Claims Canada December/January 2010

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December/January 2010

HST A Taxing Issue

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Contents DECEMBER/JANUARY 2010 • VOLUME 3 • NUMBER 6

Cover Feature 12 HST: A Taxing Issue

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The insurance industry braces itself for increased costs in conducting business as HST is set to roll out in Ontario and British Columbia this coming July.

BY LAURA KUPCIS

Spotlight 18 Riding the Tide Colonial Adjusting & Appraisal Services is experiencing a significant boom in business thanks to the recent upswing in Newfoundland’s economy.

BY LAURA KUPCIS

Education Forum 46 Mediation Basics Part two of a feature on mediation takes a look at memos, opening statements, responding, caucusing and finalizing the mediation.

News Features 20 Introducing the Ontario Chapter Presidents A spotlight on the Ontario chapter presidents from the the CIAA and the CICMA, including their plans for the upcoming year.

BY LAURA KUPCIS

22 When Objects Break Tips to protecting and collecting evidence to allow for correct determination of causation.

BY ROB SPARLING

How to effectively handle data privacy issues across the U.S./Canada border.

BY DAVID BLACK

36 Auto Insurance Reform The Ontario government has released two proposals for the auto insurance reform aimed at stabilizing rates.

BY TERI MITCHELL

24 Quarterback: The Accident Benefit Adjuster

38 Statutory Accident Benefits and Aggravated Damages for Mental Distress

The most effective way to set up a file to facilitate recovery is through a comprehensive and proactive rehab plan.

A look at a recent case where $25,000 was awarded for aggravated damages for mental distress.

BY ANGELA VERI

26 Hydrocarbon Spill Claims How to effectively and proactively handle this type of environmental spill claim.

BY MIKE LABERGE

30 Joining Forces The CIAA and CICMA in the Atlantic have come together to discuss issues affecting both associations, including the lack of new blood to the industry.

BY LAURA KUPCIS

32 Litigation and Spoliation of Evidence Litigants are obliged to disclose documentary records — and this includes ensuring the preservation of evidence.

BY KENNETH FITZ

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35 Navigating ASP and SaaS

BY KADEY SCHULTZ

40 Volatile Economy Continues to Rock Construction Pricing The drastic spike in gas prices had a direct impact on the price of construction materials.

BY JOEL DAGENAIS

42 Civil Justice Changes On Jan. 1, 2010 the monetary limit of the Ontario Small Claims Court will increase to $25,000.

BY CHRISTOPHER DUNN

36 Departments 4 First Notice 48 On The Scene

Columns 46 Education Forum

F

first notice

Subrogation in fire cases The evidence of what causes a fire is generally consumed in the fire, Richard Lindsay, founding partner of Lindsay Kenney LLP in British Columbia, said.

This makes subrogation a little different in a fire-related case, he told delegates attending the National Association of Subrogation Professionals’ Canadian Chapter’s training and education seminar in Toronto.

“A lot of people back away from that right away because they say ‘well we’ve got to prove this on the balance of probabilities and everything went up in smoke in the fire and that’s the nature of the beast’,” he said.

But it’s not really that simple, he said, noting that in Snell v. Farrell, the Supreme Court of Canada ruled that a robust and pragmatic approach to causation was used.

While the case was a medical malpractice case, the wording has been adapted in several instances to fire-related cases to note there is no difference between a fire case and a medical malpractice case where the victim has been cremated. Therefore, those involved will not be held to the standard of proof where scientific certainty must be shown, Lindsay said.

“So that goes a long way to alleviating any causation issues that may be thrown back in your face when you are told you can’t prove it,” he said. “Well the fact of the matter is, I can get close enough to proving it ‘with a robust and pragmatic approach’ … I’ve proved it and you’ve got a bigger problem than you think you have in so far as if your defense is that I cannot prove it with scientific certainty.”●

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Climate change in Canada’s North Pollution liability arising from permafrost degradation, climate change disclosure and risks associated with new shipping lanes are among the emerging insurance implications of climate change in Canada’s North, according to a report by the National Round Table on the Environment and the Economy (NRTEE). The insurance section of the report, True North: Adapting Infrastructure to Climate Change in Northern Canada, was written with significant contribution from the Institute for Catastrophic Loss Reduction (ICLR).

Overall, the report concludes infrastructure and communities in Canada’s North are unprepared to cope effectively with the looming threat climate change poses to roads, buildings, industrial waste sites, energy and other critical infrastructure.

Section 5 of the report contains a passage on some emerging insurance issues arising from climate changes in Canada’s North.

For example, “permafrost degradation could contribute to increased exposure to liabilities linked to pollution.

“In communities with above-ground water and sewer systems, permafrost melting could rupture the systems causing widespread contamination.

“Owners of the water and sewer systems may be held liable for damage, cleanup costs, and for failure to upgrade existing infrastructure.

“Energy pipelines built over permafrost terrain could be at risk of pipeline rupture and leakage, with resulting contamination of land and possibly

watercourses, and high cleanup costs.

“Abandoned and orphaned mining operations in Yukon and Northwest Territories with containment structures (e.g., tailing dams) reliant on frozen permafrost might be at risk of breaching and releasing toxic tailings.”

Consistent with international trends in corporate social responsibility, climate change disclosure is becoming more common, the report points out.

“Companies that are affected by climate change but do not themselves contribute to it could be vulnerable to class action lawsuits if they do not make changes to avert negative impacts of climate change on their operations,” the report reads. In addition, “use of new shipping lanes, including an open Northwest Passage, may raise issues of marine liability,” the report says. “For example, what would be the implications of a vessel carrying hazardous materials striking ice and releasing toxic materials?

“The cleanup of fuel alone in cold and distant waters would be both difficult and costly, while environmental and social impacts could be significant.”

With increasing tourism activity in Canada’s North, “the risk of tour ships foundering may pose great challenges,” the report says. “Aside from potential liabilities, these include greater resources for rescue and evacuation efforts and the possibility of overwhelming the service capacity of small communities.”

The full report is available at www.nrtee-trnee.ca/true-north. ●

HCAI information site launched As the Health Claims for Auto Insurance (HCAI) pilot is re-launched, so too has the newly updated information site — www.hcaiinfo.ca.

During the last rollout, the site did exist, but was only intended to be used as an update to the HCAI project and not as a training tool, Allison Brand, senior business advisor with Insurance Bureau of Canada, told delegates during an Ontario Insurance Adjusters Association seminar in Toronto.

However, in the middle of the rollout, the site was changed to become a training site and it ended up becoming very confusing, even more so as there was only one entry point for both health care facilities and insurers.

December/January 2010

After HCAI was put on hold, the first thing Brand and her team did was to work on developing a new information site.

This time around, the site has four separate entry points — insurers, health care provider/facility, media/public, and PMS practice management vendors.

Within each entry point is a completely customized site developed strictly for that audience. On the home page is also a barometer which shows, in red, yellow or green, how quickly the system is running. ● www.claimscanada.ca

F first notice Favourable responses to auto reforms Canadian insurers and insurance brokers have responded favourably to the auto insurance reform package introduced by the Ontario government on Nov. 2, 2009.

Insurance Bureau of Canada (IBC) said the government’s reforms to the Ontario auto insurance system “address affordability of premiums while at the same time maintaining robust benefits — two of the industry’s primary goals for consumers.” Under the proposed new system, consumers would have a choice to buy enhanced auto insurance benefits if they so desire.

At the same time, Ontario’s new basic package remains “as generous as any other jurisdiction in Canada.”

Randy Carroll, CEO of the Insurance Brokers Association of Ontario (IBAO), said the association was supportive of the proposed auto insurance reforms.

“They are consumer-focused and should help stabilize auto insurance rates, while still providing the coverage Ontario

drivers need,” Carroll said.

The package of 41 reforms would drop minimum coverage for non-catastrophic auto injuries from $100,000 down to $50,000. Optional packages would be available for $100,000 or $1 million, should the consumer choose to keep this level of coverage.

“One of the key new features for consumers is choice,” the IBAO said.

“Consumers will be able to buy coverage better suited for their individual needs and budgets. Consumers who are happy with their current level of coverage can continue to purchase it.”

In particular, the IBAO said it was “very pleased that the government has taken our advice and will ban objectionable quoting practices related to credit scoring in auto insurance outright.” The association said it would continue to urge the province to extend this ban to include all personal property insurance lines, such as home insurance. ●

Exemption to privacy legislation unlikely For insurance defence counsel, hope is receding that federal privacy legislation related to insurance investigations and surveillance will be aligned in the future with the comparatively more straightforward provincial privacy legislation found in B.C. and Alberta.

John Beardwood, partner in Fasken Martineau DuMoulin LLP’s Toronto office, made the observation in an address at Insurance Bureau of Canada (IBC)’s Ninth Annual Regulatory Affairs Symposium. Privacy legislation in B.C. and Alberta has a fairly simple set of exemptions. Effectively, in B.C. and Alberta, information obtained for the purposes of a reasonable investigation are exempt from the privacy legislation’s requirement that a person consents to the collection of his or her information.

Lawyers have lobbied to amend the federal privacy legislation to include these same exemptions, but the last federal election brought the possibility to a halt and now no one knows when or if those amendments will actually take place. In the meantime, the federal privacy legislation has been used to narrow the scope of an insurer’s investigatory powers, Beardwood observed.

“I am going to get into OPC [Office of 6

Claims Canada

the Privacy Commissioner’s]’s views on covert surveillance generally,” he said.

“One of the main points is: the [insurance] organization must have exhausted all other means of collecting the personal information in less-privacy-invasive ways. But clearly the past practices of taking photos with respect to surveillance are going to come under intense scrutiny from the OPC’s office on a go-forward basis.”

In particular, Beardwood referenced the Privacy Office’s decision in Finding 2008-392, in which a person objected to a private investigator taking a picture in the course of surveillance on behalf on an insurer. The insurer made four arguments, including that the purpose of the photo was to: 1) identify the investigation subject and 2) establish that the surveillance subject was indeed at home. The privacy office ruled in its finding the insurer had the full name, house address and other particulars of the person under surveillance, which should have been sufficient to identify the individual. Secondly, the insurer didn’t need the photo because telephone calls to the residence and the person’s car was in the driveway, should have been enough to determine the person under surveillance was home. ●

December/January 2010

IBC urges insurers to talk to each other to prevent organized crime Insurance companies must recognize ‘red flags’ indicating the presence of organized crime and better co-ordinate communications between them when such signs arise, according to IBC investigator Kathy Metzger.

Insurers must be vigilant in preventing organized crime, Metzger told delegates attending the National Association of Subrogation Professionals’ Canadian Chapter’s training and education seminar.

The seminar was held at the Novotel Toronto Centre on Nov. 12 Part of being vigilant includes being aware that a company’s one “problem file” may in fact be part of something bigger, such as an organized crime ring.

Metzger went on to note that insurance companies must communicate with each other and provide data when they suspect a file may be the tip of an iceberg.

She pointed out that IBC has a database of Web claims from insurance companies that are populated by date.

Companies must understand the red flags. If there is a problem file and it is part of an organized crime ring there will be indicators.

“Know what to look for,” she said.

Everyone is afraid of PIPEDA, she said. However, the important thing to know is that if there are reasonable grounds to believe that there has been a contravention of law or a breach of contract – a contract being the insurance policy – then a company is able to communicate that information with an investigative body.

“Know that and talk to each other, because that’s the only way we are going to combat any of it is to work as a group together,” she concluded. ●

www.claimscanada.ca

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F first notice Ontario follows FSCO’s lead on auto reform Ontario’s reforms to the auto insurance product follow closely along the lines of what the Financial Services Commission of Ontario (FSCO) recommended in March 2009, except on one major point important to insurers — the cap on medical/rehab benefits for non-catastrophic injuries was reduced to $50,000, and not $25,000 as initially proposed.

In total, Ontario’s department of finance unveiled a package of 41 reforms to automobile insurance in the province.

The intent of the reforms is “to streamline a number of processes for insurers and health care providers, create a less complex auto insurance system, and protect consumers while giving them more choice to buy coverage that best meets their protection needs and budgets,” the government announced in a press release.

A complete list of the government’s reforms is available at: http://news.ontario.ca/mof/en/2009/11/ontarios-proposedauto-insurance-reforms.html Ontario adopted several of FSCO’s initial 39 recommendations, including: • An optional $100,000 medical and rehabilitation benefit would be introduced in addition to the existing $1-million optional benefit. Consumers would have options to increase these coverages.

• An option to reduce tort deductibles on court awards in personal injury cases to $20,000.

• A cap on medical assessment costs of $2,000 per assessment (a fee for completing forms would be capped to $200).

• Making housekeeping and home maintenance expenses and caregiver benefits optional.

• Reviewing the SABS to identify provisions that are overly complicated and could be simplified without changing the regulations.

• Limiting the availability of in-home assessments to seriously-injured claimants only.

• Prohibiting objectionable quoting practices including the use of credit scoring, delays in providing quotes, requiring written applications for quotes and certain screening techniques.

• A review, including consultation with the medical community, of the definition of “catastrophic impairment” and the court threshold for catastrophic brain injuries.

The government said it intends to implement the auto insurance reforms “as part of a regulations package that would become effective in summer 2010, and continue to explore further long-term measures.” ●

Canadian Inde pendent Adjusters’ Asso ciation/ L’Association Canadienne des Experts Indé pendants

National Claims Manual

2010

Paul Aquino Publisher, (416) 510-6788 paul@canadianunderwriter.ca Fax: (416) 510-6809

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Laura Kupcis Editor (416) 510-5215 laura@claimscanada.ca

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Produced by the publishers of Canadian Underwriter magazine.

A bi-monthly magazine (6x per year), Claims Canada is published by Business Information Group, a division of BIG Magazines LP, a leading Canadian information company.

Business Information Group is located at: 12 Concorde Place Suite 800, Toronto, ON, M3C 4J2.

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

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Claims Canada

December/January 2010

Gary White Production Manager (416) 510-6760

non-member independent claims adjusting firms; insurance and reinsurance company executive, claims management 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 PATTI KERNAGHAN

You will be reading this message long after all the leaves have fallen; the poppies put away and Christmas will have come and gone! This fall was a very busy session for me as president of the Canadian Independent Adjusters’ Association, but most gratifying.

I attended the National Insurance Conference of Canada (NICC) with our first vice president, Mary Charman and what a tremendous event. Our association was very well received and recognized and as CIAA president, I am particularly pleased to be a member of the NICC advisory committee. In October, I met with Joel Baker, NICC chair to discuss next year’s program — the plan is for 2010 in Montréal to include a claims focus!

A major CIAA initiative this year is a Creative Strategic Planning (CSP) session with the ultimate goal of reassessing the direction of our association. This project is well underway: with three surveys being delivered to the industry — members, non-member independent adjusters and various stakeholders. To date we have received a terrific response and are looking forward to reviewing the results in early December.

Our Creative Strategic Planning session in early December includes fifteen CSP committee members and also fifteen key stakeholders. We’ll start the session with Concerto Research’s presentation of our survey results, which will lead into a focus group. These two key events will kick off several days of planning, which will bring results in the form of key actionable plans to strengthen CIAA and the claims industry at large.

Survey results and actionable plans will be presented at CIAA’s mid-year meeting on Feb. 1, 2010. We have several key organizations and companies who are strongly supporting this initiative. Our sincere thanks to these supporters who are recognized in this issue of Claims Canada!

Our national executive committee members and regional presidents are all off to a good start this year. We have implemented some changes to include more developed mandates for each executive committee chair and a newly designed reporting template to help the regional president’s update national on their activities. Our intention is to have the executive committee chairs become part of the vehicle for implementing change over the coming years. We have an excellent 10

Claims Canada

December/January 2010

Quand vous lirez ces lignes, les feuilles mortes seront couvertes de neige, les coquelicots ne seront plus qu’un souvenir et les lumières de Noël seront éteintes! En tant que présidente de l’Association canadienne des experts indépendants, j’ai été très occupée cet automne, pour mon plus grand bonheur!

En compagnie de Mary Charman, 1re vice-présidente, j’ai assisté à la Conférence nationale de l’assurance (NICC), un événement remarquable! L’accueil et la reconnaissance accordés à notre association ont été formidables et, comme présidente de l’ACEI, je suis particulièrement fière de siéger au comité consultatif de la NICC. En octobre, le président de la NICC et moi avons étudié le programme de la conférence qui se tiendra à Montréal en 2010, où il sera question des demandes d’indemnisation, entre autres choses.

Cette année, un sujet important de l’ACEI consiste dans la tenue d’une séance de Planification stratégique créative (PSC), dont le but ultime sera de réévaluer l’orientation de notre association. En fait, ce projet est déjà en cours: avec trois études envoyées à l’industrie — à des membres, des experts indépendants non membres et à diverses parties prenantes. À ce jour, nous avons reçu une magnifique réaction et nous nous proposons de réexaminer les résultats au début de décembre.

La séance de Planification stratégique créative de décembre réunira les quinze membres du comité de la PSC, ainsi que quinze représentants des principales parties prenantes. En premier lieu, Concerto Research présentera les résultats des études, puis nous définirons un groupe cible. Ces deux importantes étapes seront suivies de nombreuses séances de planification, qui conduiront à l’élaboration de Plans d’actions majeurs visant à renforcer l’ACEI et l’ensemble de l’industrie des indemnisations.

Les résultats des études et les plans d’actions seront présentés à l’assemblée semestrielle de l’ACEI le 1er février 2010.

Plusieurs sociétés et organisme importants soutiennent cette initiative. Nous leur adressons nos sincères remerciements et les mentionnons dans ce numéro de Claims Canada!

