global Technical Services division.

“I was very fortunate to be mentored by more senior adjusters, many of whom are widely respected in the industry” Jeff says. “They generously gave their time and expertise in helping me with my training.”

In his last years with the firm, Jeff observes that he returned the favour and helped to mentor several young adjusters – something that he truly enjoyed. Now with Bob McCord joining his company, he says he can continue this track record and help provide more training and mentoring.

“I think Bob has made the transition very well. I have only ever been an Independent Adjuster but I can appreciate that it can be quite an adjustment going from a staff adjuster to an independent,” Jeff notes. “The timing couldn’t have been better.”

Specifically, Bob joined Leading Edge Claims Services shortly after heavy rainstorms hit Toronto July 8 and caused massive flooding. On July 19, a rainstorm dumped excessive rainfall on parts of the Niagara region, with 106 mm of rain falling in 12 hours (59 mm in one hour) in downtown St. Catharines and Niagara Falls.

“Many businesses were inundated, home basements were backing up with water and sumps couldn’t keep up or failed, “ Jeff observes. “The ground was saturated; we had people with water in their backyards that was pouring in through windows and doors. People who never had a problem with their roofs or walls before started to experience leaking.” www.claimscanada.ca

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The flooding in both Niagara and the GTA led to a busy This problem-solving mindset, coupled with strict attenperiod of claims investigation and settlement, according to tion to detail, represents a good quality for independent adJeff. “Like many others, we really had to step it up during the justers. summer and fall, and we have stayed busy right up to, and “I am very methodical in what I do; we have had numerfollowing, the ice storm,” he says. “It has been an interest- ous successful loss investigations where the legitimacy of the ing year. Weather-related claims in the past several years claim has been in question and where the result has been have actually been quite calm. 2013 certainly changed that positive for the insurer,” Jeff says “That means going back around.” and looking at the facts, perhaps from a different perspective.

Although based in the Niagara Region, Leading Edge I am very particular in my statements, investigations, putting Claims Services handles claims throughout the Golden things in order and not overlooking any details or informaHorseshoe and often further throughout southern Ontario. tion.” He plans to instill this approach in current and future “Our customers often ask us to travel outside of Niagara for adjusters in the firm. them as they know what level of service and expertise that The work of an adjuster involves not just claims resoluthey can expect from us in certain situations in other areas,” tion, but also risk assessment and verification of hidden or he says. previously unknown hazards, according to Jeff.

As part of Jeff ’s contributions to the insurance industry, “We are investigating claims, but we are also helping that he gives presentations on various claims insurer identify and assess the risk, “ he issues to the local chapters of the Insurnotes. “There are numerous occasions I am very ance Institute of Ontario, the OIAA when I have been handling a claim, look methodical in what I through the application and find there and Brokers Associations. Recently, he delivered a presentation to local broare things that don’t jibe with what the do; we have had kers on the impact of weather-related insurer knew of that risk. For my cusnumerous claims over the last eight months, intomers, that is golden. When you go out cluding the challenge of continuing to and bring back information about the successful loss provide superior customer service with risk in addition to the claim investigainvestigations where tion, they are very appreciative of that.” such volumes of claims. “When attendees saw the amount of damage and the This level of service, expertise and the legitimacy of the attention state of some of these risks, it was a real to detail is appreciated by his claim has been in eye opener,” he observes. loyal and growing client base, which inLeading Edge Claims Services is a cludes mutual insurance companies to question and where proud member of the CIAA and the national and international insurers and the result has been OIAA. Jeff has served on the executive third party administrators. for the OIAA Niagara Chapter and is “My philosophy is that insurers positive for currently the chapter delegate. “This will always need claims to be investithe insurer is an important position to me as it algated thoroughly,” Jeff explains. “Some lows me to support continual training, claims may require that attention more learning and networking within our chapter and our indus- than others, but the skill of an independent adjuster on the try as a whole,” he says. scene of the loss is not a commodity. Some claims examinJeff has also recently agreed to become an instructor for ers don’t have the opportunity to be on the road, or to deal the Insurance Institute and is in the process of becoming an with insureds and claimants face–to–face. We are their eyes Insurance Ambassador for the Institute as well. and ears, they require that level of knowledge, know-how and Aside from property claims, Jeff notes that Leading Edge professionalism from us – and that’s what we deliver.”

Claims Services offers adjusting services for casualty and He says he understands the need for scale and efficiency auto (non A/B) insurance work. Areas of specialization for in claims management, driven by large insurance compathe firm reflect his technical focus – including large and com- nies. The challenge comes about when that model is applied plex/questionable losses, environmental losses, marine and across the board. agriculture/viniculture. “However we service our customers “I have heard it called ‘hamburger adjusting,’ and maybe on all levels of claims, from the straightforward to the not so there is a place for that in certain areas,” Jeff notes “But I straightforward.” think that the larger portion of claims require one-on-one “With Bob’s help, I am freed up somewhat in order to attention for each individual claim situation. I believe that spend the time needed on the more complex losses – those wholeheartedly.” cases where examiners look at something and say: ‘What are When Jeff talks about his firm’s business model, he is unwe going to do with this?’” Jeff comments. “I can take on a der no illusions about its strengths. challenging situation, trudge through and get it resolved for “There may be many ways of fulfilling the role of a claims both sides. When a customer has a claim that has gone off the adjuster,” he concludes. “But ours seems to work really well rails, and down the embankment, or the potential to do so, it for the customers we serve and who hire us. That is the busiusually makes its way to me.” ness model that works for us.” 

“

“

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Property Loss Trends

An expert adjuster, who has taken on a surprising new role, highlights some important property cases.

BY GLENN GIBSON

Since my last update I have taken on an additional role as the President of Business Operations for the Hamilton Tiger-Cats. That was something most of my family and friends did not see coming… and, neither did I. How did it happen? That is a bit of a story…

When you are 20-years old and starting a job as a “Claims Representative” you are not sure where your life is headed. While I have always taken pride in keeping my hand in my profession as a loss adjuster (yes, I have a few files), I’ve also had a unique opportunity to become a business professional. My employers have always supported my pathway of continuous learning. My last venture was to become accredited as a “Certified Corporate Director” (ICD.D) at the Rotman’s School of Management- University of Toronto. That was a bit daunting, given written and oral examinations were involved.

So… all of this background led to me volunteering to serve on the board of directors for the Hamilton Hurricanes Junior Football Team. They are one of Canada’s premiere junior teams. This was about giving back to a team that provided a place for me to play in my college days.

My work on that board led me into strategic discussions with the Hamilton Tiger Cat organization. In turn, that created an opportunity to get to know owner Bob 22 Claims Canada

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Young, and CEO Scott Mitchell. Providing some “advice” on a few things suddenly opened up a discussion about taking on a new role.

This new venture at this stage in my life has shown me how much I learned in the “insurance world” that represent transferable skills into any business, profession or occupation. For me, this new work experience has validated what a vibrant, wonderful sector we work in.

In 2014, the Tiger-Cats open a new stadium (for the first time in the Hamilton since 1928!) and will play hard for our fans to reach another Grey Cup game… hopefully with a better result this time!

In the meantime, I continue to write, lecture and participate as much as I can in our great industry. Here are some cases to ponder as you march into a New Year.

Bronfman et al v.

BFL Canada Risk Ontario Superior Court, Stewart J., Nov. 13, 2013 A break and entry took place on November 8, 2008 in a large, expensive house in central Toronto. A 310-pound safe containing over $2 million in jewelry and cash

was taken from the house. No arrests or recoveries were ever made.

In short order, the policyholder discovered they had coverage in place for $20,000 for jewelry and $1,500 for cash. This resulted in a significant uninsured loss and a lawsuit against the insurance broker for allegedly failing to warn the insured about the policy limits that were in place.

A 20-day trial resulted.

There was considerable evidence led. There were some significant points illustrated in the judgment including: 1. There was significant reference to the broker’s marketing brochure. Included was reference to the broker’s role to, “To be alert to any issue affecting the client’s risk profile.”

2. The evidence showed that the broker on risk in 2008 had taken over the dwelling policy in 2004. At no time had he visited the risk prior to the loss. At no time had there been a discussion about “…their home insurance needs.”

3. The insured did receive annual renewal letters where coverage was spelled out.

It was argued that the insured had a duty to review these letters but an insurance broker “expert” indicated at the trial that, “…in his experience few clients ever read their insurance policies or, if www.claimscanada.ca

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they do, rarely do they understand their complex provisions.”

4. There was considerable attention paid by the trial judge to a change in a renewal letter that was sent out after the break-in took place. This letter was more explicit in explaining the limitations of the policy with respect to jewelry etc.

The trial judge found that the broker had not gone far enough in the standard of care expected of an insurance broker in these circumstances.

There are some interesting arguments in the decision relating to whether the insureds were “contributory negligent” for failing to read the form letters. Some of this related to how the case was pleaded but the end result was the trial judge accepted the evidence of the expert and felt the letters … “contained language and provisions which are complicated and contradictory to the lay reader (and arguably to even someone with a legal background).”

2. On items where there was insufficient information to permit a value he omitted it from the list.

3. The judge agreed that the cost of the additional premium to pay for the scheduled items should be deducted. That price was to be worked out by both parties after his judgment was released.

4. And the amount paid by the insurer of their policy limits was also to be deducted from the final sum.

It appears from the judgment that the initial claim of over $2.3 million was reduced by the trial judge to about $790,000 less some of the deductions mentioned.

Summary This was an interesting case from several different points of view: 1. The policyholders in this instance were wealthy. They had accumulated expensive things including jewelry. There was no question the trial judge felt that this

Damages There were several key issues for the trial judge to determine: 1. A schedule of loss was submitted that totaled in excess of $2.3 million. The insured’s detailed “list” of jewelry items was in the safe that was stolen. What value was the judge going to place on each item?

2. If the insured’s had received the right advice and put appropriate coverage in place what would they have received in the way of indemnity? His view was that, “This ultimate figure is the total amount for which the items of jewelry would have been listed and scheduled, less the cost of purchasing insurance coverage.”