Les membres de notre comité de direction national et nos présidents régionaux ont tous bien commencé l’année. Nous avons effectué certaines modifications et les mandats de chacun des présidents des comités de direction sont maintenant plus détaillés. Ces modifications, ajoutées au modèle de rapport de concept nouveau, aideront les présidents régionaux à mieux informer le comité national sur leurs activités. Notre but est qu’au cours des prochaines années, les présidents des www.claimscanada.ca

group on board — please take the time to review who is involved and committing their volunteer time to the CIAA. This month’s feature article is HST: Ontario and British Columbia sales tax harmonization. Much has been written regarding the impact, and there will be much more as we approach the deadline. As independent adjusters, we generally do not charge GST for our services, and that will not change with the HST. The impact we will feel is a slight increase in the cost of doing business as HST will apply to some supplies and services where only GST was previously charged. Adjusters will have to be aware of which rules apply, in what circumstances, to ensure proper indemnity of first party claims and no over payment on third party claims. It behooves all of us to ensure we are up to date on the changes and how it will affect the area of business we are responsible for: adjusters and business owners alike read the articles and educate yourselves.

CIAA will bring you more learning opportunities as we get closer!

Till next month — be involved, be responsive, be professional! ■

comités de direction participent davantage à l’instauration des changements effectués. Nous avons en place une excellente équipe. Je vous prie donc de chercher à mieux connaître les membres de notre équipe qui consacrent une partie de leur temps à l’ACEI. L’article de fond de ce mois traite de l’harmonisation de la taxe de vente en Ontario et en Colombie-Britannique (HST).

L’impact de cette taxe a fait l’objet de nombreux articles, qui iront en augmentant d’ici son adoption. En tant qu’experts indépendants, nous ne chargeons généralement pas de taxe GST pour nos services et la HST n’y changera rien. Nous sentirons cependant une légère augmentation de nos frais d’affaires, puisque l’HST s’appliquera à certains produits et services sur lesquels seule la taxe GST s’appliquait précédemment. Il est impératif que nos experts connaissent les règlements applicables, et en quelles circonstances, pour que les indemnités consenties aux ayants-droit principaux soient appropriées et que celles remises aux tiers ne soient pas exagérées. Il incombe à chacun de nous de bien connaître ces changements et l’impact qu’ils auront sur notre champ d’action. Pour cela, les experts et les propriétaires de commerce doivent bien lire les articles et s’informer. L’ACEI continuera de vous renseigner le mieux possible, à mesure que les choses évolueront.

Au revoir, et n’oubliez pas: participation, responsabilisation, professionnalisme! ■ Translation provided by Henry Arcache, Themis Translations.

NATIONAL EXECUTIVE 2009 – 2010 PRESIDENT 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 Email:pkernaghan@kernaghan.com 1ST VICE-PRESIDENT Mary Charman, CIP Crawford & Company (Canada) Inc. 1 – 120 Mulock Drive Newmarket, ON L3Y 7C5 Phone: (905) 898-0008 Fax: (905) 898-1705 Email: Mary.Charman@crawco.ca 2ND VICE-PRESIDENT Greg G. Merrithew, CIP, FIFAA Arctic West Adjusters Ltd. 401 – 5204 – 50 Ave. Yellowknife, NT X1A 1E2 Phone: (867) 920-2212 Fax: (867) 873-2244 E-mail: gregm@arcticwest.ca

www.claimscanada.ca

SECRETARY Marie C. Gallagher, FCIP, CRM McLarens Canada 71 King Street, Suite 204 St. Catharines, ON L2R 3H7 Phone: (905) 984-8282 Fax: (905) 984-8290 Email: marie.gallagher@mclarens.ca TREASURER Randy P. LaBrash, CIP, CFE, CFEI Crawford & Company (Canada) Inc. 300 – 191 Lombard Avenue Winnipeg, MB R3B 0X1 Phone: (204) 947-2340 Fax: (204) 943-9168 Email: Randy.Labrash@crawco.ca PAST-PRESIDENT Reno Daigle, CIP, CLA, FCIAA Crawford & Company (Canada) Inc. 326 McIntyre Street W. North Bay, ON P1B 2Z1 Phone: (705) 476-2120 Fax: (705) 476-9280 Email: Reno.Daigle@crawco.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 Email: pbattle@ciaa-adjusters.ca DIRECTOR James B. Eso, BA, CIP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Phone: (519) 578-5540 Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca

DIRECTOR John Jones, BA McLarens Canada Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 Email: john.jones@mclarens.ca DIRECTOR Carol A. Messervey, CIP, FCIAA, FIFAA Marsh Adjustment Bureau Limited 1550 Bedford Highway, Suite 711 Bedford, NS B4A 1E6 Phone: (902) 469-3537 Fax: (902) 469-2396 Email:cmesservey@marshadj.com

DIRECTOR Jean-Marc Laurin, FPAA, CRM, FCIAA Cunningham Lindsey 1250 Guy Street, Suite 1000 Montreal, PQ H3H 2T4 Phone: (514) 938-2124 Fax: (514) 938-5445 E-mail: jmlaurin@cl-na.com

December/January 2010

Claims Canada

11

HST A Taxing Issue

BY LAURA KUPCIS

Experts suggest that if and when the HST is implemented in Ontario and British Columbia, the implications could be costly for the industry.

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December/January 2010

he Harmonized Sales Tax (HST) in both Ontario and British Columbia will have huge ramifications for the insurance industry. Ramifications that could grow into the hundreds of millions of dollars. To boot, some of those cost implications could affect earnings for 2009.

Insurers will be hit in three areas by the HST: operating costs, claims costs and reserves.

Ontario and British Columbia will be joining Nova Scotia, New Brunswick, and Newfoundland and Labrador in combining the provincial sales tax with the federal Goods and Services Tax (GST) to create the harmonized sales tax (HST).

Effective Jul.1, 2010, Ontario and British Columbia businesses will be subject to one sales tax as

T

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opposed to two, and one set of tax rules instead of two and one level of government instead of two, according to the Ontario Ministry of Revenue.

In a nutshell, “HST is GST on steroids,” Dave Schlesinger, national service leader for KPMG’s indirect tax practice, said.

Under HST, most taxes paid on business inputs would be refunded to the business through input tax credits — savings that can be reinvested and passed on to consumers, the Ministry says.

Insurance companies, however, do not currently charge GST as they are considered exempt. This means insurance companies are not entitled to claim an input tax credit (ITC).

Currently insurance companies are liable for any GST they might be required to pay for products or services used in the course of conducting business. When the HST comes in to effect, this cost will rise from five per cent to 12 per cent in British Columbia and to 13 per cent in Ontario.

According to a Gowling Lafleur Henderson LLP newsletter, “Insurance providers may be doubly affected, as the Budget materials indicated that Ontario would maintain some form of tax at a rate of eight per cent on the same kinds of insurance as are currently subject to Retail Sales Tax, generally property insurance other than automobile insurance. The Budget materials do not note that insurers will have an entitlement to recover the HST they pay on inputs as a consequence.

Indeed, when Newfoundland and Labrador maintained a similar 15 per cent unrecoverable tax on insurance, they did not provide corresponding relief to insurers, though Newfoundland and Labrador did recently repeal this additional tax on insurance.”

Effect on insurers But what does all this mean for the insurance industry, which, like all financial institutions is unable to collect or remit HST in most instances?

“At IBC we know it will have a meaningful impact on insurers,” Grant Kelly, director of policy development and chief economist for Insurance www.claimscanada.ca

Bureau of Canada, said. To determine just how much of an effect, the IBC hired Deloitte & Touche LLP to do the math. In the first full year of harmonization, the estimated impact of HST, based on information provided by IBC, its members and Deloitte data, is $210 million in Ontario and $29.5 million in British Columbia — a total of $240 million in additional costs. Those numbers projected out to 2015 will be $227 million in Ontario and $32 million in B.C., according to Danny Cisterna, a partner at Deloitte.

The figures in British Columbia are lower partly because insurance companies do not handle auto claims and furthermore because legal services were already subject to provincial sales tax.

Claims Side The claims side will be hit hardest, Kelly says. When looking at the estimates and drawing out the impact directly related to claims, the industry will be looking at an impact of roughly between $170 and $190 million every year in Ontario. In 2007, the industry paid $326 million in claims, which going forward will increase about $170 million to $496 million in Ontario alone. This is due to an increase in the cost of services, including legal fees, which are currently not subject to PST, adding an extra eight per cent on every service used to settle a claim, Kelly says.

In British Columbia, of the $29.5 million estimated cost increase, $21.2 million of that will be related to claims, Cisterna notes.

Impact on reserves Insurance companies sold a number of policies without anticipating the possibility of additional cost in settling claims under the HST environment, Jim Falle, CFO of Aviva Canada, says.

When reserves were set for 2009, the impact of HST on the costs was not anticipated, and now that legal and medical and other costs will be subject to HST, earnings for 2009 have been hit.

The actuary must take into account when reserves are set, how much the claims are going to cost after HST, so there will be an impact on reserves in

2009 for claims settled after Jul.1, 2010.

Kelly notes that in a report from Baron Insurance Services, commissioned by the IBC, Barb Addie, principal of Baron Insurance Services , estimated that of the $170 to $190 million in additional claims costs going forward, $250 million must be booked in Ontario in 2009. In British Columbia, the impact on claims reserves will be roughly $20 million.

“So it’s an instantaneous negative impact,” Kelly says. The year 2009 has already been a down year, and to add an additional $270 million will have a meaningful impact on the year’s financial results.

“There’s the one-time hit this year relating to the retroactive nature of bringing HST into account,” Falle says.

“The reason it’s retroactive is that when we sold the policies for these things, we didn’t know that HST was going to be in place, so we have no opportunity to price that cost into the products.”

Additional expenses Another cost impact will be in areas where GST was paid but PST was not charged. Because HST will apply in much the same way the GST currently does — to goods and services — any goods and services currently subject to GST at five per cent, will be, for the most part, subject to between 12 and 13 per cent (depending on the province) going forward.

A cost savings will come in situations where GST was not paid previously — such as for independent adjuster services — and thereby HST will also not be accrued. And then finally, there will be no cost impact in instances where companies were previously paying both GST and PST, and this would simply be amalgamated into HST and the cost remains the same, Schlesinger notes.

There are other factors that can influence cost, such as whether a company is located in a harmonized or non-harmonized province, whether the risks are in harmonized, non-harmonized or across multiple provinces, Schlesinger says. “There’s a series of levels of complications,” he says. “To

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understand the full ramifications, because there are so many costs, you have to understand how it affects your specific operations and uniqueness of your operations.”

An insurance company must determine what the costs will be now, so that it is aware of how to determine what premiums will be on a go-forward basis, Schlesinger says. “Pick out those places that you are paying GST and not PST and basically take that number and multiply it by 2.6 and that’s your new cost, or multiply it by 1.6 and say that’s my additional costs,” Schlesinger says. “That’s the simplest way.”

Cascading taxes HST will build on the already cascading taxes in the insurance product, Kelly points out. When a claim is settled, the PST and GST paid out is embedded in the claims numbers. The loss ratios include these taxes, and when those claims numbers are turned into premium numbers, corporate taxes are built in on top of that. Once

insurance companies come up with a premium number, they add a premium tax, which on every insurance dollar ranges from three to four per cent.

Furthermore, in Ontario and Quebec, on non-auto another eight per cent is levied at the top, which means that the eight per cent is paid on a figure that already includes premium tax, PST, GST and corporate tax. “There is a massive cascading (of taxes) in the insurance product,” Kelly says.

Another example of the tax-on-tax concern is in respect to retail sales tax applicable to certain insurance products. Ontario currently assesses a provincial sales tax on certain p&c insurance products, other than automobile insurance, and certain group insurance. Ontario has said it is not going to repeal this when HST is implemented. “It will not be HST, but that will be, if you will, a living on of the provincial sales tax on these products, which is where the industry has, in my mind, a real concern because effectively . . . it’s creating cascading taxes,” Cisterna says. “Under HST

now, as an insurance provider, I will have more tax to pay and I still have to charge tax to my customers, and if I pass those increased costs on through increase premiums, then that increases the base for which I’ve got to collect this eight per cent tax. It’s total tax cascading and that’s something that I do know that the industry has lobbied the government on and to me, in my view, that’ a very legitimate concern.”

It is, effectively, tax on tax, and very inefficient from a pure tax policy perspective. “The reason they did that simply is because they can’t afford to give up that revenue,” Cisterna adds.

According to industry data, it is estimated that the government collected $612 million of retail sales tax on p&c insurance products in 2007 alone.

Adjuster impact When the HST was implemented in Nova Scotia, New Brunswick, and Newfoundland and Labrador, the effect on independent adjusters was minimal. At most, Fred Plant, president of Plant Hope Adjusters, esti-

mates that the cost of doing business increased by at most one per cent.

“We’re an exempt service,” he says.

“So the vast majority of the service that we provide is exempt. We never charged GST before on our bills, so when they added GST and PST together to create HST back in 1997, it didn’t change anything.” He adds, however, that adjusters must be aware that HST is applicable to some of the services provided — excluding insurance companies — which means that those companies must be billed HST. Effectively, an adjuster must collect and remit HST for work done for a company other than an insurance company. The customer is defined by who the invoice is made out to, Plant says.

The difference occurs when an adjuster must purchase a product which currently is only subject to five per cent GST, will now be subject to the higher HST. But, Plant notes that the “biggest component of our cost of doing business is labour and that is not affected by this in any shape, way or form.”

He does add while there is nothing at this time to suggest that adjusters will begin to charge HST, it is a good time for adjusters to reflect on who they do work for and how that customer is billed. If a bill should have HST on it, and it is not added, and the government inspects the records, the adjuster will be required to pay the HST that should have been collected originally, out of pocket. “You’ve got noting to lose by charging it properly to the customers,” Plant says.

Vendor impact For service providers who will be required to bill HST to insurance companies, there might be additional costs incurred when financing this extra tax.

Because of the process insurance companies go through before paying for service, there is often a delay in payment, which means that the provider, who is required to pay the taxes to the government immediately, is effectively financing the tax until payment is received from the insurer. “We are having to pay before we collect it,”

Chris Giffin, partner at Giffin Koerth, says. “We have significant receivables out there, which means that the financing cost is significant. One way or another it’s either going to eat into our profitability or we are going to have to pass it on, not only the increased cost of the HST but also the cost of financing it.”

Mitigating the HST burden When it comes to adjusting claims, Mike Firth, national leader indirect tax services at PricewaterhouseCoopers, notes there are a few things adjusters and insurance companies should bear in mind after the HST is implemented.

First things first, and insurance company or adjuster should always determine whether the insured is able to recover HST — this should be determined during the first discussion with the insured after the loss. When working on a claim, an adjuster will be handling areas such as replacement goods and service providers. Because these are subject to GST, PST and in mind2010, HST, the insurance companies’

When you’re not FirstOnSite, who is?

cost can be reduced if the insured is able to recover all or part of the HST costs incurred. The easiest will be if the insured is able to recover all the HST, then the cost of the claim, minus the HST, is paid to the insured, Firth says.

There are other insureds who will be able to recover part of the HST incurred. Once it is determined how much HST the insured can recover, then again, the cost of the claim, minus the portion of HST the insured is able to recover, will be paid, he continues.

Both of these situations will reduce the cost to the insurance company, with no loss to the insured. Additionally, if the claim is for the rebuilding or substantial rebuilding of a home, a new housing rebate applies which means that a portion of the HST incurred on the cost of rebuilding the home is recoverable, Firth says.

Because property and casualty insurance is HST-exempt costs incurred related to that premium are not recoverable in Canada. However, the premium is zero rated outside of Canada, which means that it is still a tax charged at the zero rate, Firth says.

“When you look back to your costs, there’s a huge difference, because if you have a zero rated premium, any costs that the insurer incurs related to that zero rated premium can be recovered, because the insurer actually made a taxable supply at zero,” Firth adds. As an example, this means that if an insured has an auto accident in the United States, any HST costs incurred relating to the claim are considered part of the zero rated premium and therefore the insurance company is able to claim that back on its return.

An adjuster, when handling this type of claim, should be flagging all the HST costs, Firth points out. “That, I think, is an aspect that frequently gets overlooked,” Firth says. “If the loss adjuster isn’t aware of that, if the insurer’s loss adjusting policies don’t mandate that, the tax just gets paid, and it gets baked into the claims cost for that file and it’s gone forever.”

Falle suggests while insurance companies don’t currently qualify for input tax credits, he believes there is an opportunity to collect. “There are cer16

Claims Canada

While insurance companies are not able to claim input tax credits, they are required to make an adjustment to the net tax calculation using a formula under the special attribution method, according to the Canada Revenue Agency (CRA). tain elements of insurance where we charge provincial sales tax, so in theory there should be an opportunity and our guys are just exploring this right

December/January 2010

now,” he says. “We should be able to get input tax credits for some elements of this because for the province to fail to allow us to do this would represent a tax on tax.” He goes on to say that there is precedent within the GST and PST, where the government generally allows input tax credits where there is cascading impact from the taxes. However, these opportunities are minimal.

Insurance companies might be able to mitigate some of the increased claims cost through savings from suppliers, such as legal, towing and storage fees, which will now be subject to HST. “Many of the suppliers of these affected services may realize a cost savings as a result of the elimination of the unrecoverable Ontario Retail Sales Tax (ORST), and could pass on a saving in the form of a slight priced reduction to insurers,” Bill MacQueen, senior manager, commodity tax, at BDO Dunwoody LLP, says.

He goes on to note industry associations might want to voice concerns to provincial and federal ministers charged with rolling out the HST. These associations could lobby for tax breaks or rebates to offset the costs incurred by HST. “You need to kind of do some formative impact review on your business, or what HST is going to do, “ Cisterna says. “We really do believe it’s enterprise-wide, so it’s not just a tax issue. If you think about the fact that (insurance companies) are going to be applying all this non-recoverable extra cost now . . . do they pass that on through higher premiums, can they even do that, what’s the impact on their claims reserves — that affects their bottom line. Understand where those big touch points are — what is causing the big increase in costs — so look at your major suppliers, take a look at that and see if there’s any way to negotiation better pricing from them going forward.”

Special attribution method While insurance companies are not able to claim input tax credits, they are required to make an adjustment to the net tax calculation using a formula under the special attribution method, www.claimscanada.ca

according to the Canada Revenue Agency (CRA).

This formula must be used to calculate the company’s tax liability for the eight per cent provincial part of HST for participating provinces.

“That method says we don’t care where you’re at and who you source your service from, you will have to, even if you bought something from someone who didn’t charge you HST they charged you GST, factor this in to your formula and pay a portion of what’s called Ontario HST and B.C. HST,” Cisterna says. “This formula says it doesn’t matter where your source it . . . [the formula] prevents you from being incented to go to that Alberta supplier because that supplier is only going to charge you GST. Once you put it in to your formula, you are going to pay the same amount of HST as if you bought it from an Ontario supplier.”

According to the CRA, the special attribution method is used to make an adjustment, determined by a formula, to the company’s net tax for the provincial part of HST. The adjustment is determined on the basis of where supplies of financial services are made rather than purchased.

As a result, there is no requirement for an insurance company, according to the CRA, to: • track and allocate the extent of consumption or use of each property or service acquired in the participating provinces in order to claim input tax credits related to the applicable eight per cent provincial part of HST; and • self-assess and account for tax on inputs acquired in a non-participating province for consumption, use, or supply in a participating province. There are exceptions to this rule.

To view the special attribution method — and how to calculate it — log on to: http://www.craarc.gc.ca/Epub/gp/rc4050/README.html (choose to view the publication either as a PDF or HTML document) and under the heading Completion instructions for the GST494 return see Section C - Calculation of the special attribution method.

www.claimscanada.ca

While there is a reduction in some administration, dealing with only one government instead of two, one tax instead of two, etc., there are additional administrative areas, such as the special attribution method, Schlesinger says. “The problem is, if you make a mistake and you don’t do this right, any [margin of] error has increased,” he says.

What is being done The government was fully aware that in implementing HST there would be winners and losers and that, in general, financial institutions would be losers because they are tax exempt, Kelly suggests. “We support the government and the idea of HST because, ultimately, from an insurance industry point of view, the more economic growth, .. the more things there are to insure, so eventually we win,” he says.

However, there is the retroactive one-time impact on 2009’s results which is of great concern, and this is

where the IBC is focusing its discussions with the government. IBC has presented the government with a range of options to potentially mitigate the effect of the HST. But, as of press time Kelly was not at liberty to disclose what these options would entail.

“Governments understand our case, however, but as of yet I’m not in a position to tell you the odds that it will act,” he says.

Absent any movement by the government to provide relief, insurance companies will have to revisit the cost of premiums, Falle says. “It’s a very significant number for this company, so as a result how do we make sure that we continue to make the profit margins that we are expected to make on the product, and so that is going to be reflected in the pricing” he says. “How much and the impact, our actuaries are working through that right now. It’s certainly going to be a cost passed on to the consumer.”

December/January 2010

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S spotlight

Riding the Tide

In a business tied so closely to the economy, Colonial Adjusting & Appraisal Services is experiencing a significant boom in business.

BY LAURA KUPCIS

s the economy continues to boom in Newfoundland, so too does business for Colonial Adjusting & Appraisal Services.

But it is not always like this for businesses so closely tied to fluctuations in the economy. “If the economy is booming, then everything is booming,” Reg Butt, manager of Colonial Adjusting & Appraisal Services, says.

“When the economy goes down, there’s less cars bought, there’s less people driving, there’s less traffic on the go, less accidents, hence our business is down a bit.”

Something as simple as a deductible on a policy can mean less business, because when there is no money to pay the deductible, an insured is not going to be making a claim. On the flipside of that, something as simple as dealers offering leased vehicles to make cars more affordable, can increase business for the company.

While the economy has been suffering somewhat over the last few years,

A

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the current recovery has the company very busy. And while busy is always positive, there are other factors that come into play: Is this going to be a short-term boom? Does the company need to hire more staff?

“You just kind of wait it out for a little while, you’ve got no choice,” Butt says. “You hate to hire somebody and then in a few months have to lay that person off. So, you just try to cope with it as best as you can.” This means late nights, early mornings and weekends in the office until the company is able to get a firm feel for the direction the economy might take.

This always makes looking into the future tricky, Butt says. “It’s hard to foresee; we’ve been doing that for years, trying to foresee what’s going to happen,” he says. “It’s virtually impossible, it depends on the economy.”

Family values The company started with one adjuster/appraiser in 1992. By 1997, business had picked up and the com-

December/January 2010

pany brought Butt in to manage the office. Today, there are six adjusters, including one in Corner Brook — Butt, Mike Gallant, Terry Hiscock, Jackie Noftall, Bert Avery and George Cunning — and three support staff.

Having such a small office makes for a family-oriented workplace. “You leave one family in the morning, you go to your other family during the day, and you go home to your previous one at the end of the day,” Butt says, adding that the staff socialize together after hours and try to keep things light and jovial. This camaraderie helps adjusters work with each other and sort through unusual or difficult claims. “We’re here for one another,” Butt says.

Increasing the staff base is not the only change that the company has seen. The biggest change for Butt was the move from a manual-based system to a computer-based one. “We’re old school,” Butt says. “We’re used to doing things manually; we write www.claimscanada.ca

things, you keep notes, you write statements — everything was handwritten.” Now everything is inputted into the computer system and while it was a big deal for the staff to wrap their heads around, Butt notes that now they all wonder how they ever survived without it.

A job well done One thing that hasn’t changed is fast, efficient and personalized service.

“Our customers, the insurance companies, want fast, fair claims settlement,” Butt says. “I think that’s what it’s all about. It’s a service-oriented industry.” Within three to four hours of the claim being assigned to Colonial, a phone call is made and an adjuster is sent out. “We strive to get the job done as quickly as possible, and properly of course,” Butt says. “You can get things done quickly and cut corners, but that’s not the way we work here.” The experienced staff contact the insures and make arrangements to meet, assign contractors or www.claimscanada.ca

appraisers and a report sent back to the insurance company within a given timeframe. “You’ve got somebody who is depending on you to help them

“We strive to get the job done as quickly as possible, and properly of course,” Butt says.

“You can get things done quickly and cut corners, but that’s not the way we work here.” out and that’s what the bottom line is,” Butt says. “You try to get that done as quickly as possible, no matter if it’s somebody with a house full of sewage or somebody with a scratch on their vehicle. They’ve got a problem. They pay for

the service; we provide the service.”

And this upstanding service is exactly how the company, despite being small, is able to attain new business. Butt notes that because it is a smaller company, they don’t have the same marketing resources that a larger firm might have, so they must rely exclusively on word-of-mouth referrals. “We provide the service, we’re good at what we do and we are definitely starting to pick up a few more sources,” Butt says. “We offer such a good service, I think that more people or more companies should avail themselves.”

In addition to word-of-mouth, being a member firm of the Canadian Independent Adjusters’ Association is also beneficial to expanding business.

Butt notes that he has received calls from the West Coast after the company was listed in the Claims Manual.

Further to that, the company is able to be a part of adjusting catastrophe events because of the affiliation with the association.

December/January 2010

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Introducing the Ontario Chapter Presidents

BY LAURA KUPCIS

CIAA Ontario Chapter President Richard Swierczynski Richard Swierczynski, president of the Ontario region of the Canadian Independent Adjusters’ Association, is finding new ways to increase the profile of the association.

The Ontario executive will be travelling to different areas outside of the Greater Toronto Area to hold their monthly meetings. This is in an effort to allow local members the opportunity to attend both a meeting and the educational component that will follow.

The first meeting of his tenure, this past October, was held in London. The educational component focused on the upcoming changes to the small claims court and how this might affect the

CICMA Ontario Chapter President Mavis Haws Mavis Haws, president of the Ontario chapter of the Canadian Insurance Claims Managers Association (CICMA), says the association allows her the opportunity to give back to an industry that has been great to her for the last 30 years.

“It is a privilege to be the president of the executive, which is filled with enthusiastic, experienced claims professionals,” says Haws, assistant vice president of claims at The Dominion.

Since joining the executive, Haws has held the positions of membership portfolio, secretary and vice president.

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independent adjuster.

Swierczynski is looking at hosting another meeting in the spring in eastern Ontario, most likely in the Kingston area.

“I am hopeful that anyone who attends a monthly meeting just once will gain a deeper understanding of what this organization is all about,” Swierczynski says.

Throughout his tenure, Swierczynski is also focused on maintaining the value of membership within the organization.

“There is already such value to membership and I can only hope to maintain what has already been developed in this area,” Swierczynski, owner of AZ Claims Services, says when talking about his goals as president. Benefit to membership gets talked about a lot.

“Just look at the number of firms belonging to the association. Look at the individuals that volunteer their time to be involved in the provincial and national executives. They are all bright

She has also been a delegate on the national executive for three years. She now holds the position of secretary on that executive.

Accessing information Haws has made it her goal to further develop the association website.

She hopes the Ontario chapter will be able to work closely with the national executive to set up a fully functioning site. The plan is to be able to post online the forms for The Canadian Inter-Company Arbitration Agreement. In addition, the association wants to post a self tutorial/e-learning tool to help members through the arbitration process. In the future, the website would also house shared educational material, communication links and other helpful information.

Further to this, Haws would like to increase awareness about the benefits of being a member of the CICMA.

December/January 2010

people — there has to be value.”

Swierczynski looks at the industry and cannot imagine what it would be like without the CIAA. Where would independents go if they needed one common voice to represent their interests? he asks rhetorically.

For Swierczynski, getting information to members about changes in legislation and new issues that could affect their work, among other things, is of utmost import.

“We’re paying attention to what’s going on out there,” Swierczynski says.

“When there are changes, we’re there to help diffuse the information and report it to our members. We will be doing this with recent announced changes to automobile insurance and other current issues, such as HST. Look to our web site for more information on these topics.”

Swierczynski became involved in the CIAA Ontario region executive in 2000 and first held the position as industry liaison. He joined as a way to become

Benefiting members “It is important to have current and relevant programs to provide real benefits to the membership,” she says.

“These programs should not only provide educational value, but also help foster fresh outlooks.” Last term, the CICMA produced programs about FSCO’s five-year auto review and updated its membership on the threshold and cap challenges. The first meeting of the year in September was the president's panel. (See page 6 of the October/November issue of Claims Canada for coverage.) Further program topics include catastrophic weather claims and the Ontario government’s auto insurance reforms and regulations.

Haws would like to increase awareness around how claims managers interact within the industry and the community. As an example, the www.claimscanada.ca

Swierczynski continued.

more connected with the industry he works within and finds it an excellent way to network with fellow peers.

“People don’t realize the value of even just coming to a monthly meeting and talking with the current executive about what’s going on in the industry,” Swierczynski says. “It’s a great way to keep current with emerging trends.”

He has been on the CIAA/CICMA joint committee for several years and held the position of both second and first vice president.

“Organizing the joint conference is always a challenge as you strive for a balance between an event that is educational and yet entertaining,” he says.

Maintaining relationships As planning for another CIAA/CICMA joint conference is underway, Swierczynski reflects on the importance of maintaining a strong relationship between the two associations. “It is important for us to keep an

open dialogue with claims managers because we need to ensure, as independents, that the services and work product we offer are meeting the needs and expectations of the insurer,” he says.

“They are in the offices of the insurance company and we are in the field. We need to stay connected and hopefully get feedback on what we are we doing right, and just as importantly, things that we need to improve on.” ■

Haws continued.

CICMA has contributed to the Insurance Institute's Ontario Provincial Prize Fund, which provides funding for a scholarship awarded to a Sir Wilfred Laurier student who demonstrates an interest in claims as well as scholastic and leadership excellence.

In addition, the CICMA is a major sponsor of the CCIF Skills Program.

Furthermore, the CICMA chapters’ annual golf tournament raises funds for Camp Oochigeas. The camp provides summer and year-round programs for children with cancer. More than $17,000 was raised at the last tournament.

Fostering relationships For Haws, fostering a close relationship with the CIAA is important, because the goals of both associations are closely aligned. Both seek quality service for the policyholder and appropriate loss costs and expense control.

“For some member companies, independent adjusters are the eyes and ears of the company,” Haws says.

“Understanding and sharing what is good business practice and what doesn't make sense in handling claim files is a beneficial exchange.” She is looking forward to this year’s joint conference, which will focus on fraud. ■

targetting the cause

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December/January 2010

Claims Canada

21

When Objects Break Protecting the Evidence

BY ROB SPARLING

In order to settle claims or pursue subrogation opportunities, insurance professionals need to know why and how failures have occurred. As such, it is important to protect the information associated with the failure.

The forensic investigators who help insurance professionals determine the cause of failures, need as much information as possible to help conclusively determine causation. Due to time constraints or the nature of the failure, forensic investigators may not be able to attend the site of the failure to collect evidence and document the conditions surrounding the failure. This responsibility then falls to the insurance professional.

Documenting failure conditions It is important when gathering evidence to collect as much information as possible regarding the broader context of the failure. It is often the smallest details that can lead the forensic investigator to a determination of cause. When documenting the conditions surrounding a failure one should look for: Physical location — Often the best way to help the forensic investigator is to take lots of pictures. Pictures can provide information that may not be immediately obvious to the photographer. For example, the extremely black soil next to a broken water main could indicate the presence of iron sulphide, a mineral associated with bacterial corrosion. The picture of the failure location would help the forensic investigator differentiate between chemical corrosion and bacterial corrosion. If taking pictures is not possible, document what you see on paper with sketches and a written description.

Environment — The physical environment where the object failed can be very important in determining the cause of the failure. An example would be determining whether a leaky home heating oil tank was located in direct sunlight or in the shade. Large temperature swings caused by a home heating oil tank spending part of the day in direct sunlight and cooling off at night can increase the rate of water condensation in the tank, leading to internal corrosion subsequent leaking. Where possible, it is advisable to document whether the failure location was wet, dry, dusty, clean, windy or exposed to extreme temperature swings, etc.

Witnesses — Witnesses can provide timelines and sequences of events which may be important in determining the cause of the failure. If someone was present at the time of 22

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December/January 2010

the failure, document what they saw, heard, smelled, etc.

Visual observations such as smoke, steam and the direction of flying debris can all be important in determining causation. Sounds and smells may also be relevant to the failure investigation. The hissing of a steam hose before it burst could indicate a pre-existing leak in the inner layers of the hose.

Documentation and history — Maintenance records, drawings, purchasing records, warranties, manuals and old photographs, etc. can all help in determining why something failed. Collect these documents and forward them to the forensic investigator along with the failed object.

Physical evidence Improper gathering, handling, storage and transportation of evidence can lead to important information being lost.

When gathering evidence and protecting failed objects from damage, keep in mind: Evidence removal — If something has to be taken apart or cut in order to remove the evidence, document how the material was removed. Take pictures before, during and after removal and ocument what tools were used. This will assist in distinguishing between damage that occurred as a result of the failure and damage that occurred as a result evidence of removal.

Gather associated evidence — Water from a leaking pipe may contain chemicals or microbes that led to the leak.

Oil from a failed engine may have metal filings in it; soil from the area around a burst pipe may have materials which led to the corrosion of the pipe. Find suitable clean containers and keep a sample of any materials that may be associated with the failure.

Contamination by touch — Environmental attack and corrosion are often caused or accelerated by chemical compounds. Hands are covered in oils, salt, grease and dust, which can all be transferred to the failure surface. This may lead to incorrect conclusions and determinations of cause.

Wear gloves to prevent inadvertent contamination and store the material in clean containers.

Leave the dirt — Don’t clean it. The dirt may be important. Often the environment in which something failed plays an important role in why the failure occurred.

Fracture surfaces — Never put fracture surfaces back together; doing so can damage the surfaces making identification of the cause of failure difficult. www.claimscanada.ca

Suitable containers — If the object being collected is small, Ziploc bags make excellent storage containers for evidence. If Ziploc bags are too small or not available, new plastic boxes or food storage containers are the next best choice.

Plastic wrap or bubble wrap works if suitable containers are not available. Always wrap the object well before putting it into a cardboard box. Capture liquids in clean appropriate bottles, jars, or cans. Seek assistance when handling hazardous or flammable chemicals.

Protect evidence from water damage — Water can lead to corrosion, moulding or chemical changes in material.

Whenever possible, store failed objects in dry sealed containers or bags to prevent damage from occurring. If a failed object is wet, collect some of the water in a jar or Ziploc bag and then allow the object to dry before storing it in a dry container or bag.

Labelling the evidence — Mark on the container holding the evidence where it was gathered, who gathered it and when it was gathered. This will help prevent the evidence from being lost.

Extreme temperatures — Freezing and thawing conditions can damage materials containing water. High temperatures can melt waxes or plastics. It is always best to store evidence in a cool (10°C to 25°C) area.