Evidence was led at trial from both sides as to the value of the jewelry. The trial judge preferred the evidence of the insured’s expert. And in reviewing a ‘range’ of value he chose the middle figure as the “fairest and most reasonable method.” Of interest was: 1. The judge felt that any jewelry item that had a value less than $20,000 was not likely to have been a scheduled item.

Therefore, he concluded the insured’s would have not specifically insured the item and would have accepted it under their $20,000 blanket coverage. The judge felt that for these less expensive items a reasonable person would not pay the extra premiums but self-insure the risk. www.claimscanada.ca

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The case is being appealed further by the insured but for now it sits as further confirmation that the courts are very supportive of the appraisal process and the power of a judge to use discretion on how it is used. kind of policyholder should have had a personal home inspection and any restrictions of coverage on their policy should have been pointed out to them.

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2. It was very interesting to see -–after the fact – that the judge chose to recreate the policy the insured’s would have purchased as “reasonable” people. This led to a significant discount in the original amount being claimed.

Malhotra v. State Farm Fire & Casualty, Ontario Court of AppealMay 16, 2013 Five different properties owned by the appellant were subject to losses that were discovered in a short period of time. The insurer elected the “Appraisal” process to determine the “amount of loss”. They requested one umpire to be appointed to handle the multiple claims.

The insured had several objections that were heard in two separate proceedings in front of a Superior Court judge.

The insured appealed these decisions to the Ontario Court of Appeal. Our top court in Ontario determined: 1. “The power to appoint an umpire, or umpires, under s. 128 is discretionary. www.claimscanada.ca

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Nothing in s. 128 prohibits the court from appointing a single umpire to deal with multiple properties.”

2. “The appellants did not file affidavit evidence on either motion to challenge the umpires proposed by State Farm. On appeal, the appellant has not identified any form of error on the part of the motion judge that would justify interfering with their discretion.”

The case is being appealed further by the insured but for now it sits as further confirmation that the courts are very supportive of the appraisal process and the power of a judge to use discretion on how it is used.

Five different properties owned by the appellant were subject to losses that were discovered in a short period of time. The insurer elected the “Appraisal” process to determine the “amount of loss”. They requested one umpire to be appointed to handle the multiple claims.

The insured had several objections that were heard in two separate proceedings in front of a Superior Court judge.

The insured appealed these decisions to the Ontario Court of Appeal. Our top court in Ontario determined:

3. “The power to appoint an umpire, or umpires, under s. 128 is discretionary.

Nothing in s. 128 prohibits the court from appointing a single umpire to deal with multiple properties.”

4. “The appellants did not file affidavit evidence on either motion to challenge the umpires proposed by State Farm. On appeal, the appellant has not identified any form of error on the part of the motion judge that would justify interfering with their discretion.”

The case is being appealed further by the insured but for now it sits as further confirmation that the courts are very supportive of the appraisal process and the power of a judge to use discretion on how it is used.

Royal Sun Alliance V. Araujo et al, B.C. Court of AppealJune 28, 2013 This is a rather unusual case involving the fire bombing of a house on August 14, 2004. In the fire, a 15-year old grandson of the dwelling owners was seriously burned while sleeping on a living room

sofa. The grandson subsequently brought a legal action against his grandparents, father and uncle for the personal injuries he sustained.

The key question – Was this young man an “un-named insured” under the RSA policy? If he were then he would be precluded from coverage under the policy. His legal action was framed both on negligence and on statutory duties under the Occupier’s Liability Act, RSBC 1996, s337.

The insurer argued that the boy had a regular pattern of sleeping over at his grandparents’ home. There was always an intention to return to the house and their view was that this formed the, “….necessary attachment to the insured premises and meets the definition of ‘residing’ as used in the exclusion clause.”

The original trial judge relied on a US appeal court decision in Indiana (Imel) that clarified this area by declaring three elements at play: 1. Did the claimant maintain a physical presence in the insured’s home?

2. Did the claimant have the subjective intent to live there? And… what was

Marcus B. Snowden Partner Direct: 416.363.3343 marcus@snowdenllp.com Bradley J. Wells Partner Direct: 416.363.3353 brad@snowdenllp.com

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the nature of the access to the insured’s home and its contents?

4. He did not have access to the security code for the alarm system in the home.

When using these criteria to the case at hand the evidence showed:

5. At no time was he required to do any chores around the house.

1. The young man did not have a room of his own at his grandparent’s home. He always slept on the couch in the living room.

6. Most of his time was spent doing recreational things such as watching TV or going out for meals with his father.

2. He did not keep any clothing in the home.

The Appeal Court affirmed the decision of the lower court and found this young man was not a resident of the household within the policy definition.

3. He did not have a key to the house.

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The matter of liability still has to go to trial. This judgment removes the issue of whether or not the insurer has to provide a defense to their insured’s at trial.

Bennett v. State Farm Fire & Casualty Co, New Brunswick Court of Appeal- January 10, 2013 A fire loss destroyed a property on June 19, 2008. The claim was denied by the insurer on the basis that the property had been vacant for more than 30-consecutive days AND that there had been a material misrepresentation regarding to the failing to disclose the vacancy to the insurer.

Litigation commenced but there were significant delays as arguments were made about the failure of the insured to disclose RCMP information that had been obtained about the fire in question and also a prior break & entry to the same premises.

Twice motions brought the parties before the Court of Appeal.

The insured fought extensively to prevent the RCMP information from being passed along to the insurer. The foundation of the decision seems to be rooted in the principle that claiming privilege on documents should not be an impediment to the truth finding process.

The Appeal Court covers a lot of ground in their analysis. The most significant points seem to be that: 1. When the insured initially requested the documents from the RCMP there was a statutory screening process in place. In fact some of the document material was redacted to protect confidential information.

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2. There was no evidence that the RCMP had imposed any condition upon the releasing of their information to the policyholder.

The court felt the Motion Court judge made no error in ordering the release of the information to the insurer.

This decision dealt with a series of other arguments including the Privacy Act, Freedom of Information Act, public interest immunity, criminal document disclosure, litigation privilege and use of documents in a civil action. At the end of a long road, the police documents provided to the insured were compelled to be produced for the insurer.

Case summary Four and a half years later the insurer will view documents that may or may not

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Case 5040

have a relevance to the reasons the claim was initially denied.

This analysis is well written with solid references to relevant case law.

Conclusions This past year seems to have produced a bit of a ‘slow down’ at the Superior Court level on property cases. As you can see from this analysis there have been a number of cases that have been bumped up to the provincial Courts of Appeal. Most of these cases are not likely going to be granted leave to appeal to the Supreme Court of Canada so they are important decisions to review.

In looking at several of these decisions the messaging seems to be: 1. Go back to the drawing board on policy language.

2. How can we get policies to be clear and direct with no ambiguity?

3. Nothing beats face-to-face communication that is backed up with notes and clear letters of confirmation.

Sounds easy? How does this fit in our new emerging social media world? How can we leverage new communication channels? How can we show due diligence in ensuring that the policyholder understands what is being sold to them?

Managing continuous change is not easy, particularly if you view it from the lens of someone who feels they are in a sea of crisis management. There is no question that it’s important to view the changes as opportunities not problems. And in the midst of doing that make sure you control what you can control.

To me, that’s the daily attitude I bring to work and the quality of work I try to do. But the other thing I control is my continuous learning. For those who are seeking to ‘up their game’ please do yourselves a favour and look at the new FCIP program. It is an outstanding program that provides a tremendous foundation to improve your business skills.

Who knows where this might lead you—running the business of a football team? Nah…couldn’t happen!  Glenn Gibson, CIP, CLA, FCIAA, CFE, CFEI, CFII-c, is the Chief Executive Officer of Crawford & Company Consulting (Canada), and President, Business Operations of the Hamilton Tiger-Cats.

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Insurance Decisions

Some of the coverage-related cases that adjusters and claims professionals should know about from 2013.

BY CHRIS DUNN AND JOSIAH MACQUARRIE

After a lively 2012, insurers saw a relatively quiet year at the Supreme Court of Canada in 2013. Picking up the slack was the Ontario Court of Appeal, which rendered a number of significant decisions in the area of directors and officers liability, homeowners coverage and commercial general liability coverage. And here we go……

Goodyear Canada Inc. v.

American International Cos. (June 13, 2013, Ontario Court of Appeal) Commercial General Liability Goodyear faced claims for selling asbestos related products from 1968 onwards. Goodyear had liability insurance from 1968 through to 1980, however, from 1980 to 1985, Goodyear elected to self-insure. Starting in 1985, coverage for asbestos risks became unavailable in the market as insurers ceased to underwrite the risk. On motion to the Ontario Superior Court of Justice, Goodyear sought to compel its “1968 through 1980” insurers to cover its “post-1985” liabilities. The argument was based on the “Stonewall Principle”, which had been adopted by a number of U.S. States, and which held that an insured does not elect to self-insure during a period for which coverage was not commercially available. As such, the insurers on risk during the “insured” periods should pick up the shortfall in coverage for the “uninsurable” time periods.

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on appeal. The Ontario Court of Appeal cited four reasons for rejecting the “Stonewall Principle” – (1) it is inconsistent with the language of the pre-1980 policies, which only covered damage occurring “during the policy period”, (2) the “Stonewall Principle” was not universally accepted by all states, and in fact, was seen as “highly suspect” by many U.S. courts, (3) Ontario policy considerations militated against its adoption, and (4) the law of Ontario historically applied the pro-rata allocation method, which was inconsistent with the “Stonewall Principle”.

Goodyear chose to continue manufacturing asbestos products knowing that insurance was no longer available and as such, should be held to its business decision to court the risk.