Protect plastics from UV light — Many plastics, glues, rubbers and paints are sensitive to ultraviolet (UV) light. The fluorescent lights in office buildings produce a significant

amount of UV light. Materials should be stored in boxes or bags which prevent UV light from degrading them.

General handling damage — A failed wire that is subsequently kinked or a hose that is bent to the point where it does not spring back to its original shape during inspection, are both examples of handling damage. It is important that forensic investigators do not mistakenly interpret damage caused during handling as contributing factors to the failure.

Chain of custody — Make sure to document who removed the evidence, and all parties that took custody of the evidence. Although not commonly an issue, chain of custody may be important in litigation.

Summary The loss or failure to gather even the smallest details surrounding a failure can compromise an investigation and mean the difference between finding a cause and being left without the answer. For insurance professionals, this can mean the difference between settling a claim quickly and not having enough information to determine how to settle the claim. It may also be the difference between pursuing or abandoning subrogation opportunities. That being said, always ensure when gathering evidence to document as much as possible and handle the evidence with care.

Rob Sparling is a materials engineer/forensic investigator with Giffin Koerth’s forensics team.

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23

Quarterback: The Accident Benefit Adjuster

BY ANGELA VERI

Leadership is definitely one of the most important skill an accident benefit adjuster needs to effectively manage a motor vehicle accident file. Sometimes the adjuster can feel like a quarterback with everyone depending on his/her vision and ability to efficiently follow through on a proactive plan, while effectively communicating each “play” or progress with all team mates — in this case, the rehabilitation team and other stakeholders.

Much like a football team, the rehabilitation team and other stakeholders, including client, family members, employers, legal counsel, hospitals and all treating specialists and healthcare providers, look to the adjuster for direction.

Like the quarterback, adjusters must not only have a ‘big picture’ strategy, they must also be tactical, with the ability to quickly and expertly adjust the strategy as the rehabilitation plan unfolds.

Like the quarterback, the adjuster must also be motivational, creating a sense of teamwork as everyone works toward the common goal — creating a winning situation for the client of a timely return to maximum recovery.

Kickoff Laying the foundation by way of a comprehensive and proactive rehabilitation plan is the most effective way for adjusters to set up the file to facilitate client recovery. Similar to the quarterback whose best approach is to be offensive rather than defensive, 24

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adjusters who set the scene by being highly proactive create a win-win for everyone involved in the file. The best way for adjusters to ‘set the ball in motion’ is to ensure they have initiated all aspects of case management: • Co-ordinate and share information with all stakeholders on a continuous basis throughout file duration (i.e. client, family members, employers, legal counsel, hospitals and all treating specialists and healthcare providers) • Obtain medical records from treating professionals • Co-ordinate all assessments to ensure all client issues are addressed (e.g. occupational • Therapy, in-home assessments, attendant care aassessments, physiotherapy assessments, job site assessments, etc.

• Refer for insurer examinations as appropriate and follow-up on recommendations • Facilitate discharge planning • Co-ordinate return to work plan — everything from arranging for a functional abilities evaluation, to ensuring medical clearance, to participate in the RTW plan, to negotiating plan with the client and employer and facilitating the plan’s execution.

• Monitor progress throughout the entire file duration with a special emphasis on communication to all stakeholders to avoid overlap and/ duplication of services and a proactive approach to rehabilitation that will result in time and cost efficiency.

Consider using the checklist to keep track of the range of medical reports and records that need to be obtained.

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Medical reports/records Pre-MVA records • Canada Pension Plan records • Co-insurer records • Physician records (e.g., general practitioners, other treating specialists, psychiatrist, psychologist, etc.)

• OHIP records • School records • WSIB records • Veteran Affairs Canada records Post MVA records • Ambulance report • Emergency room report • Hospital records (e.g., records may need to be requested from more than one hospital) • Rehabilitation facility records It is particularly crucial the adjuster expertly quarterback the discharge planning process. A proactive discharge can ‘get the ball rolling’ in the right direction and pave the way for a smooth transition from hospital to home.

Conversely, a rush discharge often places a lot of undue stress on the client and family or worse, the result can be discharge to an environment that is not ideal for maximizing client recovery. The client’s progress is often impeded by a last minute approach to the discharge planning process.

The proactive adjuster takes the lead: • Contact hospital discharge planner/ social worker • Ensure all recommendations of hospital occupational therapist have been implemented and assistive devices rented/purchased and delivered prior to discharge www.claimscanada.ca

• Arrange for transportation if required • Refer for in-home occupational therapy assessment and attendant care assessment (as required) • Arrange for attendant care (family or agency) prior to the in-home assessment and convalescent care as needed

Knowing your bench strength A key principle of effective leadership critical for the quarterback is the ability to accurately assess each team member’s strengths and special talents.

An effective leader then supports and inspires each team member to bring these special abilities to the forefront.

For the adjuster this starts with getting to know the client.

An in-depth understanding of the client’s post-accident issues, as well as pre-accident lifestyle is imperative to building the best team to support the client and facilitate maximum recovery: • Obtain medical history from treating physicians (current & past clinical notes/records) • Find out if there is a co-insurer • Determine educational and vocational history • Determine current employer and vocation • Develop an understating of activities of daily living pre- and post-accident, as well as leisure activities (e.g., hobbies, other interests and skills) • Assess the rehabilitation potential barriers to rehabilitation, for example: • prior medical conditions • nature of injury/disability • availability of physician(s) or rehabilitation history • transportation issues Based on a thorough understanding of the client’s situation, the adjuster can then pull together the rehabilitation team with the best skills to match the client’s particular needs.

Using well-honed leadership skills, the adjuster assesses each team member’s unique strengths and their ‘fit’ with the needs of the file. As a result, the client feels that their needs are being appropriately addressed and the adjuster has accomplished this in the most effective and efficient way possible. www.claimscanada.ca

Avoiding a fumble ‘Dropping the ball’ by letting important details fall through the cracks can cause the entire rehabilitation plan to lose momentum or even grind to a halt until the various team members can get back up to speed. The best way to avoid this situation is to be focused on facilitating continuous communication with and between all team members. This is especially critical when creating the rehabilitation plan and assembling the

best team however, it continues to be a critical success factor throughout the duration of the file.

Overall, as the quarterback, the adjuster is the client’s hero; the client depends on the adjuster’s leadership skills to be superior with an emphasis on proactive and continuous communication.

Angela Veri is national director of customer relations at Sibley Inc.

December/January 2010

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Hydrocarbon Spill Claims: How to Keep above the Plimsoll Mark

(This is a fictional story used to illustrate issues, challenges and solutions when managing this type of environmental claim. Any similarity to real persons or events is purely coincidental.)

Malcolm Plimsoll received a spate of nasty emails from subscribing underwriters on a suburban residential program. The emails expressed grave concern about the severity of the program. Underwriters were concerned about the viability given significant step reserving on two separate claims involving heating oil spills. The reserve increases for both claims totalled $700,000. The situation was made worse by the delay in reporting the reserve change. Each claim had been open for more than six months.

As the claims manager for a Lloyd’s broker, Plimsoll had “the pen” to settle claims on Canadian business.

London was demanding answers and Malcolm, feeling he’d been blindsided by his adjusters, had no immediate answers. The six-hour time difference was another obstacle in the uphill battle in trying to diffuse the situation. Pacifying the heated underwriters on this one would take a person-to-person conference call. Plimsoll would need a very compelling argument to retain the underwriters on the program.

Reeling from the tongue-lashing inflicted by his boss, Malcolm knew that his career had reached its own Plimsoll Mark. It was time to chart a new course, notwithstanding the load! Malcolm would need a beacon to guide him through these treacherous seas.

Determined not to sink, he reviewed each file, preparing for his conference call scheduled for 3:00 a.m. local time.

The first file wasn’t stellar, but Plimsoll found some answers that might appease the underwriters. His review uncovered that the adjuster hadn’t responded urgently. The 26

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reserve increased dramatically because a qualified professional was not consulted soon enough to conduct an initial site assessment. The adjuster of record was known to be a very competent property adjuster, however, she’d never adjusted a hydrocarbon spill claim. Lesley Brulé, with years of experience adjusting major fire losses, relied on her instincts and appointed a restoration contractor to this residential oil spill. While skilful in responding to the fire peril, the contractor, like Brulé, had little experience with oil spills. Nevertheless, No-All Restoration could hardly be criticized for their response to the loss. Plimsoll remarked the contractor had undertaken “emergencies” in an effort to contain the contamination.

They quickly brought in a vacuum truck to extract the free product floating on the basement slab around the aboveground tank. They even shut off the circuit breaker for the sump pump, but because the adjuster had only attended three days after receiving the claim, the sump pump had evacuated a concentrated mixture of water and heating oil from the basement into a nearby ditch, which flowed into a well-known trout stream. After a number of site meetings, Brulé and No-All Restoration agreed at least half of the basement slab had to be removed. More free product was discovered so the contractor continued to dig and dig.

After two months, the adjuster and the contractor finally realized the oil seemed to be everywhere underneath the foundation. Complicating their attempts to remove the contamination was a perched water table. Things appeared to be getting worse and the homeowners were becoming extremely frustrated at not being able to live in their home.

Overwhelmed, Brulé felt the heat reviewing the contractor’s interim invoice. She had recommended an initial www.claimscanada.ca

Illustration by Glenn McEvoy

BY MIKE LABERGE

reserve of $50,000 and was now poring over documents for work completed to date totalling $343,552.09. She’d wanted to get her preliminary report off in a timely manner to meet Plimsoll’s expectations. What to do now with the initial reserve so inadequate?

Brulé panicked as she reviewed cost items for labour, heavy equipment, haulage, disposal fees — and the list went on! Brulé’s detailed report was past due and she feared how Plimsoll would respond to her recommended reserve increase. Desperate and needing guidance, Brulé called an old friend, Guy Ding, who worked for a competing firm. Known as the environmental loss guru, Ding agreed to meet Brulé at their favourite watering hole. Guy Ding walked her through the next steps.

Before doing anything else, Ding suggested an experienced remediation expert be brought in to conduct a site assessment and to prepare a remediation plan with estimated costs. Taking her friend’s advice, Brulé was able to

turn the claim around, working with a professional geoscientist. The estimate to complete the clean up was an additional $120,000. Eventually, Brulé

One of the other challenges to this remediation was the prevalence of fissured clay, which allowed the oil to spread easily in unpredictable ways.

could be done about the reserve increase.

Plimsoll’s mantel clock struck 11 bells. The second file had yet to be reviewed. A streamlined method of reviewing the file handling fundamentals in the second file was required in order to be prepared in time for the conference call. Plimsoll developed a set of customized Key Performance Indicators (KPIs) to serve as a measurement framework in reviewing hydrocarbon spill claims. The KPIs examined critical file handling fundamentals, including: (1) Initial action, (2) Site stabilization, (3) Reserves, (4) Documentation, (5) Quantum control,

found the courage to complete her detailed report for Malcolm Plimsoll.

By this time, under the oversight of the expert, the remediation was on track and almost complete, but nothing

(6) Reporting, (7) File management, (8) Environmental liabilities, and (9) Fees.

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December/January 2010

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27

Using the above KPIs as a measurement framework to analyse the performance for all the service providers on the file, Plimsoll could see the adjuster handling the second file, Guy Ding, had not blindsided him on the reserve.

Ding had scored A to B+ on all the KPIs. He had responded urgently to the loss and had hired a site professional to stabilize the site, conduct an assessment and prepare a remediation plan with cost estimates. The site professional, a

P.Geo. by the name of Roch E. Cobbles, had prepared a remediation plan that implemented an excavation and removal approach to cleaning up the mess. Initially, the reserves appeared adequate. Satisfactory documentation and reports were on time. The file appeared to be well managed and the contractor and subcontractor pricing was in line with standard industry rates.

So where did the reserve on this file get so off course?

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Site conditions and poor record keeping by the City were to blame.

When spilled, heating oil will follow preferential pathways. As part of his assessment, Cobbles had ordered locates for all possible infrastructures.

This would ensure excavation would go smoothly. Unfortunately, only after several weeks of digging under the policyholder’s underpinned residence, did the contractor unearth a decommissioned sewer line. The oil followed this preferential pathway under the roadway contaminating two other commercial properties across the street. One of the other challenges to this remediation was the prevalence of fissured clay, which allowed the oil to spread easily in unpredictable ways. A mid-April blizzard, which closed down the site for almost a week, also created additional and significant surface water run-off.

Ding did the right thing. As soon as the additional contamination was discovered, working with the site professional, he prepared a reserve worksheet to enable him to calculate the reserve change. Ding communicated the situation and recommended a reserve change to Plimsoll immediately. Initially, Plimsoll was fuming, but after reviewing the file and looking at how it scored against his KPIs, he concluded that certain aspects of the loss were unforeseeable.

The clock struck three. Time to face the music with the underwriters. Later that morning, Plimsoll explained to his boss the Lloyd’s program was not in jeopardy and that his proposed solution had been satisfactory. Going forward, Plimsoll would have to stick to his KPIs when managing spill claims.

Guy Ding would be his go-to guy for all environmental claims.

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Mike Laberge is assistant vice president with Environmental Solutions Remediation Services.

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Joining Forces The Atlantic chapters of the CIAA and CICMA are working together to further the claims industry in the area.

BY LAURA KUPCIS

hen it comes to clearing the air, nothing is better than talking it through. And talking is exactly what members from the Canadian Independent Adjusters Association (CIAA) and the Canadian Insurance Claims Managers Association (CICMA) in the Atlantic are doing.

Even though the associations were holding joint conferences every year, open dialogue between the two organizations was still not something that had been broached — until Jane Richardson, then president of the CIAA’s Nova Scotia region, invited Frank Robertson, the president of the CICMA’s Nova Scotia chapter, to attend a CIAA meeting.

During the meeting, the independent adjusters had many questions for him, Robertson says, about why insurers do certain things. He says he found it difficult to answer because while he is aware of the ways his insurance company conducts things, he was not able to speak for other companies. A good example of this arose when the adjusters mentioned being called in to work on an after-hours claim and then having the claim taken back by the insurance company come Monday morning. Robertson noted he was unable to speak to this, because the insurance company he works for does not follow this practice. That ultimately led to opening up the channels of discussion and having more claims man-

W

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agers in attendance to garner a wider spectrum of possibilities.

Opening discussion “My whole idea of having it was just that we could actually sit down and talk to each other openly and freely about what’s bugging us and what we are happy with in the relationship and how we can build on that relationship,” Richardson says.

At the next joint conference in 2008, select CIAA members and CICMA members got together to discuss issues affecting both members. They were able to discuss the issue of some insurance companies hiring adjusters to handle claims on the weekends and then taking the claim back the following Monday. “We did have success with two of the largest insurers agreeing not do that any more, which was great,” Richardson says. Furthermore, the adjusters were able to let insurance companies know how difficult it is to bring in new trainees and staff when the constant flow is lacking. “We spoke about claims volume and how it’s very difficult for us . . . that we don’t have a steady stream of claims that we can staff,” Richardson says. “Christmas is very busy, summer is very busy and if there’s a weather occurrence then it is very busy, but other than that it is very up and down.”

A number of insurance companies agreed to start doling out claims at the

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beginning of December so that the independent adjusters were not receiving all the claims at once when the insurance company staff started to go on vacation, Robertson says. “It’s everything,” he says. “If you can get a little bit here and a little bit there and give a little, it all helps.” On the flip side, the independent adjusters were also able to learn that insurance companies want to be notified if an adjuster is too busy to handle a claim and that they were ultimately looking for quality work. The managers were not prepared to discuss fees, however, as those are not controlled in the Atlantic region, Richardson says.

Carol Messervey, director of both the CIAA national executive and the Nova Scotia region, says that instead of being protective about the territory and being upset about a potential lack of support of independent adjusters, those in the Maritimes have found a way to work with the new reality by opening up dialogue between the two associations. “We know these people, so it’s not big deal for us to sit down and break some bread or have a beer at the end of the day,” she says. “It’s a small area, we run into each other a lot. It’s just that people know each other well and they generally get along well.”

Continuing claims Over the past year or so, the two associations have held three meetings www.claimscanada.ca

after Robertson first attended the CIAA’s semi-annual meeting in 2008.

At the most recent meeting in the June, as issues were being talked through, the topic of training, and the possibility of claims managers and independent adjusters working to train new recruits together, came up. From there it was a smooth transition to the topic of the shrinking claims industry. The group is now working to create a program through the community college in Nova Scotia where the committee would be able to go and speak to students in business courses and perhaps set up a booth during the lunch hour to promote insurance.

“Now they are trying to find a place to slot this, so that they can provide more than just a surface scratch of knowledge with respect to the insurance industry and how it works and the opportunities,” says Fred Plant, president of Plant Hope Adjusters. “Not specifically to tell people here’s the work that you can do in the insurance business, but to say here’s the insurance industry and here’s how it works, here’s what a broker is, here’s what an underwriter is, here’s what an adjuster is.”

The aim of the initiative is not to create a new education program such as the ones at Fanshawe or Mohawk Colleges, but maybe it should be that and maybe it can go to that, Plant says, adding that the original plan was to create a program that will educate people who are in college as to the existence of insurance and how it works.

“We’re focusing on the claims side of the business so that people, maybe after one year of a two-year diploma, can say one of the courses I had to take was the business of insurance and from that I learned about loss adjusting and I really want to do that or I want to look into that further,” Plant says. Then, in year two, they can take more courses that will provide further insight into that aspect. Another bonus would be if the Insurance Institute would provide credit for these completed courses, so that students have one or two Institute courses under their belt, Plant says.

The committee has, through the Insurance Institute, gone to speak to www.claimscanada.ca

high school students about insurance and is currently looking at putting a program together to jointly train high school students, bringing them into companies and walking them through the system, Richardson says. Both the CIAA and CICMA were invited by the Insurance Institute to bring in Grade 11 co-op students who are interested in insurance. The students would come in and do 100 hours of businessrelated work in the insurance industry to see if that type of career would be

interest, Robertson says. At this time, educators are presenting this option to students to see if there is any interest, he adds.

“I think it’s a great opportunity,” Robertson says of the discussion between the claims managers and the independent adjusters. “Everyone feels quite free if an issue comes up to make that phone call and bring it forward. It takes away that ‘us and them’ type of attitude. We are all in this together.”

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Litigation and Spoliation of Evidence

BY KENNETH FITZ

In a recent case in Alberta, a fire causing Inevitably, circumstances arise as in Black & Decker extensive property damage occurred at the where a litigant fails to preserve evidence or documentary plaintiff’s home. Fire investigators deter- records. These omissions can arise due to a pre-existing polmined the cause of the fire was either an un- icy for record retention, intentional acts of a litigant, neglect extinguished cigar or an overheated cordless or the failure of counsel (or those with carriage of a matter drill manufactured by the defendant. The before it is assigned to counsel) to advise a client in a timely plaintiff’s insurance company hired an fashion of the evidentiary obligations that exist as part of the investigator who visited the scene and removed the rem- litigation process. nants of the drill and other evidence for inspection by an The destruction of evidence can have far-reaching conseengineer. quences for the litigant who fails to preserve records as The plaintiff later sued the defendant claiming, among required as it is well-established that a party in possession or other things, that the drill had caused the fire. Black & Deck- control of evidence has a duty to take reasonable steps to er Canada Inc. defended in part by alleging that by razing preserve such evidence for court purposes.4 The legal principle of spoliation is based on the Latin maxim the house and removing some drill compoomnia praesumuntur contra spoliatorem, refernents, the plaintiff had deliberately destroyed Spoliation ring to the act of intentionally destroying evievidence. Black & Decker was successful in should not be dence and that all things are presumed against having the lawsuit dismissed in advance of the wrongdoer. trial on the basis of spoliation. Spoliation confused Courts in Canada have followed a conservrefers to the destruction or material alteration with the ative path. The leading case is that of St. Louis5 of evidence, or potentially the failure to preunintentional where the Supreme Court held that the intenserve property for another’s use as evidence in litigation that is pending or reasonably destruction of tional destruction of evidence gives rise to a foreseeable.1 rebuttable presumption of fact that the evidence.

The plaintiff appealed on the issue of destroyed evidence would not assist the party whether an action can or should be struck, that destroyed it. Further, the law is clear that prior to trial, on the basis of spoliation. ~ Justice Conrad spoliation does not occur merely because eviMcDougall v. Black & Decker Inc.2 came dence has been destroyed, but rather that evibefore the Alberta Court of Appeal in 2008. dence is deliberately destroyed in circumstances where a reaWhile the discovery rules in each province differ slightly, sonable inference can be drawn that the intention was to the general principle that runs through the litigation rules is affect litigation. Nevertheless, some Courts subsequently that litigants are obligated to disclose, in advance of trial, tried to extend the concept of spoliation to non-intentional documentary records (which include electronic records) acts. For example, in Lamont Health Centre v. Delnor Conthat are relevant and material to the issues raised by the struction6 the Court suggested it may be possible to invoke pleadings. For example, the Alberta Rules of Court requires the remedial presumption of spoliation even where the every litigant file and serve an affidavit of records disclosing destruction of evidence is not intentional, but merely reckall relevant and material records within a stipulated time less or negligent. period. Records are defined broadly in the Alberta Rules of In Enden v. Canadian Red Cross Society,7 a claim in tort Court to include “the physical representation or record of of “intentional spoliation” was dismissed by the British any information, data or other thing that is or is capable of Columbia Court of Appeal, who found that no such tort being represented or reproduced visually or by sound, or existed. Yet several Courts in Ontario have strengthened the both.” In Alberta, a record is relevant and material only if argument that an independent tort of spoliation might be the record could reasonably be expected to significantly help recognized in Ontario. For example, the Ontario Court of determine one or more of the issues raised in the pleadings, Appeal in Spasic Estate v. Imperial Tobacco Ltd., held: or to ascertain evidence that could reasonably be expected “… I do not see why the existence of procedural sancto significantly help determine one or more of the issues tions or the “spoliation inference,” which may, or may not, raised in the pleadings.3 ameliorate the effects of spoliation, should in themselves 32

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www.claimscanada.ca

preclude the recognition of an independent tort.”8 McDougall v. Black & Decker is useful for its concise historical summary of the law that has developed in this area.

In reviewing the decision to dismiss the action in advance of trial, the Court of Appeal in McDougall held the chambers judge erred in law since there was no basis on which to conclude the matter of spoliation could not be adequately dealt with at trial. The court stated that determining whether spoliation has occurred, and what relief should follow, is a matter best left to the trial judge who can consider all of the surrounding facts. The Court in McDougall concluded that steps could be ordered in advance to help the respondent prepare for trial.

The apparently contradictory findings of Endean and Spasic Estate left open the possibility of extending the law relating to spoliation. In the result, McDougall does not transform the law in this area although Justice Conrad rejects the suggestion in Lamont that the negligent or careless destruction of evidence also gives rise to the presumption the missing evidence will tell against the spoliator, even without the requisite intent. She emphasized spoliation should not be confused with the unintentional destruction of evidence.

By way of concluding the discussion on the law of spoliation in its decision, the Court of Appeal offers a concise summary of the current Canadian law of spoliation at paragraph 29 of McDougall. The definition of spoliation provided is “the intentional destruction of relevant evidence when litigation is

existing or pending.”9 Section 4 of that summary further states that, “The courts have not yet found that the intentional destruction of evidence gives rise to an intentional tort, nor that there is a duty to preserve evidence for purposes of the law of negligence, although these issues, in most jurisdictions, remain open.”10 This statement confirms that the law of spoliation continues to evolve in Canada, and might one day give rise to a thus far unrecognized tort relating to the intentional destruction of evidence.

Kenneth W. Fitz is a partner with McLennan Ross LLP in Edmonton. Graham Semeniuk, summer student, assisted in writing the article. McLennan Ross LLP is a member firm of The ARC Group Canada.

1 Osepchuk v. Tim Hortons 1645, [2003] A.J. No. 542, 2003 ABQB 364 at paras 43-44 2 McDougall v. Black & Decker Inc. (2008), 97 Alta L.R. (4th) 199 (C.A.) 3 Alberta Rules of Court, r. 186.1, 187.1, 187(1) 4 R. v. La (appeal by Vu), [1997] 2 S.C.R. 680, [1997] S.C.J. No. 30 at para 17 5 St. Louis v. R. (1896), 25 S.C.R. 649 at 652 6 Lamont Health Centre v. Delnor Construction Ltd. (2003), 32 C.L.R. (3d) 75 (Alta. Q.B.) 7 Enden v. Canadian Red Cross Society (1998), 157 D.L.R. (4th) 465 (B.C.C.A.) 8 Spasic Estate v. Imperial Tobacco Ltd., 40 O.R. (3d) 699, [2000] O.J. No. 2690 (leave to appeal to SCC refused, 196 D.L.R. (4th) (vii) at para 22; see also Robb Estate v. St. Joseph’s Health Care Centre, 5 C.P.C. (5th) 252, [2001] O.J. No. 606 9 McDougall, supra, at para 29, s.1 10 McDougall,

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Navigating ASP and SaaS data privacy issues across the U.S./Canada border

BY DAVID BLACK

The information age has given us the abil- Minister of Health proposed contracting health information ity to connect with virtually every govern- services to a U.S.-based company. The heart of the concern ment and business around the globe. While was centered on the U.S. Patriot Act, which was introduced there are obvious benefits, there are also shortly after the events of Sept. 11, 2001 to provide the U.S. tremendous privacy risks to all parties Government with greater ability to intercept and obstruct involved — from individuals to small busi- terrorist activities and communications. The Act requires nesses to global corporations. An increase in U.S.-based companies to disclose information to authorities the number of data breaches across the globe, compounded without notifying Canadian companies or individuals. Other by a high level of personal and business impact, has led gov- countries, including Canada, have similar laws. ernments in the U.S., Canada and other countries to the creUnderstanding the laws and risks ate or toughen their data privacy regulations.

To assist U.S. and Canadian companies to safely and effecIn Canada, privacy acts have been enacted at the federal tively pursue cross-border ASP and SaaS solutions, the foland provincial levels for public and private sector companies lowing points should be made clear: and for some specific industries. This, • Private sector transfer of personcoupled with the fact that lines al information from Canada to the between federal and provincial jurisU.S. is not a violation of Canadian diction over business activities are not Applications service federal law. The Personal Informaclear, has created a broad level of contion Protection and Electronic Docproviders and software fusion about what can and cannot be ument Act (PIPEDA) is the federal done in Canada when it comes to as a service solutions private sector privacy law that prodata privacy. allow companies to vides for the transfer of personal For several years, businesses information so long as the law’s around the world have been focusing offload functions like requirements are met. This is furon core competencies and outsourchuman resources, ther supported by the 2008 Privacy ing non-core functions. Now, appliCommissioner’s report, Leading by benefits administration, cations service providers and software Example, which states, “The Assisas a service solutions allow companies information technology tant Commissioner noted that to offload functions like human and other PIPEDA cannot prevent covered resources, benefits administration, organizations from outsourcing to information technology and other shared-services. foreign-based service providers. shared-services. These tools enable Nor can PIPEDA prevent foreign companies to lower operating costs governments from compelling proand focus on core business functions. duction of personal information They are safe, secure and cost-effeccontrolled by organizations within their own jurisdiction tive to implement, yet utilizing them across the U.S. and and under their lawful authority.

However, what the Act Canada border can be tricky. does demand is that the covered organization be transparGlobal business expansion and technology evolution have ent about its personal information handling practices and provided a means to reduce costs and let organizations conprotect customer personal information in the hands of forcentrate on the most critical aspects of business. And while eign-based third-party service providers to the extent posleveraging such opportunities introduces risks of exposing sible by contractual means.” i information and breaching one or more of the numerous privacy regulations, not doing so limits competitive growth • Government sector transfer of personal information from Canada to the U.S. is not a violation of Canadian federal potential. law. Similar to the PIPEDA on the private side, Canada’s U.S./Canada transborder data flow Privacy Act does not prohibit the international transfer of The transborder flow of personal information was personal information so long as precautions are taken to launched into the spotlight in 2003 when British Columbia’s provide appropriate protection and controls. The Treasury 34

Claims Canada

December/January 2010

www.claimscanada.ca

Board of Canada has no plans to restrict storing, accessing or disclosing personal information outside of Canada.ii • The transfer of personal information from Canada to the U.S. by financial sector companies is not a violation of Canadian federal law. As with the Privacy Commissioner, the Office of the Superintendent of Financial Institutions approved such arrangements providing contractual obligations for protecting privacy were implemented following PIPEDA.iii • With a few exceptions, provincial laws permit the transfer of personal information from Canada to the U.S. British Columbia, Nova Scotia and Alberta have similar permissions on the storing, accessing and disclosing of public sector information by service providers outside of Canada. It should be noted that exceptions exist as the Minister can grant exemptions on a case-by-case basis.

Four tips to maximize value and minimize risk Following are four key recommendations for companies that want to use ASPs and SaaS solutions across the U.S./Canada border: • Consult legal counsel for the latest in Canadian regulations at both the federal and provincial levels. The laws change and new laws can be enacted at any time; therefore it is critical to stay current.

• Review federal and provincial cases for rulings on efforts similar to what your organization is considering. Prece-

www.claimscanada.ca

dence may already be set which will reduce the level of effort required to make decisions.

• Utilize contracts and other legal means to provide a high level of information protection with ASPs and SaaS providers. Service providers are aware of privacy concerns and should be prepared to properly protect data regardless of country of origin.

• Be open about policies and practices relating to the management of personal information. Make users aware about data to be stored outside of Canada.

The Canadian government is managing its laws with the goal of providing businesses with opportunities to improve operations and expand across borders. In many cases, offloading data storage and management to ASPs or via SaaS across the U.S. and Canadian border can be done if it is done properly. The keys to success are preparation and knowledge.

David Black is the chief information security officer for Aon eSolutions. i Leading by Example: Key Developments in the First Seven Years of PIPEDA, Page 12, paragraph 3, (http://www.privcom.gc.ca/information/pub/lbe_080523_e.pdf) ii Privacy Matters: The Federal Strategy to Address Concerns About the USA PATRIOT Act and Transborder Data Flows (http://www.tbssct.gc.ca/pubs_pol/gospubs/TBM_128/pm-prp/pm-prp03-eng.asp) iii PIPEDA Case Summary #2005-313, (http://www.priv.gc.ca/cf-dc/2005/313_20051019_e.cfm

December/January 2010

Claims Canada

35

Auto Insurance Reform More Changes on the Horizon

BY TERESA (TERI) MITCHELL

On Nov. 2, Premier Dalton McGuinty presented Ontario’s Proposed Auto Insurance Reforms and Proposed New Options for Drivers Buying Auto Insurance. These proposals came on the heels of a report by the Financial Services Commission of Ontario (FSCO) in March 2009, Report on the Five Year Review of Automobile Insurance.1 The FSCO report addressed all areas of auto insurance; however the main thrust related to accident benefits, trying to stabilize rates. What (or who) has brought us to this point again that change is thought to be needed? Has it been the insurance industry, the consumer, the media? The answer is all of them. The industry is concerned about skyrocketing claims costs and reduced profitability; the consumer became vocal about increasing premiums; and the media focused its attention on insurance due to public outcry.

In the 1980’s, Ontario had limited no-fault benefits and was a full tort system. In 1990, Ontario Motorist Protection Plan was introduced to stabilize premiums. It drastically increased the level of accident benefits, and became a full no-fault regime with an injury threshold for bodily injury claims. In 1994, Bill 164 was acclaimed which introduced more accident benefits, amended the wording of the tort threshold and implemented tort injury deductibles. Bill 59 was approved in 1996, reducing benefits, but increasing the amount of forms to complete. The last change in 2003 with Bill 198 did not change the level of benefits, but changed administration and procedure.

The changes since 1990 have done nothing to stabilize rates — in fact, has had the opposite effect. When benefits are increased (which results in higher payouts and expenses), premiums will increase to cover those costs. The changes also did not stop the overwhelming abuse by those individuals and firms who realized they could take advantage and bombarded adjusters with so much paper they were completely buried.

The two proposals have a planned implementation date the summer of 2010. The insurance industry is divided as to whether or not rate stabilization can be achieved. Some industry experts hailed the proposals as “about time” legislation for the consumer, while others highly criticized the changes as a detriment to consumers that would reduce the level of benefits available and cause undue financial hardship for those who do not have a tort action. Ontario’s Proposed Auto Insurance Reforms3 contains 17 measures to protect consumers, some of which include: • prohibiting objectionable quoting practices including the use of credit scoring; • expanding the definition of “catastrophic impairment” to include single-limb amputees; 36

Claims Canada

December/January 2010

• amending Regulation 283/95 to make it more difficult for insurers to deflect claims and ensure claimants receive accident benefits while the issue of liability is resolved; • the need for insurance claims departments to better focus on the needs of claimants with serious injuries, specifically training those adjusters; • the government would consider amendments to reflect the unique status of public transit services operated by municipal authorities by excluding injuries from no-fault where no collision has occurred.

Proposed New Options for Drivers Buying Auto Insurance4 delves into the actual proposed changes, as seen in Figures 1, 2 and 3.

What the proposed changes do not address is frequency, severity, and overall expenses. As accident benefits are reduced, capped or removed completely, those claims will be pushed to the minor bodily injury claim, increasing bodily injury costs. Rate stability is not achieved by robbing from Peter to pay Paul.

FSCO reports profitability for the p&c sector has not been an issue, although there has been a steady decline commencing in 2008, resulting in premium increases. Loss costs have increase exponentially; however premium increases have not kept pace with the rise in claim costs. The government believes rates will stabilize for the consumer, and allow the p&c industry to recover and maintain its profitability. Ontario will continue to provide the most generous, and most complex, automobile insurance benefits in Canada. However, we must be cognizant that, if changes are made time and time again, and the desired results are not achieved, we need to look at alternatives that take us away completely from “band-aid” solutions.

What does this mean for the independent adjuster?

FSCO stated there is a need for proper training of adjusters handling serious injury claims. But training doesn’t stop at the accident benefits level — it must include the bodily injury adjuster. Training for the bodily injury adjuster has, for the most part, faded away, as one simply needs to obtain a copy of the accident benefit file to either make a determination of whether to defend based upon the threshold definition, or to negotiate a settlement. However, with these proposals, the bodily injury adjuster will be faced with more issues that will have a direct impact on investigation, determining quantum, and whether or not to defend or settle. The bodily injury adjuster will need just as much training and assistance as an accident benefits adjuster.

CIAA takes education most seriously, and strives to provide seminars that are timely and will assist adjusters in their day-to-day handling of claims. CIAA Ontario will address this issue and endeavour to provide our members www.claimscanada.ca

with the training needed to not only meet FSCO’s recommendations, but to put CIAA members at the forefront of the industry.

So now, we wait … again …

Teri Mitchell is a senior all-lines adjuster with a specialty in auto AB & BI, with Crawford & Company (Canada) Inc. She is also the CIAA Ontario region first vice president.