Bawden v. Wawanesa Mutual Insurance Company (November 26, 2013, Ontario Court of Appeal) Homeowner’s Insurance (Liability) The insured’s eight year old daughter was injured after being struck by a car. She sued the driver and owner of the car, and they in turn claimed against her parents for failure to supervise. The parents sought liability coverage from Wawanesa, their homeowners insurer. Wawanesa denied coverage, relying on the policy’s exclusion for injuries to members of the household. The exclusion precluded coverage “for bodily injury to you or to any person residing in your household.” Historically, similar exclusions had been upheld

by Canadian courts.

In finding that the exclusion did not apply, the Court of Appeal focused on the difference between the language in the coverage grant and

that of the exclusion. The policy covered bodily injury or property damage “arising out of your personal activities anywhere in the world.”, while the narrower exclusionary language excluded coverage “for bodily injury to you or to any person residing in your household…” The Court of Appeal held that the claim was not one “for” the injuries to the daughter, but instead, was one “for” contribution and indemnity arising out of negligent supervision.

Onex Corp. v. American Home Assurance Co. (February 25, 2013, Ontario Court of Appeal, leave to appeal to S.C.C. denied) D&O Policy Onex and certain of its directors sought reimbursement for defence costs and settlement amounts paid in an action commenced against them in Georgia. That litigation was brought by the trustee in bankruptcy of a former Onex subsidiary, Magnatrax Corp., claiming that various officers and directors of Onex breached their duties to Magnatrax. The action was settled for $9.25 million and Onex incurred approximately $35 million in defence costs.

Onex had a 2002-2003 D&O policy with American Home, and purchased a “run-off ” policy when it looked like Magnatrax might be sold. The “runoff ” coverage added an endorsement which precluded coverage for claims being made by Magnatrax itself (Endorsement 14), and an endorsement reducing the limits of the “run-off ” policy where there was other coverage available from American Home (Endorsement 16). www.claimscanada.ca

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Onex had provided notice of circumstances to American Home under the 2002-2003 policy(s) after receiving a demand letter from Magnatrax’s counsel in August, 2003. When the Trustee for Magnatrax subsequently sued the Onex directors and officers in May, 2005, they tendered the claim to American Home, seeking coverage under the 2004-2005 D&O policies.

American Home denied coverage, taking the position that the claims had been “reported” to American Home under the 2002-2003 policies. American Home’s position was ultimately upheld by the Court of Appeal.

American Home also denied coverage on the basis of endorsement 14, arguing that the claims were being made against the directors and officers of Magnatrax by Magnatrax itself. The motions judge disagreed, holding that the claims were being made against the directors and officers, in part, in their capacity as directors and officers of Onex. As such, the “insured” versus “insured” exclusion did not apply. The judge found endorsement 14 to be unambiguous in this regard. The Court of Appeal disagreed, holding that competing interpretations of Endorsement 14 were available. However, with no other interpretive aids to assist, and no extrinsic evidence, the Court of Appeal was left to refer the matter back to the Superior Court to determine which interpretation should prevail. The same result held with the similarly worded Endorsement 16. American Home had already accepted that the Georgia action triggered coverage under the “runoff ” policy, and ultimately paid $15 million in legal fees under that policy.

$750,000. Lombard denied coverage on the basis of the “employee injury” exclusion.

The trial judge agreed with Lombard’s position, noting that CGL policies are intended to protect against losses caused to third parties, and not employees of the insured. Regardless

of one’s status as an “employee” or “executive”, all individuals were “employees” of the company in the sense s by the exclusion.

Dominion of Canada General Insurance Company v. Hannam (May 24, 2013, Newfoundland Court of Appeal; leave to appeal to S.C.C. denied) Homeowners’ Coverage - Liability

Sam’s Auto Wrecking Co. v.

Lombard General Insurance Co. of Canada (March 28, 2013, Ontario Court of Appeal) Commercial General Liability Sam’s Auto Wrecking opted out of worker’s compensation for its management-level employees, instead purchasing coverage privately. The insured’s vice president was seriously injured on the jobsite when he was run over by a crawler crane. When he sued, Sam’s sought coverage from its CGL insurer Lombard after settling the claim for www.claimscanada.ca

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The insured family had a homeowner’s policy with Dominion. The son was operating an ATV with the father’s consent. The son permitted a friend to drive the ATV in a rock quarry, and a passenger was seriously injured during a crash. The passenger sued. The defendants included the father, who owned the ATV, the mother and the son. The claims against the father included vicarious liability as “owner” under statute for the negligent operation of the ATV and failure to supervise the son. The mother was sued for failure to supervise the son.

The son was sued for consenting to the negligent use of the ATV by the friend.

Dominion denied coverage on the basis of the exclusion for “ownership, use or operation, by you or on your behalf, of motorized vehicles…” The policy did, however, extend coverage for the use of any ATV not “owned” by the insured. Dominion brought an application denying a duty to defend.

The application judge found coverage for the father, son and mother holding that the claim(s) being made against them arose out a failure to supervise and not the “use or operation” of the ATV. Dominon successfully appealed.

The Court of Appeal supported a denial of coverage to the father, as his failure to supervise was inextricably linked to the “use or operation” of the ATV. While the same held true for the son and mother, they were covered as they did not “own” the ATV. Leave to appeal to the Supreme Court of Canada was refused.

Boyce v. The Co-Operators General Insurance Company (May 8, 2013, Ontario Court of Appeal) Property Insurance The insured’s business suffered a loss in 2010 as a result of odour contamination. Co-Operators alleged that the odour was caused by a skunk and denied coverage. The insured filed a proof of loss in December 2010, and commenced an action seeking coverage in February 2012. The insured sued within the two-year period set out in the Limitations Act, but not the one30 Claims Canada

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year limitation period in the statutory conditions. Co-Operators moved for summary judgment on the limitation issue.

The motions judge held in favour of the insured, as the insurance policy lacked the necessary language to be a “business agreement” under the Ontario Limitations Act. Had it been a “business agreement”, the insurer could have contracted out of the two year limitation period. CoOperators successfully appealed. The Court of Appeal held that commercial policies incorporating a one-year limitation period are “business agreements”, and therefore the limitation period was enforceable. However, if the coverage is for personal, family or household purposes, then the two-year limitation period applies.

Turpin v. The Manufacturers Life Insurance Company, (June 17, 2013, British Columbia Court of Appeal)- Travel Insurance/ Reasonable Expectations Turpin incurred medical expenses in California and sought indemnity from Manulife under a travel insurance policy. Just prior to her trip, she went to her doctor and the hospital for abdominal pain. She was given medication and her pain subsided. She subsequently purchased a travel insurance policy with Manulife, but did not read the policy wording. While in California, Turpin incurred $27,000 worth of medical treatment for abdominal pain and, upon her return to Canada, underwent an appendectomy.

Turpin’s claim to Manulife was denied on the basis of the policy’s exclusion for pre-existing medical conditions. Turpin sued.

The trial judge held that the policy’s exclusions were unambiguous. Turpin had suffered from an unstable medical condition in the 90 days prior to travel, and had received treatment prior to departure. However, the “reasonable

expectations” doctrine permitted the judge to find coverage regardless of the clear exclusion, as Turpin had a “reasonable expectation” of coverage. The Court of Appeal disagreed, upholding Manulife’s denial of coverage. The Court of Appeal held that the “reasonable expectations” doctrine could only to be applied in circumstances where the policy language was ambiguous.

Here, where there was no ambiguity, the doctrine was of no application.

Aviva Insurance Company of Canada v. Lombard General Insurance Company of Canada (June 20, 2013, Ontario Court of Appeal) Ranking of Policies/Equitable Contribution Eight legal proceedings were commenced in the wake of a fire at a Toronto apartment that resulted in the deaths of six people. The building owner and property manager were both found liable. Lombard provided a primary policy of $1 million and an excess policy of $9 million to both the owner and property manager. Aviva provided a $5 million excess liability policy insuring only the property manager. Lombard appointed a single counsel to defend the owner and property manager. Aviva did not participate in the defence. At the end of the underlying trial, liability was not apportioned between the owner and property manager as “one defendant”.

Lombard had previously received an order from the Ontario Superior Court of Justice that the Aviva excess policy ranked ahead of the Lombard excess policy with respect to the property manager’s liability. In the wake of that decision, Lombard refused to satisfy any portion of the judgment in excess of its $1 million primary policy. Aviva was left to pay the remaining $2.5 million.

Aviva successfully sued Lombard to recover 50% of that payment. The Court of Appeal held that principles of restitution, equitable contribution and unjust enrichment all applied to hold Lombard liable to pay 50% of the excess judgment based on Lombard having been the sole excess insurer of the owner. www.claimscanada.ca

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ACE INA Insurance v. Associated Electric & Gas Services Limited (November 14, 2013, Ontario Court of Appeal) Commercial General Liability After an explosion in 2008, various lawsuits were brought against Toronto Hydro seeking in excess of $50 million in damages. ACE provided primary insurance of $1 million per occurrence.

That policy had a duty to defend, with no limit for defence costs and without such costs reducing the limit of liability. Toronto Hydro had a $45 million excess policy with AEGIS. The AEGIS policy did not contain a duty to defend, though AEGIS did have a right to associate in the insured’s defence. The payment of defence costs, if required, under the AEGIS policy, eroded the policy limits.

ACE brought an application seeking a contribution to defence costs from AEGIS. ACE argued that both it and AEGIS shared exposure to risk, and therefore should share equally in the defence costs. Both the application judge and the Court of Appeal sided with AEGIS. Equitable contribution only arises when insurers cover the same risk. The AEGIS

policy could only be called upon to defend where other insurance was not valid and collectible. The Court of Appeal reiterated that, absent a duty to defend in the excess policy, there was no entitlement on the part of a primary carrier to a defence cost contribution simply because the excess carrier was exposed to indemnity.