Accident Benefits

1. Financial Services Commission of Ontario, “Report of the Five Year Review of Automobile Insurance”, March 31, 2009, Toronto ON 2. Incisive Media Seminars, “Litigating Motor Vehicle Accident Claims – Gearing Up for Regime Reform”, September 30 and October 1, 2009, Toronto ON 3. Ministry of Finance, Government of Ontario, “Ontario’s Proposed Auto Insurance Reforms”, November 2, 2009, Toronto ON 4. Ministry of finance, Government of Ontario, “Proposed New Options for Drivers Buying Auto Insurance”, November 2, 2009, Toronto ON.

figure 1

COVERAGE

CURRENT COVERAGE

PROPOSED BASIC COVERAGE

PROPOSED CONSUMER CHOICES

Medical/Rehabilitation (non-catastrophic)

$100,000

$50,000 – includes assessments $3,500 for minor injuries

$100,000 $1 million (includes attendant care) including assessments

Medical/Rehabilitation (catastrophic)

$1 million

$1 million includes assessments

$1 million – includes assessments

Attendant Care

$72,000

$36,000 (2 years @ $3,000 per month)

$72,000

Attendant Care (catastrophic)

$1 million

$1 million

Included under the med/rehab option

Housekeeping & Home Maintenance

$100 per week

Benefits available for catastrophic injury only

$100 per week

Caregiver Benefits

$250 per week plus $50 per dependent

Benefits available for catastrophic injury only

Up to $250 per week plus $50 per dependent

Income Replacement Benefits

Maximum $400 per week or 80% of net weekly income

Maximum $400 per week or 70% of gross weekly income

Maximum $1,000 per week or 70% of gross weekly income

Death & Funeral

$20,000 eligible spouse; $10,000 each dependent, $6,000 funeral expenses

$25,000 eligible spouse; $10,000 each dependent; $6,000 funeral expenses

$50,000 eligible spouse; $20,000 each dependent; $8,000 funeral expenses

Cost of Examinations/ Assessments

$63.72 to complete forms Rebuttal assessments to address refusals or stoppage ($450, $775, $900)

$2,000 per assessment by claimant $200 for any assessment to complete a form by claimant $2,000 max for s42 Exams Rebuttal assessments eliminated

No Options

Third Party Liability

figure 2

COVERAGE

CURRENT COVERAGE

PROPOSED BASIC COVERAGE

PROPOSED CONSUMER CHOICES

Third Party Liability (non-catastrophic)

$200,000 (Mandatory minimum) $1 million

$200,000

$500,000 $1 million $2 million

Compensation Through the Courts

$30,000 deductible not-at-fault victims $15,000 deductible FLA

$30,000 deductible not-at-fault victims $15,000 deductible FLA

REDUCE TO: $20,000 deductible not-at-fault victims $10,000 deductible FLA

First Party Direct Compensation Property Damage

figure 3

COVERAGE

CURRENT COVERAGE

PROPOSED BASIC COVERAGE

PROPOSED CONSUMER CHOICES

Direct Compensation (not-at-fault)

Deductibles: $0 $300

Deductible: $500

Deductibles: $0 $300

www.claimscanada.ca

December/January 2010

Claims Canada

37

Statutory Accident Benefits and Aggravated Damages for Mental Distress:

A $25,000 Question?

BY KADEY B.J. SCHULTZ

In the recent decision of McQueen v. Echelon (2009 CanLII 50865 (ON S.C.))1, Justice Harris was called upon to consider the issue of aggravated damages for mental distress.

The law has swiftly developed in this area since the 2006 Supreme Court of Canada ruling in Fidler v. SunLife (2006 SCC 30 (CanLII)) where the British Columbia Supreme Court awarded aggravated damages for mental distress of $20,000; a decision which was later upheld by the highest court. In that case, Fidler had been denied disability benefits over a period of time, which were later paid on the eve of trial.In upholding the trial judge’s award, the Supreme Court of Canada concluded 38

Claims Canada

that aggravated damages for mental distress were warranted where: a) An object of the contract was to secure a psychological benefit that brings mental distress upon breach within the reasonable contemplation of the parties; and b) The degree of mental suffering caused by the breach was of a degree sufficient to warrant compensation.

Shortly after the Fidler decision, the issue was again considered, this time by the Court of Appeal for Ontario in Monks v. ING (2008 ONCA 269 (CanLII)). In Monks, the claim was for Ontario Statutory Accident Benefits flowing from a motor vehicle accident.

The trial judge awarded significant benefits to Monks who had suffered a catastrophic impairment as a result of three motor vehicle accidents and the Court

December/January 2010

of Appeal confirmed the trial judge’s award of $50,000 for aggravated damages for mental distress.

The bar was raised and a shift from the $20,000 question2 occurred. The real concern is whether we are moving, much as the game show did, to a $100,000 question. Arguably, we are.

In the recent decision of McQueen, Justice Harris made an award of $25,000 for aggravated damages for mental distress in a case involving a mere $13,181.41 in disputed past benefits.

McQueen was involved in a motor vehicle accident on Jan. 31, 2004. The vehicle she occupied rolled over and she sustained injuries. Prior to the accident, the plaintiff was vulnerable, suffering from bi-polar disorder and pre-existing upper back complaints. www.claimscanada.ca

Following the accident and over the course of time, the defendant insurer refused to pay for various benefits claimed, and limited her access to various medical assessments. In three years, the insurer made 21 denials of 16 separate benefits, including housekeeping benefits, taxi funding to get to and from treatment sessions and three costs of assessments.

As a result, the plaintiff contended the insurer’s conduct caused her mental distress.

In considering the matter, Harris reiterated the Supreme Court of Canada’s comments in the Fidler case, noting an insurer owes the duty at common law to act in good faith in all its dealings with the insured and has an additional duty not to inflict unnecessary mental distress. Continuing, it was noted an independent actionable wrong is not required for an award of mental distress. Rather, in the context of damages for mental distress, “aggravated damages takes full account of the intangible injuries such as distress and humiliation.”3 Financial hardship as a consequence of the insurer’s breach is not the only concern in considering a damages award for mental distress. Where it is reasonably foreseeable that intangible injuries and mental distress may flow from the insurer’s wrongful refusal to pay benefits, despite any evidence of financial consequences, an award of damages for mental distress may flow.

In considering the claim for aggravated damages in this case, Harris reviewed the conflicting reports proffered by experts for the plaintiff and the insurer’s examination reports, noting that in a case where an insurer’s expert was not provided with the complete relevant file materials, his evidence would be discounted, deemed incomplete, discarded. Additionally, the insurer defendant was criticized where the “benefit of the doubt” was not given to the plaintiff in the case of conflicting medical opinions.

As a reminder to insurers about how (not) to document the file, Harris reviewed the claim log notes. These notes included references such as “the claimant is expecting great things from

www.claimscanada.ca

her claim”; “she has retained a lawyer” and “the lawyer is not the easiest to deal with”, and were interpreted to connote an outmoded attitude that runs against the settled case law established by Whiten v. Pilot (2002 SCC 18 (CanLII)).

Those notes persuaded the trial that there was evidence of an adversarial approach to the plaintiff ab initio and in behaving in this manner, the defendant insurer breached its contract of insurance with the plaintiff.

While the multitude of denials, the conflicting medical evidence, the incomplete medical disclosure to the insurer’s examiner and subsequent reliance on his report, and questionable entries into the internal notes all caused concern for the Harris to succeed on a claim for damages for mental distress,

Financial hardship as a consequence of the insurer’s breach is not the only concern in considering a damages award for mental distress.

evidence must still be put forward to confirm such allegations.

For McQueen, her family doctor and her psychiatrist had well documented her mental state, frustration, increasing anxiety and depressive symptoms flowing from the insurance claims process and her dealings with the insurer.

Based on the medical evidence and on the balance of probabilities, Harris J. found that an adversarial relationship had been created which was likely to cause mental distress and did so. The insurer’s approach was found to be counter-productive to the well being of the plaintiff.

With this information in hand, we must query two significant issues. First-

ly, how does one justify an award of $25,000 for damages for mental distress in a case involving almost half that in denied benefits (to date) and less than $20,000 in benefits in total? Is this a sign that the damages for mental distress need not relate, at all or in part, to the value of the benefits in dispute?

For some time, Ontario practitioners have known that where benefits have been unreasonably withheld or delayed, the most successful forum for an award in excess of benefits would be the Financial Services Commission of Ontario, where an arbitrator may grant a special award of a value of up to 50 per cent of the benefits found to be unreasonably withheld or delayed, and 50 per cent of the interest found to be payable. Keeping in mind the interest under the Statutory Accident Benefits Schedule (section 46) is two per cent per month compounded monthly. A four year old case involving $10,000 in unreasonably delayed or withheld benefits can quickly be worth, $10,000 in benefits, the same in interest, and $10,000 for a special award.

The second significant concern relates to the recent proposed amendments to the Ontario Insurance Act, particularly the accident benefits regulation. Where all signs seem to indicate a desire by the legislature to curtail the costs of administering auto insurance with a consequent reduction in benefits available under the policy, isn’t a decision like McQueen fodder for plaintiffs with minimal benefits in dispute to push insurers to trial in the hopes of achieving an award for mental distress well in excess of the value of benefits in dispute?

Surely some plaintiff counsel have already noted this decision as a template for moving forward. If insurers have not, they should.

Kadey B.J. Schultz, LL.B., LL.M. practices civil litigation with a focus on advising insurers at Hughes Amys LLP in Toronto.

1 This case has been appealed.

2 For those readers wise enough to recall the days of Dick Clark’s The $20,000.00 Pyramid) 3 See Fidler , para 42).

December/January 2010

Claims Canada

39

Volatile Economy Continues to Rock Construction Pricing Lessons from 2008

BY JOEL DAGENAIS

25-Year Composition Shingle Annual Change Rising fuel costs in 2008 had the greatest impact on petroleum-based building materials. A good example of this impact is found in the cost of 25year composition shingles. In 2007, the average cost of 25-year composition shingles in Canada decreased by nearly 12 per cent. However, 2007 installed costs for shingles rose very slightly (by .2 per cent), primarily because the lower cost of shingles was offset by increased costs for labour.

25-Year Composition Shingle Annual Change Canada Average

Installed Cost

Material Only

70% 57.85%

% Change

60% 50% 40% 30%

25.67%

20% 5.23%

10%

6.65%

0% 2008

2009 As reported to Xactware Solutions Inc.

This pattern was reversed in 2008.

As fuel costs spiked in mid-year, the yearly average for 25-year composition shingle costs skyrocketed by almost 58 40

Claims Canada

Carpet Composite and Cost Index Most popular styles of carpet use petroleum-based fibers. The mid-2008 spike in fuel prices had a significant impact on carpet prices, but carpet manufacturers were slower to pass along cost increases than were composition shingle manufacturers. Increased petroleum prices typically have a more immediate impact on composition shingle manufacturing.

A composite of average- and highgrade carpet prices reported was still down in the second and third quarter of 2008 even as fuel costs hit their peak.

The impact of higher fuel prices began to affect carpet prices in the fourth quarter with a spike in costs that continued into 2009.

Carpet Index Installed Price

Material Only

4% 2% 0% -2% -4% -6% -8% -10% 4 Q

20

07 1 Q

20

08 2 Q

20

08 3 Q

20

08 4 Q

20

08 1 Q

20

09 2 Q

20

09 3 Q

20

09 4 Q

20

09

As reported to Xactware Solutions, Inc.

Lumber Composite Index Although costs for petroleum-based products are the most dramatically affected by spikes in fuel costs, prices for all construction materials are affected, primarily because of increased production and distribution costs. In mid2008, rising fuel costs stopped a steady decline in lumber prices that started in the last quarter of 2006. The average price for the Canadian Lumber Composite Index rose by 9 per cent in the third quarter of 2008 and by another two per cent in the fourth quarter.

The composite is based on prices

December/January 2010

acquired from more than 1,000 suppliers across Canada for a variety of highly used dimensional and panel lumber products.

Drywall Material Index Drywall prices fell off a cliff between the first and third quarters of 2007.

Before this dramatic plunge drywall Lumber Composite Index Canada Average 0% -2% -4%

% Change

per cent. Installed costs for composition shingles including labour and other materials such as nails and flashing rose by around 26 per cent. The lower installed cost was due to stable costs for labour and other materials.

% Change

Volatile fuel prices in mid-2008 drove up reconstruction costs in Canada and the longterm impacts are still being felt.

Gas prices in Canada peaked at $1.47 toward the end of June 2008 and by year’s end dropped to prices not seen since November 2006.

While a number of economic factors were at play throughout 2008, this drastic spike had a direct impact on the price of construction materials — especially those with a petroleum base.

Cost information from more than 17.9 million repair estimates for buildings in the U.S. and Canada that totaled over $111.1 billion in losses was gleaned by mid-year. Over 14,000 unit costs in 37 economic markets in Canada are monitored each month as part of the research process.

-6% -8% -10% -12% -14% -16% 4 Q

20

07 1 Q

20

08 2 Q

20

08 3 Q

20

08 4 Q

20

08 1 Q

20

09 2 Q

20

09 3 Q

20

09 4 Q

20

09

As reported to Xactware Solutions, Inc.

prices had been highly volatile over the past five years. These years included high demand from the record-breaking U.S. storm seasons of 2004 and 2005 and a booming worldwide economy that had an impact on drywall costs in Canada. Drywall plants were often running at capacity and reports of drywall shortages were common. Once drywall prices collapsed, they were little moved by the upsurge in fuel costs in 2008, even though drywall is heavy and relatively expensive to ship. It is likely the increase in fuel costs kept drywall costs from dropping even more. The result was fairly consistent drywall pricing throughout 2008.

The drywall material index is based on various quantities of the drywall materials included in a typical installation including drywall boards, tape, joint compound, and so forth.

2008 Year-End Median Cost to Rebuild The overall reconstruction cost relationships between Canadian provinces can be seen in data from the Year-End Median Costs to Rebuild. The overall cost to rebuild typical homes ranging in quality from economy construction to www.claimscanada.ca

The 2008 economy showed that many former trends and assumptions no longer apply in the current turbulent market. Access to up-to-date information and current cost trends is increasingly important for risk managers and claims mangers looking to make informed decisions in an unforgiving economy.

Drywall Material Composite Canada Average 30% 20%

% Change

10% 0% -10% -20% -30% -40% -50% 1 Q

20

05 2 Q

20

05

3 Q

20

05 4 Q

20

05 1 Q

20

06 2 Q

20

06 3 Q

20

06 4 Q

20

06 1 Q

20

07 2 Q

20

07 3 Q

20

07

4 Q

20

07 1 Q

20

08 2 Q

20

08 3 Q

20

08 4 Q

20

08 1 Q

20

09 2 Q

20

09 3 Q

20

09 4 Q

20

09

As reported to Xactware Solutions, Inc.

2009 Year End Median Cost to Rebuild

by Home Quality

Premium

Economy

Alberta

Manitoba

New Brunswick

Saskatchewan

Ontario

Quebec

Nova Scotia

Newfoundland

British Columbia

Prince Edward Island

$0

$100

$200

$300

$400

$500

$600

As reported to Xactware Solutions, Inc.

www.claimscanada.ca

Joel Dagenais is president of AXP Software, which is Xactware’s exclusive Canadian representative.

• BREAK & ENTER • FIRE • WATER • WIND • SEWER BACKUP • TRAUMA • IMPACT

• Applied Structural Drying • Microbial Remediation • Fire & Smoke Restoration • Trauma Cleanup • Water Damage Restoration • Odour Control

SPECIALIZING IN STRUCTURAL DRYING 210 Milner Avenue, Unit 6 Toronto, Ontario Tel: 416-287-3332 • Fax: 416-287-3335 admin@completerestorationservices.ca 24 HOUR EMERGENCY RESPONSE

1-800-363-0006

• BREAK & ENTER • FIRE • WATER • WIND • SEWER BACKUP • TRAUMA • IMPACT

December/January 2010

Claims Canada

• VANDALISM • FIRE • WATER • WIND • SEWER BACKUP • TRAUMA • IMPACT • REMEDIATION • VANDALISM • FIRE • WATER • WIND • SEWER BACKUP •• TRAUMA • IMPACT

Lessons from 2008 A key lesson from 2008 is that market volatility makes it difficult to predict changes in the property insurance industry. For some, a struggling economy would seem to indicate lower reconstruction prices across the board in 2008, but higher fuel costs sent many construction costs soaring and kept others from falling. Once fuel prices dropped, most material prices failed to drop with them. By the end of 2008 fuel prices were as low as they

had been since late 2006, but many material prices remained relatively high.

• VANDALISM • FIRE • WATER • WIND • SEWER BACKUP • TRAUMA • IMPACT• REMEDIATION• VANDALISM • FIRE • WATER • WIND • SEWER BACKUP •• TRAUMA • IMPACT

premium construction is tracked. This includes the labour, material, and equipment needed to rebuild the home using pricing information from cost research. A look at home types at both ends of the scale — economy and premium quality — shows how costs varied across Canada in 2008 The national average for economy grade homes was $97.26 per square foot and the national average for premium grade homes was $451.81 per square foot. In 2008, Alberta led the country in the cost to rebuild a premium quality home and New Brunswick led in the cost to rebuild an economy grade home.