Certain Underwriters at Lloyd’s of London v. All Spec Home Inspections et al. (November 19, 2013, Ontario Superior Court of Justice) Professional Liability The insured was a self-employed home inspector who had a professional liability policy with Lloyd’s written on a “claims made and reported” basis. The insured inspected a home in July of 2010. A contractor was subsequently killed on August 16, 2010 after coming into contact with an exposed electrical wire that the inspector had missed. The Ministry of Labour interviewed the insured and also conducted an inquest. When the insured renewed his policy nearly a year after being interviewed by the Ministry, he was asked if he was aware of any situation

or circumstance which may in the future result in a claim. He answered “no”.

In November, 2011, the family of the deceased contractor sued a number of parties, including the home inspector. The inspector tendered the action to Lloyd’s for coverage.

Lloyd’s denied on the basis of the failure to disclose circumstances which could have given rise to a potential claim. Lloyd’s successfully applied to the Ontario Superior Court of Justice for a declaration that there was no coverage. The application judge agreed that the insured’s failure to disclose the circumstances, including the Ministry of Labour investigation, violated the terms of the policy.  Chris Dunn is a partner at Dutton Brock LLP. His practice involves advising insurers, corporations and individual on insurance and reinsurance coverage issues, with a particular focus on commercial general liability policies. Josiah MacQuarrie is an associate at Dutton Brock LLP. His practice is dedicated to insurance litigation, with a focus on the defence of personal injury and property claims, insurance coverage and subrogation.

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Driving Efficency

How insurers and adjusters can capitalize on data insight and partnerships in collision repair.

BY DARCY GORCHYNSKI

Insurers and repairers can start the year off right by focusing on data insight to gain a competitive advantage in claims management. Specifically, to make wiser business decisions, you can uncover and share data insights, and work together through partnerships to define key metrics that are top of mind for an insurance company and a collision repair shop.

Investing in intelligent partnerships makes good business sense in the claims industry. Deloitte’s 2012 report, Driving Operational Excellence In Claims Management, states: “Since claims are the single largest spend for a P&C insurance company, investing in operational improvements in claims management is one of the most effective strategies to drive profitable growth.”

Such operational improvements include increased transparency into claim data to pinpoint opportunities improve severities, increase profitability and enhance customer experience through better cycle times.

The Role of Data vs. Data Insight It is important to understand the distinction between data and data insight. With today’s technology, businesses are able to collect tremendous amounts of data with relative ease.

However, the data is usually meaningless unto itself. By contrast, data insight, or intelligence, translates measured data into meaningful, actionable managerial insights.

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Creating a win-win scenario with data insight entails measuring, mining and managing your information by analyzing the data for trends, pattern relationships and other useful information. By leveraging all this information, you will be able to stop making decisions “by the seat of your pants” and improve the way you communicate with your respective business partner.

For instance, insurers and repairers, how efficient are your staff appraisers, independent appraisers and collision repair shops? What data do you use to determine a high performing shop? If you already use data to measure and benchmark, how are you using it? How is this data communicated and how often? Is it driving the outcomes you expect? Do repair shops know how they stack up against their competitors? Does the policyholder receive timely communication and quality service throughout the entire claims process?

Most insurers already use analytics to improve claims process efficiency, eliminate duplicate data entry and reduce delays. Now it is increasingly necessary for insurers to look deeper into their metrics. Applying data insight elevates tactical claims processing to the level of strategic claims management.

How to Get Started Many repairers currently use data insight to work closely with their insurance partner to deliver financial results and world-class service. However, some repairers don’t and they need to begin by using the proper

tools to mine their data and become educated on what the data means.

You can start by asking questions – such as, ‘What does this data mean?’ and ‘Why is this data important to my company?’ Then figure out the relationship between your repair decisions and the impact on the claim severity and cycle time. By being curious and asking powerful questions you can learn how to turn combative conversations into meaningful dialogue when you discuss the data with your insurance partners, your peers and industry experts.

It is a process but, if you are going to stay competitive in this business, you must learn how to leverage data. You must learn how to turn key performance indicators (KPIs) into insightbased actions to improve business processes, which will improve cycle time and enhance the customer experience.

The business benefits are clear, as a recent FenderBender KPI Survey Report cites: “Shops that track KPIs tend to have larger annual sales volumes and high net profit margins.” As such, repairers require more sophisticated electronic estimating and data mining resources.

Although repairers have no control over the types of damaged vehicles entering their facilities, they can control certain decisions, and monitor and understand the outcome of those decisions based on metrics.

Over my more than 30-year career in insurance, I have had the opportunity to work with some phenomenal industry leaders in British Columbia who all understand metrics and KPI, www.claimscanada.ca

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and all run very successful businesses.

What I have learned from these experts is that the repair severity is often an outcome of two main decision points within the repair of a vehicle: ‘Can the damaged part be repaired?’ and ‘Does the part require replacement?’

If the part cannot be replaced, an additional question is, ‘What type of part will you use in the replacement process?’ (i.e. original equipment manufacturer (OEM), aftermarket or recycled). It is often more cost-effective to repair parts. However, some repair facilities do not consider repairs as their first option and quickly move to replace repairable parts. When reviewing your metric, as a rule of thumb, the higher the percentage of total labour to the gross repair amount, the more cost-effective the repair.

Repairers should also measure competitive data to determine how their shops compare to rivals. If you are not currently receiving this data, you should ask your insurer for it.

Meaningful metrics include: cycle time, average touch time per day, average repair order, and timeliness of communication with customers and insurers. Adopting more sophisticated analytics can reveal patterns that lead to actionable, feasible decisions by repairers.

Profiting From Partnerships To compete effectively, insurers and repairers also need to rethink their relationship dynamics. Specifically, they need to consider replacing their arm’s-length, transactional relationships with collaborative partnerships focused on common goals: quality, cost-effective repairs and happy, loyal customers.

Currently, the transactional relationships between insurers and repairers tend to use data as a stick to drive performance. However, this dynamic is becoming outdated. A more competitive relationship model involves sharing data insights to coach collision repair shops to higher performance through partnerships. Partners use data as mutually-beneficial intelligence to foster meaningful dialogue and drive sustainable growth. www.claimscanada.ca

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In contrast to today’s transactional relations between insurers and repairers, healthy partnerships: • Cooperatively analyze entire systems – including the claims processing value chain – in search ways to improve customer experience;

• Break down silos within and across organizations by emphasizing constructive, cooperative dialogue; • Seek long-term relationships through a strong customer focus and a high level of contact with them; and • Reduce stress by balancing power in the relationship.

By partnering with suppliers, including insightful data providers, repairers and insurers can improve visibility, control and tracking of supplier spending, performance and risk.

Establishing partnerships can strengthen your performance by increasing trust, accountability and credibility through open dialogue with partners and customers alike. Partnerships can also help manage expectations, exercise autonomy and increase productivity.

Putting It All Together: Intelligent Partnerships Deloitte determined an effective claim supplier management strategy can yield savings as high as 30% through collaborative cost control and efficiency improvements. Such a strategy combines data insights and partnerships.

To determine the types of information partners should share, Deloitte states, “One of the biggest operational challenges is a lack of analytical insight; most insurers are simply unaware of what their suppliers are costing them.” By partnering with suppliers, including insightful data providers, repairers and insurers can improve visibility, control and tracking of supplier spending, performance and risk. Partnering can enhance customer service since repairers directly engage with policyholders and impact their satisfaction with the overall claims process.

Consider the fundamentals of intelligent partnerships: • Be open to interdependence. Consider the long-term, big-picture benefits of collaborating with other organizations in your ecosystem, which includes the sum total of repairers, insurers and suppliers.

• Think strategically: Focus on the metrics that will drive desired outcomes and set targets against those metrics.

• Measure & mine data: Identify where you are and where you want to be. Measure outcomes against what matters to your customers, including fast, quality service and clear communication. Then dive deeper, translating data into meaningful insights to improve decision-making.

• Share insights: Make ongoing, constructive dialogue a priority. Meet to share data insights and translate them into feasible action items. Keep internal and external stakeholders informed to build credibility and trust.

• Commit to continuous improvement: Keep monitoring KPIs to pinpoint what works and where to improve.  Darcy Gorchynski is Director of Business Development for Audatex Canada, where he applies his decades of insight into leveraging technology to enhance service delivery and improve the overall claims experience.

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End Game

Examining the three expectancies of damages quantification.

BY MATHEW ROSE AND KATERYNA SHPIR

Determining when a head of damage should cease can make a significant impact on the amount of compensation that needs to be paid out in a claim. Establishing when a person will likely die could make a significant impact on when compensation should terminate and the quantum of damages.

Over the past 30 years, Canadian life expectancy at birth has been steadily increasing. The longevity of those born in 2009 is 8% higher than those born in 1979, according to data from Employment and Social Development Canada. This improvement is accompanied with an increase in the number of years spent working and doing housework.

The aim of this article is to introduce the most prevalent methodologies and provide a general overview without delving into the mathematical and statistical details of the concepts of three types of expectancies – life, worklife and household.

These three types of expectancies play an important role when assessing damages and preparing reports on claims.

That is, if Accident Benefit or Bodily Injury Adjusters determine that compensation payments are appropriate, the expectancies provide the endpoints of such payments. This article can serve as a reference for members of the legal and bodily injury insurance community on how the endpoints for services outlined in a life care plan and future valuations report are determined.

The calculations of damages in personal injury and wrongful death cases rely heavily on the duration of payments. A longer time period means a larger lump-sum present value of damages to be paid-out. The calculated expectancies determine the points at which certain services either need to continue or cease. These points may have a notable impact on the settlement or quantification of the pecuniary damages.

Life Expectancy The life expectancy of the individual provides the endpoint of the future cost valuations and, thus, is an important variable when quantifying damages. Life expectancy influences the time period in which the cost of care as a result of 34 Claims Canada

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the injury is accumulated and is retrieved from statistical models modelling the mortality experience of a population summarized in life tables.

There are two types of life tables. The cohort life table follows an actual specific cohort population from birth to death. The efforts and resources required for the construction of such a table are immense. This type of table demands a mass volume of data and estimation techniques for projecting mortality experiences in the future. For example, if we follow the cohort of individuals born in 1990, we will need to extrapolate data to predict the changes in population. The common obstacles of deficiency and incompleteness of data often renders the creation of the cohort table unattainable.

The second kind of life table, the period life table, is the widely accepted primary method used for mortality experiences modelling. The period life table overcomes the problems presented in the cohort life table by following a hypothetical cohort and applying the age-specific mortality rates of the actual population at each period in time.

An age, gender specific statistic for life expectancy in Canada can be retrieved from The Life Tables published by StatsCan. Observing Canada, the provinces and territories, the table tracks the population changes in an original hypothetical population of 100,000 followed from birth to 110 years of age. The life expectancy calculated from this approach tells us the average remaining number of years the individual is expected to live.

Using the most recent published 2007-2009 life table, a 60-year-old female, for example, has a life expectancy of 22.29 years. This is determined by considering the 2,017,686 combined years of life left for the 90,509 females left from the initial population.

Life expectancy, however, does not necessarily need to be based on gross normative population data, but could be based on health characteristics unique to the individual. www.claimscanada.ca

14-02-24 9:26 AM

This is especially relevant when the injury experienced impacts the individual’s life span.

sideration in economists’ reports and rarer still in life care plans. However, this expectancy can play an important role in quantifying the damages and, thus, should be a factor of Worklife Expectancy interest in the reports.

Worklife expectancy is another expectancy that is often Household maintenance expectancy can be defined as disputed in civil litigation cases. It tells us the individual’s the individual’s average outstanding years of declining average number of active years remaining in the labour force capacity for household activities. The complexity of meafrom a specified age. This statistic can be used to determine suring this type of expectancy is shown through the sugthe age at which the individual ceases to work, which may gested (and the authors would hesitate to suggest arbitrary not be equivalent to retirement age. This, in turn may im- framework) featured by StatsCanada in their household pact the calculations regarding the damages accrued dur- surveys. ing income earning years such as loss of This framework separates housefuture earnings, loss of future earning hold activities into three types – capacity and loss of competitive advanheavy-duty tasks, intermediate-duty tage. tasks and low-duty tasks. Each kind The determined retirement age has of activity requires a different amount substantial effect on the estimate of of strength and ability and can condamages and, thus, the worklife expectribute to different household expectancy is of interest to both the plaintancies. The logical assumption being tiff and defendant. Suppose a simplithat as humans age a person’s ability fied situation not considering taxes or to complete heavier tasks naturally defringe benefits where 100% of future clines and occurs with a person losing earnings constitute the loss and damthe ability to do “heavy-duty” tasks ages will be paid out at the beginning first and then lighter tasks last. of each year. A base salary of $50,000 Some loss may be attributed to othwith a growth rate of 3%, discount rate er areas such as cognitive losses, such of 5% will yield a present value of damas Alzheimer’s, that would prevent a ages of $695,272 over 16 years. Over person to lose the ability to complete an 18-year period, the present value more complex tasks first, and then easwill amount to $768,052. Thus, eviier tasks last. This is notwithstanding dently, an increase of worklife by only the over learning of an activity, that two years results in an increased loss of becomes automatic. Regardless of the $72,813. varying expectancies associated with Similar to finding life expectancy the type of tasks involved, it is generendpoints, the method of projecting This article can serve ally accepted in Canada that the indithe duration of the income-earning as a reference for vidual’s ability for all household activiperiod is to consult the worklife tables, ties will generally cease at age 80. members of the legal which tell us the average remaining It is the opinion of the authors that length of time in the labour force for and bodily injury damages quantification can be more an individual. These tables are derived precisely and empirically utilized in insurance community by applying a labour force participation life care plans and future valuations on how the endpoints rate to the population numbers extractthan is currently being completed in ed from life tables effectively separating for services outlined the insurance industry. This is espethe population into two groups - those cially true as Canadians continue to in a life care plan and that are participating and those that are inactive in the labour force. The Canafuture valuations report experience increased longevity in all areas of their lives, which means it is dian tables are multi-state tables that, are determined. becoming increasingly important to instead of assuming full participation apply a more thorough examination to commencing from the specified age these expectancies.  to age of retirement, these age, gender specific tables allow for unemployment periods at various times during the worklife reflecting inconsistencies, risk in the labour market.

Household Maintenance Expectancy Household expectancy, the age at which housekeeping capacity declines, is rarely taken into any meaningful conwww.claimscanada.ca

p34-35 DAMAGES.indd 35

Mathew Rose, OT (Reg). ON, CCLCP, is a Canadian Certified Life Care Planner, Occupational Therapist and Principal of Mathew Rose and Associates Inc. He is also an Adjunct Lecturer at University of Toronto’s Department of Occupational Therapy. Kateryna Shpir is the Economist at MRA Medlegal Consulting and provides economic/statistical assessments of damages used in settlement negotiations and litigation.

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Claims Canada 35

14-02-24 9:27 AM

Settlement Privilege

Understanding the latest developments in settlement opportunities may reduce the costs and delays of litigation for adjusters and their clients.

BY ALBERT WALLRAP

Settlement privilege is unequivocally about access to justice. The very purpose of settlement privilege is to promote settlement and avoid the expense and time in extended litigation. The law of privilege establishes the scope of protection to facilitate settlement discussions so that disputes can be resolved efficiently.

The insurance industry in Canada revolves around risk assessment and the efficient means to resolve claims disputes. While in contemplation of litigation, any settlement negotiations about insurance claims are protected under the common law rule of privilege whereby such communications are presumed inadmissible.

The elements of settlement privilege are: “(1) litigation had been commenced or was within contemplation; (2) the communication was made with the express or implied intention it would not be disclosed; and (3) the purpose of the communication was to bring about a settlement,” (The Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension v. SNC Group Inc., 2013, ONSC 6297). For privilege, it is unnecessary to expressly denote communications as “without prejudice” or “in contemplation of litigation,” although the practice is recommended.

There may be early attempts to settle insurance claims where the issues are clear and fault as-

36 Claims Canada

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certainable. Legal counsel may explore settlement upon review of the relevant documents and expert reports, and throughout the stages of litigation. For example, settlement opportunities may arise at the various stages of production, discoveries, mediation, pre-trial and trial. Strategically, the plaintiff may enter into a settlement agreement with one or more defendants so as to increase pressure on the remaining parties and achieve a global settlement. This strategy has been effective for mediation in complex claims involving multiple parties.

Another example is where the plaintiff settles early with one or more defendants to demonstrate that it is open to compromise or where such an arrangement would provide access to key witnesses, experts, and documents or other information that could facilitate the trial of the action as against the remaining parties. There may be groups of defendants with common issues or positions that call for early settlement, even if only to avoid the risk of costs against.

Insurance policy limits and coverage issues may come into play. The plaintiff may also settle with third parties to shift the focus and increase pressure back to the remaining defendants.

Partial settlement can be especially effective where the remaining parties are ill prepared for trial and lack expert opinion or key witnesses.

This form of settlement can quickly change the tone of a mediation or

February/March 2014 www.claimscanada.ca

14-02-24 11:10 AM

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13-10-16 10:45 AM

trial, for example, and instill uncertainty or even fear in or not a settlement is reached. In a well-written decision, the minds of opponents. At least, the strategies focus dis- Justice Abella for the entire Supreme Court confirms that pute resolution and narrow the pending trial, and therefore settlement privilege is a class privilege that creates a preminimize legal costs. sumption of inadmissibility. The public interest in encourFor more complex disputes involving multiple parties aging settlement outweighs the competing public interest in and issues, the plaintiff may wish to settle with some but not disclosure. all defendants. There is value where partial settlement reThe effect of a Pierringer agreement is that joint liabilsults in the plaintiff receiving money now from the settling ity between the settling defendants and the remaining dedefendants, and where the remaining defendants are no fendants is severed so there is no right of contribution and worse off and possibly in a better position in their exposure indemnity between these two groups. While the settling deat trial. Over the years the law has fashioned a framework fendants are removed from the action, the exposure of the for the protection of settlement negotiations from disclo- remaining defendants to judgment is reduced by the settlesure and any exceptions, culminating ment amounts. in a recent decision by Canada’s high(The Pierringer agreement is often est court. compared to another form of settleLast summer, the Supreme Court of ment, the Mary Carter agreement, Canada released Sable Offshore Energy where the settling defendant settles Inc. v. Ameron International Corporawith the plaintiff but remains in the tion (2013 S.C.C. 37), which considers action and may pursue cross-claims the issue of settlement privilege and the against the remaining defendants. In disclosure of partial settlement agreethe latter situation, the settling defenments and amounts for the first time. dants guarantee the plaintiff a certain The Supreme Court endorsed the Pieramount of recovery and the exposure ringer agreement, which came from of the settling defendant is then capped the 1963 Wisconsin decision of Pierat that amount. The settling defenringer v. Hoger, 124 NW 2d 106 (Wis dant’s liability is then decreased in di1963). It provides plaintiffs with a way rect proportion to any recovery above to discontinue their action against the the specified amount.) settling defendants while still proceedPierringer agreements in Canada ing against the remaining defendants. have evolved since their adoption from This form of agreement severs joint American jurisprudence. Sable Offliability between the settling and reshore solidifies settlement privilege maining defendants so that the latter and recognizes a narrow public interare responsible for only the loss they est exception. Settlement privilege apAs a result of actually caused. plies regardless of whether negotiations Sable Offshore, In Sable Offshore, the owner of a lead to settlement or not. Settlement the legal landscape for number of offshore structures and onamounts in Pierringer agreements are shore gas processing facilities in Nova privileged but must be disclosed to settlement discussions Scotia brought a number of actions in courts after trial and upon a finding of and agreements has negligence, negligent misrepresentaliability so as to avoid any over-combecome more tion and breach of collateral warranty pensation of the plaintiff. against the contractors and applicators As a result of Sable Offshore, the transparent. responsible for preparing surfaces and legal landscape for settlement discusapplying paint to parts of these strucsions and agreements has become more transparent. Partial settlement agreetures, and then settled with some of the defendants under Pierringer agreements. At issue is the fail- ments, such as Pierringer and Mary Carter agreements, provide yet another method in the litigator’s array that can ure of paint to prevent corrosion.