41

Civil Justice Changes BY: CHRISTOPHER R. DUNN

The subtleties and nuances of the various provincial civil justice systems are often of interest only to those of us who represent Canadian insurers and risk managers in court. I can’t say I’ve ever impressed a client with a detailed discussion of the subtleties of the Rules of Civil Procedure, nor would I want to. However, every now and then, changes to the civil justice system are significant enough to warrant bringing them to the attention of the industry as a whole. In Ontario, that time is now, as Jan. 1, 2010 will see important changes to the Ontario civil justice system take effect. These changes will invariably have an impact on the insurance industry, primarily, of course, on the claims’ side of the business.

Many of these changes are rooted in November 2007’s report by Justice Coulter Osborne entitled Civil Justice Reform Project. Osborne was asked in June 2006 to review Ontario’s civil justice system and to make recommendations as to how the system could be made more accessible and affordable.

The Osborne project involved exten42

Claims Canada

sive consultation with representatives of the legal profession, the judiciary and the public, including, on the insurance industry’s behalf, The Canadian Defence Lawyers and the Insurance Bureau of Canada. The overarching issue for Osborne was the notion that the time and expense involved in legal proceedings should be proportionate to the amount in dispute.

The resulting changes to the system are significant, including, at the outset, the addition to the Rules of a general principle of proportionality to guide their interpretation — the time and expense devoted to any proceeding must reflect the amount at stake. In order to implement this general principle, specific changes have also been made in the following areas: • small claims court • the simplified procedure • expert evidence • the discovery process • summary judgment motions

Small claims court As of Jan. 1, 2010, the monetary limit of the Ontario small claims court will increase from $10,000 to $25,000,

December/January 2010

the first change in the limit since 2001.

The impact of this increase on the industry will be quite significant, as this will allow company representatives to directly represent the company in court without going to the expense of hiring legal counsel for disputes involving up to $25,000.

Simplified procedure The simplified procedure was first introduced to the Ontario civil justice system in 1996 for disputes involving, at the time, less than $25,000. The simplified procedure eliminated oral examination for discovery and also provided for a summary trial process where evidence could be adduced more inexpensively by affidavit rather than oral evidence. The monetary jurisdiction of the simplified procedure was increased to $50,000 in 2003.

As of Jan. 1, 2010, the simplified procedure will be mandatory for claims less than $100,000. In addition, the scope of documentary disclosure has been narrowed, in response to a general complaint that existing documentary discovery requirements were too broad, and accordingly, too expensive.

The test for production of documents www.claimscanada.ca

THIS IS MORE THAN A HURRICANE. To business owners who have tirelessly committed themselves, it’s the loss of their dream and livelihood. To insurance professionals, it’s the challenge to fairly and accurately quantify what their loss is worth. When disasters strike, trust the firm that provides an expert, objective opinion and quality resources. BDO. More than you think.

Business Interruption | IRB Calculations | Personal Injury Claims | Forensic Investigations Inventory Losses | Fidelity & Surety Bonds VANCOUVER | CALGARY | EDMONTON | WINNIPEG | TORONTO | MONTREAL | HALIFAX ASSURANCE | ACCOUNTING | TAXATION | ADVISORY SERVICES Greg Hocking ghocking@bdo.ca 905-946-6800

Jeffrey C. Smith jsmith@bdo.ca 905-946-6802

www.bdo.ca/advisory

has been changed from “semblance of relevance” to actual relevance, as the sense was the former wider test served only to increase the scope of documentary discovery beyond that which was necessary for the parties to fairly litigate the case.

Given this dramatic increase in the limit of the simplified rules, the court reintroduced oral examinations for discovery to the process, though such discovery must be limited to two hours per party, regardless of the number of parties involved. This should benefit insurance defence counsel greatly, as it will allow us to ask quick and pointed questions to a plaintiff (for example, the names of treating physicians or employment history) in cases where, up until now, no oral discovery was permitted.

Expert evidence Defence counsel and insurers have often taken issue with the perceived bias of experts retained by plaintiff’s counsel, who, unlike defence counsel, can “expert shop.” The Osborne report also reflected this concern that experts were too focused on being advocates, and were not providing independent and unbiased assistance to the court.

Experts will now be explicitly required by the rules to provide only evidence that is fair, objective and non-partisan, and related to matters that are within the expert’s area of expertise. Experts must also provide additional assistance to the court if required, and all experts must execute a form called an Acknowledgment of Expert’s Duties confirming their acceptance of these obligations.

Experts will also be required to reveal the instructions provided to them by counsel, the evidence they relied upon and the factual assumptions on which their opinion is based.

Another issue for Osborne was delayed trials due to late delivery of expert reports. In response, the timelines for delivery of expert reports have been tightened. While expert reports, responding reports and supplementary reports were formerly due 90, 60 and 30 days prior to trial respectively, the target date for delivery is now the pretrial.

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The discovery process According to the Osborne report, overwrought and unnecessary oral and documentary discovery reduced the cost and efficiency of the civil justice system.

In response, the rules will now impose a seven-hour time limit per party on examinations for discovery, unless the parties consent or the court orders otherwise. In addition, as with

Experts will now be explicitly required by the rules to provide only evidence that is fair, objective and non-partisan, and related to matters that are within the expert’s area of expertise.

the simplified rules, the test for documentary production will now be actual relevance.

The parties to the litigation must now plan ahead and agree to a written discovery plan, which establishes the scope of each party’s anticipated documentary and oral discovery, taking into account relevance, cost and complexity of the issues. The court will now have the power to limit any form of discov-

December/January 2010

ery where its cost is out of proportion with the amount in dispute.

Summary judgment motions One of the universal complaints from Ontario lawyers had been the lack of a meaningful summary judgment motion procedure in Ontario like the Rule 18A summary trial procedure available in British Columbia, where judges can consider issues such as credibility and draw inferences from the evidence in order to dispose of cases prior to trial. In Ontario, judges were limited to simply dismissing a summary judgment motion if any triable issue was raised in opposition, and onerous cost consequences often flowed if the motion failed.

New changes will improve the system significantly. Ontario judges will now be permitted to evaluate credibility and draw reasonable inferences from the evidence. The court can also order a “mini-trial” of any issue(s) in dispute and obtain oral evidence to assist. Further, the court will now have greatly expanded power to use the summary judgment motion process as the basis for narrowing the issues in the litigation, including making orders listing the issues in dispute and orders relating to appropriate discovery in respect of those issues. Only unreasonably brought motions will now result in solicitor-client costs.

In the end, the hope is that these changes will reduce the overall cost of litigation for those involved in the process, including Canadian insurers and risk managers. One assumes that this result, if achieved, would be met with widespread industry approval.

Thankfully, however, William Shakespeare’s recommendation for cost reduction in the justice system, “The first thing we do, let’s kill all the lawyers,” has yet to be embraced by the Ontario legislature. I am under no illusion, however, that insurers do not continue to hold out hope.

Chris Dunn is a partner with Dutton Brock, LLP and his practice involves representing and providing insurance coverage advice to those in the insurance industry. www.claimscanada.ca

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E

education forum

A SERIES OF ARTICLES PROVIDED BY THE INSURANCE INSTITUTE OF CANADA

Mediation Basics: Getting from Memos to Minutes

In the last issue of Claims Canada, Education Forum outlined the main roles and opening steps in mediation.

This article follows up with an overview of other key stages in the process.

ally this involves a discussion or an exchange of letters between counsel, confirming agreement to enter mediation and acknowledging any change in position.

Mediation memos

Opening statements At the beginning of the session, the mediator introduces all the parties and describes the rules and goals of the mediation, explaining the dynamic of cooperative, interest-based negotiation.

This explanation is mainly for the benefit of the claimant, who is usually the only one new to the mediation process.

Once a mediation has been booked, lawyers for each side prepare a mediation memo dealing with the arguments that they expect to face from the other party. A well-developed mediation memo can provide a road map to resolution for the mediator. The best memos are concise but thorough and are written in a narrative form, presenting the situation in a way that engages the reader, outlines the issues and analyzes the strengths of the arguments.

Counsel and client should discuss the mediation memo before it is issued.

Usually counsel prepares a draft version and sends it to the insurer to invite suggestions; sometimes the claims representative assists in the drafting.

Disclosures The memo should include a mediation summary disclosing any formal offers to settle that were made before the mediation. If there have been no formal offers but settlement negotiations have taken place, counsel should contact one another directly to communicate any changes in their opinions before the mediation is arranged. Usu46

Claims Canada

(Counsel for each side and the insurance representative are usually well versed in the principles of mediation.)

The mediator does not discuss the claim itself.

After the introductions, opening statements are made by each side to convey the essence of the dispute. The insurer’s opening statement is an opportunity for the claims representative to acknowledge the other party’s injury or inconvenience, express empathy and find common ground. For example, the claims representative might say something like:

Just the facts: presenting evidence • The mediation memo should be concise enough to be easily understood, but comprehensive enough to cover crucial points and supporting evidence.

• For complicated medical evidence, key points can be highlighted in the memo with a cross-reference to more detailed evidence, or a summary of the medical briefs can be prepared.

• If the insurer intends to use surveillance, it should be disclosed in the mediation summary and sent to counsel ahead of time for viewing and comment – particularly if defence counsel have asked expert medical witnesses to comment on it.

• The opinions of experts carry more weight if the opposing side is permitted to question the experts directly. In complex cases, experts from both sides may be asked to meet in order to narrow or eliminate differences between their positions.

December/January 2010

facts www.claimscanada.ca

• “I’m sorry that you were injured” (if the insurer has acknowledged the injury as legitimate) or • “I appreciate your taking the time and trouble to meet with us to discuss this situation” or • “I know that I would rather not be in a lawsuit; I hope you feel the same way.”

The claims representative can then summarize the reasons the session is taking place, listing the issues in dispute, for example, a deductible, a threshold, eligibility for income payments, or consideration for collateral payments.

Responses After the opening statements, each side can address the points made by the other and answer any questions that were directly raised. People entering into mediation may have unrealistic expectations about the validity of their claims. Unsubstantiated claims should be probed, underlying assumptions should be questioned and evidence should be provided to reveal any weaknesses. An objective examination of expectations may lead to a successful mediation.

Caucusing Private side meetings in mediations are known as caucusing. Mediators often separate the disputing parties after the opening statements, directing claimants and their counsel into one room and the claims representative and insurer’s counsel into another.

The mediator speaks to each party confidentially to determine what flexibility exists in their positions.

Caucusing also permits each party to discuss issues openly with their counsel. The claims representative and the insurer’s counsel have an opportunity to reflect on what has been said and to modify their plan if appropriate. They may also take the opportunity to speak privately with the mediator, perhaps about new evidence that might discredit the claimant.

The buffer of caucusing in mediawww.claimscanada.ca

tion allows this sensitive information to be put before the other party in private.

Finalizing a mediation If the claim is resolved, the lawyers draw up minutes of settlement documenting the agreement reached. These include a claim release and a description of next steps: when the claim will be paid, time limits, who will do what, and any further undertakings. The minutes of settlement can stipulate the agreement be kept confidential, thus avoiding negative publicity or the creation of a legal precedent.

The minutes of settlement can stipulate that the agreement be kept confidential, thus avoiding negative publicity or the creation of a legal precedent.

A reasonable settlement approximates what a claimant would be awarded at trial less any reasonable amount negotiated to account for the claimant’s saving of time, trouble and expense.

Obstacles to settlement • Sometimes a claimant feels he or she has a good case and would secure a larger settlement at trial. This “jackpot syndrome” can derail mediation because it is a disincentive to compromise. The defendant insurer, of course, may feel the opposite. When both parties feel they would be better off taking the case to court, the

mediation environment becomes adversarial.

• If the parties enter mediation after litigation has begun, many fences may need to be mended. Defending counsel probably issued a boilerplate statement of defence that denied all allegations. The situation may have been further complicated if litigation counsel asked invasive questions at discovery or ordered surveillance and caused the claimant to feel threatened.

• One of the recognized failings of mandatory mediation is the timing: often it occurs too early for effective negotiation and the case cannot be resolved because not enough information is available.

• The mediation can be cancelled if materials or memoranda are delivered at the last minute. The mediation agreement should include a clause that stipulates that whoever is responsible for the cancellation will bear the cost.

• Sometimes when mediation seems close to closure, one party suddenly makes a new demand. Parties then need to explore the underlying reasons for the request. Perhaps an external pressure, such as an adjuster’s supervisor giving difficult-to-follow parameters for the mediation, is the cause.

• The parties present at the mediation must have authority to settle on behalf of their side. An insurance representative may have insufficient settlement authority to reach an agreement if the case turns out to be more serious than was first thought and reserves were set too low.

If mediation is not successful, the parties may choose neutral evaluation, arbitration or litigation.

This article is based on excerpts from the study material in the Claims Professional Series of applied courses – a core of the CIP Program that helps adjusters learn the functional knowledge and skills required of their profession.

December/January 2010

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47

O on the scene Cunningham Lindsey is the newest national sponsor at the platinum level of the Women in Insurance Cancer Crusade (WICC), representing a commitment of $45,000 over three years. The company says it has committed to continuing its support of the outstanding efforts this organization has made in the fight against cancer. “The work that WICC and its many volunteers and Rob Seal supporters have accomplished in the crusade to cure cancer is exceptional,” Rob Seal, president and CEO of Cunningham Lindsey, said in a release.

“Through their fundraising and promotional efforts, WICC has made tremendous strides in increasing the awareness for cancer research funding within the P&C industry in Canada and it is our hope that our sponsorship will help them move one step closer to their ultimate goal of making cancer history.” ●

Andrew Hernandez has been appointed executive general adjuster and district manager for Vancouver Metro, Fraser Valley and Victoria, BC regions of Cunningham Lindsey.

Hernandez holds more than 22 years of insurance adjusting experience.

He was most recently a senior general adjuster for an international Andrew Hernandez adjusting firm and has previously been chief operations officer for a national adjusting firm.

“Andrew has extensive experience handling large and complex losses involving commercial property, commercial and product liability, environmental, and boiler & machinery claims,” said Gary Dalton, senior vice president and executive director of Cunningham Lindsey. “He has handled multimillion dollar claims in the mining industry and acted as control adjuster on several large accounts.” ●

The 2009-10 Canadian Insurance Claims Managers’ Association (CICMA) National Delegates back row: Peadar Mulhall (Southern Alberta chapter); Dieter Mayer (Ontario chapter); Wes Moroziuk, (Saskatewan chapter); Ron Bouwmeister, out-going past president; Ralph Best, past president (Newfoundland chapter); Lynn Ross (Bluenose chapter); Robert Hertner, treasurer (Ottawa chapter) front row: Claude Joicoeur (Quebec chapter); Mavis Haws, secretary, (Ontario chapter); Diane Prendegast, (Northern Alberta); Rick Cicin (New Brunswick chapter); Sharon Clark (Ontario chapter); Linda Brunette, president, (Quebec chapter); Lyndon Friesen, vice president, (Manitoba chapter)

David Koa

David Koa has been appointed executive vice president of sales and marketing for McLarens Canada.

Koa will also be responsible for the sales and marketing of Granite Global Solutions Inc. of which McLarens Canada is one of six member companies.

Koa holds more than 25 years experience in senior management roles and has developed and managed sales and marketing divisions for a number of national businesses. ●

Tom DeLong, president of DeLong & Associates Inc., is pleased to welcome Peter Hammil as co-owner and senior partner.

“This solidifies our longterm and continuing commitment to the general Tom DeLong and Peter Hammil insurance industry in Prince Edward Island,” DeLong said. “The firm has been providing adjusting services to clients for 37 years and Peter is celebrating his 20th year as an important part of our success.

Congratulations Peter!” ●

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: laura@claimscanada.ca 48

Claims Canada

December/January 2010

www.claimscanada.ca

The Canadian Press Images PHOTO/Aviva Canada Ltd.

Mike “Pinball” Clemons, Ashley Briggs, Andy Van Dyke, Aaron Velasquez and Bob Fitzgerald celebrate the launch of the Aviva Community Fund at George Harvey Collegiate Institute in Toronto on October 21, 2009.

McLarens Canada has acquired Binns & Associates Adjusters Ltd. in Edmonton, Alta.

“We welcome Delores Thorbourne, president of Binns & Associates, and her entire team to the McLarens family,” said Michael Holden, president and CEO of McLarens.

Binns & Associates will continue to operate under its current name and serve the needs of clients from their office.●

CIAA Ontario Region took their executive meeting on the road on Oct. 15. As a regional initiative the association is holding an executive meeting in each region of the province.

This allows attendance by local members and is done in conjunction with an educational component. The first session was held at the Winmar training room in London, where delegates heard about the Esporta cleaning process and on how it is saving property insurers millions in soft content claims. Those attending also received a legal update on the changes coming into effect surrounding the judicial system Jan. 1, 2010. Special interest was on the small claims cap being increased to $25,000 and the potential for claims to be handled by IA firms. Kerri Wilson of Shillingtons LLP in London presented. ●

Richard Swierczynski, Ontario region president, with Lynda Ford, Winmar

Richard Swierczynski, Ontario region president, with Keri Wilson, Shillington LLP

CIAA New Members — October 2009 CORPORATE MEMBERSHIP D-Tek Corporation Inc McKeon & Associates Adjusting Company NCRS (Nutmeg Casualty Risk Services Co.)

INDIVIDUAL MEMBERSHIP D-Tek Corporation Inc. Donald Georgevitch Aurora, ON McKeon & Associates Adjusting Company David McKeon, CIP Mississauga, ON NCRS (Nutmeg Casualty Risk Services Co.) Fred Silvestri, BA(Hons.), B.Ed., CIP Toronto, ON Kevin Kwong, BA(Hons.)