Although the terms of the Pierringer agreements were assist the insurance industry towards more timely and efdisclosed to the remaining defendants, the amount of the ficient resolution of disputes. settlement was not. The remaining defendants then brought Albert Wallrap is a member of Canadian Defence Lawyers a motion to disclose the amounts, arguing that non-disclosure would undermine their fundamental right to know the (CDL) and an associate at Dutton Brock LLP. His practice focase to meet. The motion was dismissed at trial. The Nova cuses on insurance defence, subrogation, and coverage matters, Scotia Court of Appeal overturned the trial decision and often with engineering or construction issues. CDL is the only national organization representing the interests of civil defence granted disclosure of the amounts.

The Supreme Court of Canada in Sable Offshore dis- lawyers. It offers broad opportunities to unite the defense bar agreed and found that the Pierringer agreement was accept- over common issues as well as providing accredited continuing able and that settlement negotiations are protected, whether legal education.  38 Claims Canada

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February/March 2014

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CIAA REGIONAL PRESIDENTS 2013 – 2014 NEWFOUNDLAND & LABRADOR TBA 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 Claude Nadeau Cunningham Lindsey Canada Claims Services Ltd. 1250 Guy Street, #1000 Montreal, QC H3H 2T4 Phone: (514) 939-1570 Fax: (514) 938-5445 E-mail: cnadeau@cl-na.com ONTARIO Dorothy Lowry, FCIP Crawford & Company (Canada) Inc. 15 - 431 Bayview Drive Barrie, ON L4N 8Y2 Phone: (705) 728-5597 Fax: (705) 728-2167 E-mail: Dorothy.Lowry@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 Cheryl Hanson Crawford & Company (Canada) Inc. 210 – 227 Primrose Drive Saskatoon, SK S7K 5E4 Phone: (306) 931-1999 Fax: (306) 931-2212 E-mail: Cheryl.Hanson@crawco.ca WESTERN Russell Fitzgerald, CIP Kernaghan Adjusters Limited 203 – 4246 97 Street N.W. Edmonton, AB T6E 5Z9 Phone: (780) 488-2371 Fax: (780) 488-0243 E-mail: rfitzgerald@kernaghan.com PACIFIC David Porter, LL.B., FCIP, CRM Granite Claims Solutions 400 - 4370 Dominion Street Burnaby, BC V5G 4L7 Phone: (604) 659-6559 Fax: (604) 659-6570 E-mail: david.porter@graniteclaims.com

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National Standing Committees 2013-2014 ADVISORY David Porter, LL.B., FCIP, CRM Granite Claims Solutions 400 – 4370 Dominion Street Burnaby, BC V5G 4L7 Phone: (604) 659-6559 Fax: (604) 659-6570 E-mail: david.porter@graniteclaims.com Albert Poon, CIP Cunningham Lindsey Canada Claims Services Ltd. 1102 – 50 Burnhamthorpe Rd. W. Mississauga, ON L5B 3C2 Phone: (905) 896-8181 Fax: (905) 896-3485 E-mail: apoon@cl-na.com John D. Seyler, CIP ProFormance Group Inc. 5080 Timberlea Blvd., Suite 214 Mississauga, ON L4W 4M2 Phone: (905) 238-4985 Fax: (905) 238-2735 E-mail: jseyler@prospecialty.ca James B. Eso, CIP, CIOP 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 Craig J. Walker, CIP, FCIAA, FIFAA Maltman Group International 3550 Victoria Park Ave., Suite 301 Toronto, ON M2H 2N5 Phone: (416) 492-4411 Fax: (416) 492-5657 E-mail: cwalker@maltmans.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 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 David Porter, LL.B., FCIP, CRM Granite Claims Solutions 400 – 4370 Dominion Street Burnaby, BC V5G 4L7 Phone: (604) 699-6550 Fax: (604) 659-6570 E-mail: david.porter@graniteclaims.com John D. Seyler, CIP ProFormance Group Inc. 5080 Timberlea Blvd., Suite 214 Mississauga, ON L4W 4M2 Phone: (905) 238-4985 Fax: (905) 238-2735 E-mail: jseyler@prospecialty.ca Patricia M. Battle Canadian Independent Adjusters’ Association/L’Association Canadienne des Experts Indépendants Centennial Centre, 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 James B. Eso, CIP, CIOP 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

Laurie Walker, CIP Granite Claims Solutions 5915 Airport Road, Suite 300 Mississauga, ON L4V 1T1 Phone: (905) 740-1784 Fax: (905) 671-1889 E-mail: laurie.walker@graniteclaims.com Albert Poon, CIP Cunningham Lindsey Canada Claims Services Ltd. 1102 - 50 Burnhamthorpe Rd. W. Mississauga, ON L5B 3C2 Phone: (905) 896-8181 Fax: (905) 896-3485 E-mail: apoon@cl-na.com Craig J. Walker, CIP, FCIAA, FIFAA Maltman Group International 3550 Victoria Park Ave., Suite 301 Toronto, ON M2H 2N5 Phone: (416) 492-4411 Fax: (416) 492-5657 E-mail: cwalker@maltmans.com 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 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 Paul Hicks, FCIP, CRM TD Insurance 2161 Yonge Street, 4th Floor Toronto, ON M4S 3A6 Phone: (416) 486-2507 Fax: (416) 545-6022 E-mail: Paul.Hicks@tdinsurance.com

CONVENTION Matt Allan, CIP, CRM Granite Claims Solutions Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 E-mail: matt.allan@graniteclaims.com

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

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

MEMBERSHIP & QUALIFICATIONS Georgiana Chen, CIP ProFormance Group Inc. 1101 Kingston Rd., Suite 280 Pickering, ON L1V 1B5 Phone: (877) 539-3111 Fax: (905) 554-3776 E-mail: gchen@proadjusting.ca

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

NOMINATING John D. Seyler, CIP ProFormance Group Inc. 5080 Timberlea Blvd., Suite 214 Mississauga, ON L4W 4M2 Phone: (905) 238-4985 Fax: (905) 238-2735 E-mail: jseyler@prospecialty.ca

Robert V. Pearson, CLA, FCIAA Hansen Labelle Adjusters Ltd. 1328 17th Avenue N.W. Calgary, AB T2M 0R1 Phone: (403) 284-2211 Fax: (403) 284-2299 E-mail: bob@hansenlabelle.ca EDITORIAL Mary Charman, CIP Crawford & Company (Canada) Inc. 1 – 120 Mulock Dr. Newmarket, ON L3Y 7C5 Phone: (905) 898-0008 Fax: (905) 898-1705 E-mail: Mary.Charman@crawco.ca John M. Sharoun, FCIP, FCIAA, CRM 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

Justin MacGregor Past President Insurance Brokers Association of Canada EDUCATION Phone : (416) 859-4567 Gary Ellis, BBA, FCIP, RF, FCLA, FCIAA Mark Stewardson, FCIP AMG Claims Inc. Royal & Sun Alliance 535 North River Road, Unit 3 2225 Erin Mills Parkway, Suite 1000 Charlottetown, PE C1E 1J6 Mississauga, ON L5K 2S9 Phone: (902) 628-9091 Phone: (905) 403-2333 Fax: (902) 628-9093 Fax: (905) 403-2326 E-mail: gary.ellis@amgclaims.ca E-mail: EMERGENCY MEASURES Mark.Stewardson@rsagroup.ca Richard Van Horne Action Investigations Inc. Mark Weir 2 Catelina Court Intact Financial Corporation Dartmouth, NS B2X 3G9 700 University Avenue, 13th Floor Phone: (902) 462- 1222 Toronto, ON M5G 0A1 Fax: (902) 462-3688 Phone: (416) 341-1464 E-mail: Fax: (416) 217-0562 richardvanhorne@actioninvestigations.ca E-mail: mark.weir@intact.net Beth Bull ACE INA Insurance 1400 – 25 York Street Toronto, ON M5J 2V5 Phone: (416) 594-3067 Fax: (416) 368-0641 E-mail: beth.bull@acegroup.com Alex Walker, CIP Royal & Sun Alliance 2225 Erin Mills Parkway, Suite 1000 Mississauga, ON L5K 2S9 Phone: (905) 412-1397 Fax: (905) 403-2328 E-mail: Alex.Walker@rsagroup.ca 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 TBA 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

FINANCE Russell Fitzgerald, CIP Kernaghan Adjusters Limited 203 – 4246 97 Street N.W. Edmonton, AB T6E 5Z9 Phone: (780) 488-2371 Fax: (780) 488-0243 E-mail: rfitzgerald@kernaghan.com

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 James B. Eso, CIP, CIOP 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 Craig J. Walker, CIP, FCIAA, FIFAA Maltman Group International 3550 Victoria Park Ave., Suite 301 Toronto, ON M2H 2N5 Phone: (416) 492-4411 Fax: (416) 492-5657 E-mail: cwalker@maltmans.com PRIVACY James B. Eso, CIP, CIOP 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 PROFESSIONAL PRACTICES John D. Seyler, CIP ProFormance Group Inc. 5080 Timberlea Blvd., Suite 214 Mississauga, ON L4W 4M2 Phone: (905) 238-4985 Fax: (905) 238-2735 E-mail: jseyler@prospecialty.ca

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 John D. Seyler, CIP ProFormance Group Inc. 5080 Timberlea Blvd., Suite 214 Mississauga, ON L4W 4M2 Phone: (905) 238-4985 Fax: (905) 238-2735 E-mail: jseyler@prospecialty.ca 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

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EF

• education forum

A SERIES OF ARTICLES PROVIDED BY THE INSURANCE INSTITUTE OF CANADA

The World Around You: Assessing The Competitive Environment

I

n last issue of Claims Canada, Education Forum looked at how to identify risks to a firm’s reputation, including analyzing both external and internal factors. In this issue, we take a closer look at analysis of a firm’s external environment.

Every independent adjusting firm is different, and yet all are frequently subject to similar pressures and constraints imposed by the external environment. One of the keys to minimizing risk and maximizing business opportunity is to implement a strategy that’s appropriate for the external environment your firm is operating in.

When looking at the external environment, it can be helpful to think in terms of three levels: • the general environment – dimensions of society that influence all industries (though in different ways) • the industry environment – a set of factors that directly influence an industry’s profit potential and a firm’s competitive actions and responses 40 Claims Canada

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February/March 2014

• the competitor environment – the collective characteristics of a firm’s direct competitors.

The general environment For analysis purposes, the general environment can be further split into segments such as demographic, economic, political/legal, socio-cultural and technological.

The demographic segment includes the size, age structure, geographic distribution, ethnic mix, and income distribution of a population. The age structure of the Canadian population is an area of current concern for Canadian businesses – adjusting firms among them – as baby boomers move into retirement,

potentially shrinking the Canadian workforce.

The economic segment includes the nature and direction of the economy in which a firm competes. As we’ve seen in the last six or seven years, this segment can be subject to significant swings with the potential to affect all businesses.

The political/legal segment includes the body of laws and regulations that govern business conduct within a jurisdiction. This segment is of particular interest to independent adjusters, whose activities are regulated by government authorities and impacted by court decisions and the general legal climate.

Factors

Impact on Industry

Political and legal Econonomic Social Technological www.claimscanada.ca

14-02-24 9:35 AM

The socio-cultural segment (dealing with society’s attitudes and cultural values) and the technological segment (creating knowledge and developing new products, processes and materials) sometimes have a mutually reinforcing impact. For example, the rapid expansion of electronic communication technologies in recent years has altered customer expectations about levels of service and response times – a phenomenon that front-line adjusters know well.

A popular tool for looking at the general environment is a PEST analysis. This analysis uses a breakdown that is similar to the six segments described above: • Political (similar to the political/legal segment above) • Economic • Social (covering both the socio-cultural and the demographic segments)

Political

• Technological To begin analyzing how the general environment affects your firm, you can use a simple chart like the one shown here to brainstorm and capture key PEST factors and their implications for the adjusting business.

The industry environment For analysis at the industry level, key questions to think about include • What does the industry look like?

What are the major competitive forces? What are the trends?

• Where do the opportunities and threats lie?

• What does it take to do better than average in this industry? What are the sources of sustainable competitive advantage?

Analysis of the industry environment tends to be inf luenced by the work of Harvard Business School professor Michael E. Porter, who has suggested that firms operating in the same industry will be affected similarly by five key competitive forces: www.claimscanada.ca

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1. the threat of new entrants (how easy it is for competitors to start up)

groups of firms that offer similar services to similar clients using similar strategies. In analysis of the competitor environment, a firm examines the 2. the bargaining power of suppliers objectives, strategies, assumptions 3. the bargaining power of buyers/ and capabilities of each of its direct clients competitors. For the p&c sector, 4. the threat of substitute products/ commonly used sources of information include company filings with services regulators, annual statistical profiles 5. the intensity of rivalry among of the industry, articles in trade pubcompetitors lications, and information gathered For independent adjusting firms, informally at events and in the field. the bargaining power of buyers (inIn addition to analyzing competisurance companies) and the threat of tors, it’s useful to look at complemensubstitute services (for example, the tors: companies that provide complementary goods and services. For example, forensic engineering firms and auto glass repair facilities are General Environment complementors for independent adjusting firms – their services Industry Environment complement the adjusters’ work. Understanding the Firm C objectives, strategies and Competitors capabilities of these firms is another important piece of Firm A external analysis.

Firm B Analyzing the various Technological levels of the external environEconomic ment can help an adjusting firm Social to identify strategic risks and opportunities. This analysis of external factors is often paired with internal use of staff adjusters) are significant analysis of firm attributes to get a forces. As their insurer clients cycle complete picture of the firm’s situathrough alternating phases of em- tion. Internal analysis will be the fophasizing cost containment and em- cus of the next issue of Education Fophasizing loss control, the challenge rum.  for independent adjusters is to manage through these shifting forces. AsThis article is based on material sessing the strategic priorities of these used in the Insurance Institute’s FCIP clients and the strengths of their ser- program, the pinnacle of learning in vices is an important step.

Canada’s p&c industry. Focusing on strategic leadership and advanced Competitors and management principles, the program complementors blends academic business theory with Rivalry among competitors can practical insurance application. be intense within strategic groups –

A PEST by any other name…

• PEST analysis is sometimes called STEP analysis (same categories, different order). You may also see versions with additional categories: • SLEPT – adds Legal • PESTLE/PESTEL – adds Legal, Environmental • STEEPLE – adds Legal, Environmental, Ethical • PESTLIED – adds Legal, International, Environmental, Demographic

February/March 2014

Claims Canada 41

14-02-24 9:36 AM

• on the scene OTS Cunningham Lindsey Canada Claims Services Ltd (“Cunningham Lindsey”) President and CEO Rob Seal is pleased to announce the promotion of Mike Alwyn to Vice President, Major Loss Services (“MLS”), formerly known as Commercial Risk Division and Specialty Services (“CRD”). With over 25 years experience, Mike is well known in both the Canadian and International insurance markets as one of the top Executive General Adjusters. l Granite Health Solutions LP has become the first standalone independent medical evaluation firm in Canada to be accredited by CARF International (Commission in the Accreditation of Rehabilitation Facilities). Granite Health Solutions (including its independent operating brands of Sibley Associates, MDAC and TRM) were accredited for three years for their Independent Evaluation Services (Adults) and Independent Evaluation Services (Children and Adolescents) programs. CARF International is a nonprofit accreditor of health and human services. Its goal is to ensure that persons served remain at the centre of the service delivery process. l

Colin Avery, seated far right, of Crawford & Company (Canada) Inc.’s Moncton office retired in December after 40 years in the business of insurance claims adjustment.

Colin started his career as an independent adjuster in Labrador City, advancing to a branch manager position with a National firm, followed by 15 years as a Claims Manager for a National Insurer and then joining Crawford – Moncton in 1998. Colin and wife Joyce were guests of honour at a dinner on December 5 where he was recognized for his valued commitment during his years with Crawford Atlantic. l

WHAT PEOPLE ARE SAYING ABOUT THE 2014 CLAIMS MANUAL “Thank you for forwarding the 2014 National Claims Manual to our Office. If possible, please send me 6 additional copies of the Manual. We find the information in this manual very helpful and we also utilize the Claims Manual to identify and source out Adjusting Firms that we can assign claims to in various parts of the Country.”

– Ian Frost FCIP, Director of Claims and Customer Service, Wynward Insurance Group l

42 Claims Canada

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Michael Holden, President and CEO of Granite Claims Solutions, announced that Scott McFie has joined the GCS team as Executive Vice President, Business Development.

In other company news, Granite announced that Denis Houle has been appointed Regional Manager of the Atlantic Region at Granite Claims Solutions. l AssessMed Inc., a privately held Canadian corporation, and a professional, evidence based assessment organization, announced the appointment of Donald Kunkel as National Vice President of Business Development for AssessMed. l SN Collision & Glass, Canada’s largest network of collision repair facilities, and Audatex Canada ULC, the leading provider of claims solutions serving Canada’s automotive industry, today announced that CSN has selected Audatex InsightPlus™ as its new National Data Solution engine. As part of its initiative to deliver value, CSN decided it needed to enhance its core performance measurement systems with a best-of-breed solution to help Members achieve their business goals. The company sought a solution that could protect shop data and yet offer the transparency and flexibility required in providing customized reporting and analytics to over 285 locations on a regular and frequent basis.

The solution currently is being rolled-out on a shop-by-shop basis. l Ken Tucker, CEO of DKI Canada, is proud to announce that Disaster Restoration has joined the organization.

Hugh Sinclair, founder of Disaster Restoration, has provided high-level property restoration services in the Chatham, ON area for over 30 years, and Hugh and his staff of professionals have continually built a reputation for excellent service and quality workmanship. DKI Canada also announced the addition of its newest member, ProServe DKI, a full-service operation servicing Fort McMurray/Wood Buffalo, AB. l Discount Car and Truck Rentals Ltd., one of Canada’s largest vehicle rental companies, recently announced a new alliance with Europcar, a car rental network operating in more than 130 countries. Under this partnership, Discount Car and Truck Rentals will provide customers across Canada with access to one of the largest rental car outlets located in Europe, Central America, Mexico, the Caribbean, Africa, the Middle East, the Asia-Pacific region and beyond. l www.claimscanada.ca

14-02-24 9:38 AM

MGB Claims Consultants Inc. announced that Neil Gibson and Anna Toner have joined the firm to launch their Entertainment and Contingency Division. They continue to serve their clients in the Motion Picture/Television Production, Non-Appearance, Event and Venue coverage and Prize Indemnity claims. The firm also announced that that Robert (Bob) Prefontaine has joined MGB Claims Consultants in the role of Senior International Executive General Adjuster. Bob brings his unique skill set of large Oil & Gas, Energy and Commercial / Industrial loss handling experience to the MGB team. l Peace Hills Insurance (PHI) announced in January that it has closed all Slave Lake, Alberta claims, becoming one of the first insurance companies to settle all claims from the Slave Lake wildfire of 2011.“We are pleased and proud to announce we have finalized all our Slave Lake losses,” said Diane Brickner, President and CEO of PHI. “Our staff worked diligently to close files to ensure life would go back to normal as quickly as possible for everyone affected.” l Lloyd’s of London has launched a new service for high volume claims as part of its overall “claims transformation program.” The new outsourced Volume Claims Service allows for cost-efficient handling of non-complex claims, Lloyd’s said Monday. The service will be provided

by Xchanging and Crawford & Company, “both of whom will operate under upper quartile service level agreements,” according to Lloyd’s. The service is “designed to handle high volume, low value claims which make up around 85% of total claims in the Lloyd’s market,” according to a Lloyd’s release. l RSA Canada has partnered with Audatex Canada, a global claims solution provider serving the automotive industry, to streamline the insurer’s claims handling process.

The partnership will replace multiple software programs with Audatex Canada’s software suite, which will standardize workflow and procedures across all of RSA Canada’s companies. “This solution enables RSA Canada to leverage its size and scale to provide even better service to our customers and helping them get back to normal faster after a claim,” Irene Bianchi, senior vice president of Claims, Corporate Services and Strategic Sourcing for RSA Canada noted in a statement. l Nova Scotia’s minor injury cap has increased to $8,213 for 2014, notes a Jan. 31 bulletin from the province’s Office of the Superintendent of Insurance. The new cap – the limit must be reviewed annually to reflect changes in the Consumer Price Index – is up from $8,200 in 2013, states the bulletin issued on behalf of Doug Murphy, Nova Scotia’s Superintendent of Insurance. The bulletin addresses the minor injury cap amount for 2014, as well as matters regarding the Diagnostic and Treatment Protocols Regulations (intended to provide clients with necessary supplies for self-care) and updates to various policy and endorsement forms. l www.claimscanada.ca

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CIAA New Members — December 2013 INDIVIDUAL MEMBERSHIP Absolute Claims Adjusters Denise Duval

Pilot Butte, SK

Level 3

AMG Claims Inc. Nicholas MacDonald

Halifax, NS

Level 3

Crawford & Company (Canada) Inc. Monica Bramley Grande Prairie, AB Ira Parsons Grande Prairie, AB Karyna Parsons Grande Prairie, AB Katherine Rumford Calgary, AB Carl Troeger Calgary, AB

Level 1 Level 1 Level 2 Level 2 Level 1

Granite Claims Solutions Craig Gauthier Bijender Singh Balhera Bob Phillips Jocelyn Duguid Michael Miles Rupert Pong Aubrey Rosdahl Karen Bell James Fitzpatrick Jorge Bettencourt Brooke Hachborn Catherine O’Neil Tom Hayes Mike Wasiukow Carolyn Drambalas Maria Grellette Nahid Khan Matthew Leaker Cheryl Moses Deborah Sherren Max Traversari Mike Vipond Philip Contardo Michael Burke

Level 3 Level 2 Level 3 Level 2 Level 3 Level 1 Level 3 Level 2 Level 3 Level 3 Level 1 Level 3 Level 3 Level 3 Level 1 Level 3 Level 1 Level 2 Level 2 Level 3 Level 2 Level 3 Level 1 Level 3

Edmonton, AB Burnaby, BC Nelson, BC Saskatoon, SK Abbotsford, BC Burnaby, BC Saskatoon, SK Winnipeg, MB Barrie, ON Hamilton, ON Hamilton, ON Hamilton, ON Kingston, ON London, ON Mississauga, ON Mississauga, ON Mississauga, ON Mississauga, ON Mississauga, ON Mississauga, ON Mississauga, ON Mississauga, ON Thunder Bay, ON Windsor, ON

Kernaghan Adjusters Limited Janet Velemirovich Mackenzie, BC Mekhala Kale Vancouver, BC

Level 1 Level 1

Marsh Adjustment Limited Christopher Geddes Janet MacDonald Lucie Madore Brent Pezzareallo Gregory Giles Lynn Brantnall David Hawkins Julien Leger

Bedford, NS Bedford, NS Bedford, NS Sydney, NS Yarmouth, NS Moncton, NB Moncton, NB Moncton, NB

Plant Hope Adjusters Ltd. Bertrum McNeil

Bedford, NS

ASSOCIATE FIRM AmeriClaim

Oklahoma City, OK, USA

February/March 2014

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

Claims Canada 43

14-02-24 9:38 AM

• on the scene OTS The Boiler Inspection and Insurance Company of Canada has introduced a new product offering equipment breakdown coverage for home equipment systems, appliances, electronics and service lines. The offering, branded as Home Systems Protection, is available through insurers that partner with the company, the company, part of the HSB Group and Munich Re’s Risk Solutions group, announced in January. “Systems in the home are becoming more complex, costly and prone to breakdown,” Derrick Hughes, vice president for HSB BI&I commented in its statement. l

Ontario’s Ministry of Transportation is seeking public comment on a proposal to create a pilot project testing the safety of “autonomous vehicles,” often referred to as “driverless” cars.“ MTO recognizes the importance of new vehicle technology, especially if it can expand mobility options for Ontarians,” the ministry said of its proposal, posted online in late December. The proposal is for a five-year pilot program testing the safety of selfdriving vehicles before they are widely available to the public, which could be between 2020 and 2025, based on industry estimates. l

The Financial Services Commission of Ontario has issued a request for proposal for arbitration services, after continuing to face a backlog. FSCO had previously entered into an agreement with ADR Chambers to help eliminate its mediation backlog and assist with the growing number of arbitration files. The commission and ADR recently eliminated the backlog of 30,000 mediation files. “FSCO correctly anticipated that as mediation files move through the system, an increased demand would develop in arbitration,” the regulator said on its website. l

The Groupement des assureurs automobiles (GAA), an industry group in Quebec, has announced a new plain language auto insurance policy to take effect March 1. In 2010, GAA and Autorité des marchés financiers (AMF), the provincial regulator, began reviewing policies Q.E.F. No. 1 and 5, and their endorsements, so that consumers would find them easier to read and to understand. A 2011 poll of 1,000 Quebec residents found that 58% found the terms in auto insurance policies to be unclear, and that the legal language used was much too complex to understand without years of schooling. l

Efforts by Manitoba Public Insurance’s Special Investigation Unit (SIU) resulted in $8 million of fraud savings for ratepayers in the province in 2013, according to the organization. The special unit investigates roughly 3,000 claims per year, according to MPI. l SGI Canada has asked homeowners to take steps to avoid ice dams, noting there were 2,600 ice dam claims reported to the insurer in 2013, dwarfing the 28 claims in 2012. The 2,600 ice dam claims last year in Saskatchewan cost $21.7 million, notes a press release Thursday from SGI Canada. Preventive maintenance is key, the insurer reports. “Ice dams can cause considerable property damage. If an ice dam forms and water enters the attic, it can damage the roof, ceilings, walls and contents of your home,” Andrew Cartmell, president and CEO of SGI CANADA, said. l Auto insurance rates in Ontario have dropped 4.66% on average since August 2013, Ontario’s Ministry of Finance said in mid-January. Its announcement noted that rates had decreased 4% since the Liberal government announced plans for a 15% on average reduction within two years (by August 2015) in its 2013 budget. Rate filings approved during the fourth quarter of 2013 declined on average by 3.98% and during the third quarter of 2013 by 0.68%, which together make up the average reduction announced Jan. 15. l

Claims Canada Wants You! Claims Canada magazine wants you to send us your company news, appointments and event photos for possible inclusion within our ‘On the Scene’ department.

Please help us share your items with the claims industry across the country. For more information, please email: craig@editinsight.com 44 Claims Canada

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February/March 2014

Economic losses from catastrophes in 2013 were about US$130 billion, or more than three times insured losses, according to an article posted to the Lloyd’s website.

“Lloyd’s research showed that some of the countries at greatest risk from natural catastrophes are the least insured against the potential damages resulting from them,” according to the article, titled Natural Disasters in 2013: Behind the Figures. “Overall economic losses from 2013’s catastrophic events reached $130bn, more than three times the insured loss. The total loss of life climbed to around 25,000 from 14,000 in 2012.” l Meanwhile, Munich Re reported in early January that insured losses for 2013 were about US$31 billion. The latter number was below the average figures of the past 10 years (US$184 billion and US$56 billion), Munich Re reports.

There were exceptionally high losses from weather-related catastrophes in Europe (floods and hailstorms caused double-digit, billion-dollar losses in central Europe) and Super typhoon Haiyan (one of the strongest cyclones in history, Haiyan resulted in a human catastrophe with more than 6,000 fatalities). l Three Toronto-area rehabilitation clinics have been convicted of several offences, resulting in maximum fines of $100,000 per conviction, the Insurance Bureau of Canada said in January. The convictions come after cooperative investigation efforts from IBC’s investigative services division, multiple insurers, police and the Financial Services Commission of Ontario (FSCO), IBC said in a news release. Rick Dubin, vice president of investigative services with IBC said in a statement that he was “very encouraged” that the courts acknowledged the seriousness of the offences and imposed stiff penalties. l www.claimscanada.ca

14-02-24 9:40 AM

MDD Forensic Accountants held its Annual American Thanksgiving Football Open House on Thursday November 28, 2013 at the Real Sports Bar & Grill in Toronto. Attendees contributed to a collection in support of the Starlight Children’s Foundation Canada, with total funds raised reaching $2,980.25. l

ServiceMaster Toronto North Vaughan hosted an open house on December 13, 2013 celebrating the grand opening of its new location. Guests enjoyed a tour of the new facility, mingled with the staff and were treated to locally-catered Italian cuisine and freshly-shucked Rodney’s Oysters. l

www.claimscanada.ca

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Claims Canada 45

14-02-24 9:40 AM

• on the scene OTS Blouin, Dunn LLP hosted a holiday “jingle, mingle and mix” cocktail reception on December 5, 2013 at the Ritz Bar at the Ritz-Carlton Hotel in Toronto. Hundreds of industry guests enjoyed an evening of great conversation and networking. l

The Ontario Chapter of RIMS, the Risk Management Society™ (ORIMS) held its Christmas Luncheon on December 12, 2013, at the Westin Harbour Castle in Toronto. More than 660 attended. In keeping with the spirit of giving, the ORIMS executive chose to raise funds for The Daily Bread Food Bank. In all, $10,000 and hundreds of pounds of food were raised to help the food bank in its fight to eliminate hunger in and around Toronto.l

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February/March 2014

www.claimscanada.ca

14-02-24 9:42 AM

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