Toronto, ON Warren Brouillette, CIP Toronto, ON

Crawford Adjusters Canada Jordan Bell Stephen Agnew Linda Fiorido Joanne Hall Courtney Hubley Dorothy Lambert, CIP Jason Longpre Alma Martire, CIP Kris Smallwood, CIP Erin Spencer Yako Topalovic Ana Batista Gurminder Dheri Justin Longpre, BBA John-Paul Cappuccitti Leanne Clarkson, CIP Terry Black, CIP, CRM Tasha Thompson Ryan Demchuk

www.claimscanada.ca

Toronto, ON Toronto, ON Toronto, ON Toronto, ON Waterloo, ON Whitby, ON

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

Level 1

Bannatyne & Co General Insurance Adjusters Alyson Harper Hamilton, ON

Level 1

Level 3

Comiskey Insurance Adjusters Inc Brian Weber, CIP Chatham, ON

Level 3

Cormier Adjusting Ltd Wayne Cormier

Huntsville, ON

Level 1

Cunningham Lindsey Denisse Cumby, CIP Kim Glockling, CIP Lori Picheniuk Jamie McGinnis, CIP

Barrie, ON Hamilton, ON Hamilton, ON Milton, ON

Level 3 Level 3 Level 1 Level 3

Curo Claims Services Christine Fizell, CIP Jon Hodson, CIP Robert Mueller, FCIP Sean Purcell, CIP Natalia Saraiva, CIP Carmen Tessier, CIP

Waterloo, ON Waterloo, ON Waterloo, ON Waterloo, ON Waterloo, ON Waterloo, ON

Level 3 Level 3 Level 3 Level 3 Level 3 Level 3

PCA Adjusters Ltd. Andrew Lillico

Ottawa, ON

Level 1

Aurora, ON Mississauga, ON Toronto, ON

Brampton, ON Hamilton, ON Hamilton, ON Hamilton, ON Hamilton, ON Hamilton, ON Hamilton, ON Hamilton, ON Hamilton, ON Hamilton, ON Hamilton, ON Mississauga, ON Mississauga, ON Mississauga, ON Newmarket, ON Newmarket, ON Orangeville, ON Owen Sound, ON Toronto, ON

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

Michael Dickson, FCIP, CRM Kirk McCullough Lydia Thomas, CIP Amanada Turner, BA(Hons.)

Kevin Dudley Jeff Linton

SCS Insurance Adjusters Ltd. Lynn C. Pell, CIP, CFEI Timmins, ON Christopher Holland, B.Sc., CCFI-C, CIP Thunder Bay, ON

Level 3 Level 3

Upper Canada Adjusters Inc. James Chiarot, CFEI

Level 2

Toronto, ON

December/January 2010

Claims Canada

49

O on the scene Crawford & Company (Canada) Inc. held a reception on Oct. 28 for more than 150 clients and members of the Quebec insurance industry at Auberge St. Gabriel in Old Montreal. Members of Crawford’s executive management team were also on hand to welcome guests and introduce the new members of Crawford’s Quebec team.

“This is a wonderful occasion for us to get together with the local insurance industry and to introduce the new members of Crawford’s Quebec team,” Claudine Davoodi, director, operations for Quebec, said. ●

2010Winter Wine & Cheese Reception Join us to celebrate TIWA’s 50th Anniversary at Atlantis Pavilions – Ontario Place Thursday February 4, 2010 5:00 pm – 8:00 pm Plan today to attend the premier social networking event of the New Year – the Toronto Insurance Women’s Association (TIWA) 2010 Wine & Cheese (…a proud member of the Canadian Association of Insurance Women) Tickets are only available through advance purchase and will not be sold at the door.

TICKETS: $55 each Order Form found at: www.tiwa.org Or for ticket Inquiries contact Mary: mary@asgerpedersen.com or by phone at 416-264-3295 x 223 Deadline for ticket orders is noon on Thursday, February 2, 2010

Door Prizes and Sponsorship Welcome!

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December/January 2010

www.claimscanada.ca

National Standing Committees 2009 – 2010 ADVISORY Mary Charman, CIP Crawford & Company (Canada) Inc. 1 – 120 Mulock Drive Newmarket, ON L3Y 7C5 Phone: (905) 898-0008 Fax: (905) 898-1705 E-mail: Mary.Charman@crawco.ca Greg G. Merrithew, CIP, FIFAA Arctic West Adjusters Ltd. 401 – 5204 – 50 Ave. Yellowknife, NT X1A 1E2 Phone: (867) 920-2212 Fax: (867) 873-2244 E-mail: gregm@arcticwest.ca Reno Daigle, CIP, CLA, FCIAA Crawford & Company (Canada) Inc. 326 McIntyre Street W. North Bay, ON P1B 2Z1 Phone: (705) 476-2120 Fax: (705) 476-9280 E-mail: Reno.Daigle@crawco.ca James B. Eso, BA, CIP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Phone: (519) 578-5540 Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca Jean-Marc Laurin, FPAA, CRM, FCIAA Cunningham Lindsey 1250 Guy Street, Suite 1000 Montreal, PQ H3H 2T4 Phone: (514) 938-2124 Fax: (514) 938-5445 E-mail: jmlaurin@cl-na.com John Jones, BA McLarens Canada Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 E-mail: john.jones@mclarens.ca Carol A. Messervey, CIP, FCIAA, FIFAA Marsh Adjustment Bureau Limited 1550 Bedford Highway, Suite 711 Bedford, NS B4A 1E6 Phone: (902) 469-3537 Fax: (902) 469-2396 E-mail: cmesservey@marshadj.com CAREER RECRUITMENT PLANNING Wendy S. Fralick, AIIC Cunningham Lindsey 50 Burnhamthorpe Rd. W., Suite 1102 Mississauga, ON L5B 3C2 Phone: (905) 896-8181 Fax: (905) 896-3485 E-mail: wfralick@cl-na.com Christina Welton, FCIP McLarens Canada 637 The Queensway, Unit 9 Peterborough, ON K9J 7J6 Phone: (705) 740-0023 Fax: (705) 740-2296 E-mail: christina.welton@mclarens.ca COMMUNICATIONS Craig J. Walker, CIP, FIFAA, FCIAA Maltman Group International 1049 McNicoll Avenue Toronto, ON M1W 3W6 Phone: (416) 492-4411 Fax: (416) 492-5657 E-mail: cwalker@maltmans.com

Fred R. Plant, AIIC Plant Hope Adjusters Ltd. 85 Englehart Street Dieppe, NB E1A 8K2 Phone: (506) 853-8500 Fax: (506) 853-8501 E-mail: fplant@planthope.com CONSTITUTION & RULES John Jones, BA McLarens Canada Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 E-mail: john.jones@mclarens.ca CONVENTION Allan B. Hart, BBA, CIP, CRM Coast Claims Service Ltd. 2727 Quadra Street, Suite 6 Victoria, BC V8T 4E5 Phone: (250) 386-3111 Fax: (250) 386-1473 E-mail: ahart@coastclaims.com DISCIPLINE Reno Daigle, CIP, CLA, FCIAA Crawford & Company (Canada) Inc. 326 McIntyre Street W. North Bay, ON P1B 2Z1 Phone: (705) 476-2120 Fax: (705) 476-9280 E-mail: Reno.Daigle@crawco.ca EDITORIAL Fred Silvestri, BA, CIP, NCRS 121 King Street W., Suite 1810 Toronto, ON M5H 3T9 Phone: (416) 733-9265 Fax: (416) 733-0510 E-mail: fred.silvestri@srsconnect.com John M. Sharoun, FIIC, CFE, FCIAA Crawford & Company (Canada) Inc. 300 – 123 Front Street West Toronto, ON M5J 2M2 Phone: (416) 867-1188 Fax: (416) 867-1925 E-mail: John.Sharoun@crawco.ca Mary Charman, CIP Crawford & Company (Canada) Inc. 1 – 120 Mulock Drive Newmarket, ON L3Y 7C5 Phone: (905) 898-0008 Fax: (905) 898-1705 E-mail: Mary.Charman@crawco.ca EDUCATION Gary A. Ellis, BBA, FCIP, RF, FCIAA, CLA, FIFAA Crawford & Company (Canada) Inc. 18 Great George Street Charlottetown, PE C1A 4J6 Phone: (902) 566-1011 Fax: (902) 894-3044 E-mail: Gary.Ellis@crawco.ca W.E. (Ted) Baker, BA, CFE, FCIAA Baker, Bertrand, Chassé & Goguen Claim Services Limited 3660 Hurontario St., Suite 601 Mississauga, ON L5B 3C4 Phone: (905) 279-8880 Fax: (905) 279-5338 E-mail: webaker@bbcg.ca

John D. Seyler, AIIC Cunningham Lindsey 50 Burnhamthorpe Rd. W., Suite 1102 Mississauga, ON L5B 3C2 Phone: (905) 896-8181 Fax: (905) 896-3485 E-mail: jseyler@cl-na.com

EMERGENCY MEASURES David W. Lyon, FCIP, CLA, FCIAA Cunningham Lindsey 111 Granton Drive, Suite 220 Richmond Hill, ON L4B 1L5 Phone: (905) 707-5527 Fax: (905) 764-3398 E-mail: dlyon@cl-na.com

Jane Richardson, BBA, FCIP Crawford Adjusters (Canada) Inc. 237 Brownlow Ave., Suite 120 Dartmouth, NS B3B 2C7 Phone: (902) 468-7787 Fax: (902) 468-5822 E-mail: Jane.Richardson@crawco.ca

Roger S. Bickers, CIP, FCIAA McLarens Canada 600 Alden Road, Suite 600 Markham, ON L3R 0E7 Phone: (905) 946-9995 Fax: (905) 946-0171 E-mail: roger.bickers@mclarens.ca

www.claimscanada.ca

Carol A. Messervey, CIP, FCIAA, FIFAA Marsh Adjustment Bureau Limited 1550 Bedford Highway, Suite 711 Bedford, NS B4A 1E6 Phone: (902) 469-3537 Fax: (902) 469-2396 E-mail: cmesservey@marshadj.com

NOMINATING Reno Daigle, CIP, CLA, FCIAA Crawford & Company (Canada) Inc. 326 McIntyre Street W. North Bay, ON P1B 2Z1 Phone: (705) 476-2120 Fax: (705) 476-9280 E-mail: Reno.Daigle@crawco.ca

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

Patti M. Kernaghan, FCIP, CRM Kernaghan Adjusters Limited 300 – 1575 West Georgia St. Vancouver, BC V6G 2V3 Phone: 1-800-387-5677 Fax: 1-800-387-5644 E-mail: pkernaghan@kernaghan.com

Robert V. Pearson, CLA, FCIAA AAL Alberta Ltd. 600 – 2424 4th Street S.W. Calgary, AB T2S 2T4 Phone: (403) 452 2195 Fax: (403) 452 3568 E-mail: rvp@aaladjusters.com Jean-Marc Laurin, FPAA, CRM, FCIAA Cunningham Lindsey 1250 Guy Street, Suite 1000 Montreal, PQ H3H 2T4 Phone: (514) 938-2124 Fax: (514) 938-5445 E-mail: jmlaurin@cl-na.com FINANCE Randy P. LaBrash, CIP, CFE, CFEI Crawford & Company (Canada) Inc. 300 – 191 Lombard Avenue Winnipeg, MB R3B 0X1 Phone: (204) 947-2340 Fax: (204) 943-9168 E-mail: Randy.Labrash@crawco.ca

NEWFOUNDLAND & LABRADOR Neil F. Lacey, CIP, FCIAA Crawford & Company (Canada) Inc. 44 Torbay Road, Suite 300 St. John’s, NL A1A 2G4 Phone: (709) 753-6351 Fax: (709) 753-6129 E-mail: Neil.Lacey@crawco.ca

John Jones, BA McLarens Canada Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 E-mail: john.jones@mclarens.ca Carol A. Messervey, CIP, FCIAA, FIFAA Marsh Adjustment Bureau Limited 1550 Bedford Highway, Suite 711 Bedford, NS B4A 1E6 Phone: (902) 469-3537 Fax: (902) 469-2396 E-mail: cmesservey@marshadj.com PRIVACY James B. Eso, BA, CIP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Phone: (519) 578-5540 Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca Wendy S. Fralick, AIIC Cunningham Lindsey 50 Burnhamthorpe Rd. W., Suite 1102 Mississauga, ON L5B 3C2 Phone: (905) 896-8181 Fax: (905) 896-3485 E-mail: wfralick@cl-na.com

Reno Daigle, CIP, CLA, FCIAA Crawford & Company (Canada) Inc. 326 McIntyre Street W. North Bay, ON P1B 2Z1 Phone: (705) 476-2120 Fax: (705) 476-9280 E-mail: Reno.Daigle@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

LEGISLATIVE Russell E. Malkoske, BA, FCIP, CLA QA Adjusting Company 279 Provencher Blvd.

Winnipeg, MB R2H 0G6 Phone: (204) 233-8844 Fax: (204) 233-7793 E-mail: qa-russ@shaw.ca LICENSING J. Miles O. Barber, B.Comm.

(Hons.), FCIP, CRM Network Adjusters Ltd. 67 Folkestone Blvd.

Winnipeg, MB R3P 0B4 Phone: (204) 897-5793 Fax: (204) 897-5797 E-mail: mbarber@mts.net MEMBERSHIP & QUALIFICATIONS Rob Johnston Midwest Claims Services 320 Gardiner Park Court Regina, SK S4V 1R9 Phone: (306) 522-1656 Fax: (306) 569-1256 E-mail: rob@midwestclaims.ca

NOVA SCOTIA Nicholas B. MacDonald, AIIC Cunningham Lindsey 11 Morris Drive, Suite 200 Dartmouth, NS B3B 1M2 Phone: (902) 421-1519 Fax: (902) 429-7296 E-mail: nmacdonald@cl-na.com 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 Charles A. Berthiaume Réclamations C. Berthiaume 44, Chemin d’Oka Saint-Eustache, PQ J7R 1K5 Phone: (450) 491-6165 Fax: (450) 491-6230 E-mail: rcb@reclamationscberthiaume.ca

Patti M. Kernaghan, FCIP, CRM Kernaghan Adjusters Limited 300 – 1575 West Georgia St. Vancouver, BC V6G 2V3 Phone: 1-800-387-5677 Fax: 1-800-387-5644 E-mail: pkernaghan@kernaghan.com

IBC: LIAISON & FORMS O. Martin Moran, CIP Cunningham Lindsey 50 Burnhamthorpe Road West, Suite 1102, Sussex Centre Mississauga, ON, L5B 3C2 Phone: (905) 896-8181 Fax: (905) 896-3485 E-mail: mmoran@cl-na.com

CIAA REGIONAL PRESIDENTS 2009 – 2010

ONTARIO 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 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 Rob Johnston Midwest Claims Services 320 Gardiner Park Court Regina, SK S4V 1R9 Phone: (306) 522-1656 Fax: (306) 569-1256 E-mail: rob@midwestclaims.ca WESTERN Bea Boutcher, CIP Horizon Adjusters Ltd. #207, 9814 – 97 Street Grande Prairie, AB T8V 8H5 Phone: (780) 402-8383 Fax: (780) 402-7888 E-mail: bea.boutcher@horizonadjusters.com PACIFIC TBA

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O on the scene More than 100 guests attended Gilbertson Davis Emerson LLP’s Annual Fall Reception. Guests at the Sept. 24 event were treated to great music by a live band and excellent food at the company’s offices in Toronto. ●

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Delegates of the 2009 National Insurance Conference of Canada (NICC), held in Ottawa, enjoyed the opportunity to share drinks and discussion during the opening night of the conference, before enjoying the gala dinner. Over $18,500 was raised for WICC. The third annual NICC featured speakers, such as Jean ChrĂŠtien, former prime minister, and Julie Dickson, OSFI superintendent, who offered insight on the current trends and state of the property and casualty industry. Patti Kernaghan, CIAA president, and Mary Charman, CIAA vice president, were invited to join the advisory committee. â—?

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O on the scene Jazz crooner Carol McCartney, pianist John Sherwood, bassist Keiran Overs, drummer Terry Clarke and trumpeter Kevin Turcotte entertained a crowd of insurance industry professionals on Oct. 1 at La Maquette Restaurant in Toronto. The ‘Evening of Jazz’ was presented by McLarens Canada, Sibley, King Reed Investigation Services and Beard Winter LLP. ●

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Property Damage Cost Control Consultants Providing Innovative Solutions to Control Property Claim Costs

National Coverage • Expertise • Consistency • Results DETAILED VALUATIONS LARGE LOSS SPECIALISTS LIABILITY SPECIFICATION & ACTUAL CASH VALUE (ACV) VALUATIONS INSURANCE TO VALUE APPRAISALS SPECIFICATION AND BID DOCUMENTS PROJECT CONSULTING & REVIEW CATASTROPHE VALUATION PROGRAMS CONFLICT RESOLUTION FILE AUDITS & REVIEWS APPRAISALS UNDER THE INSURANCE ACT Contact us today to further discover why we are acknowledged as Canada’s leading, independent property loss valuation and cost control professionals!

TOLL FREE: 1-888-394-4434 ext. 25 • eMail: info@specs.ca • www.specs.ca

O on the scene The 2nd Annual Wish Upon a Star Golf Tournament, in support of the Starlight Starbright Children’s Foundation was held on Oct. 7 at the Deer Creek Golf and Country Club. The event brought golfers from across the industry.

Event sponsors included Formula One Collision, Paul Davis Systems, Diamond Auto Bids & Disposal, Enterprise, Discount Car and Truck Rental and HUB International Ontario, in addition to continued support from insurers and vendors. It was a day filled with fun and laughter, dinner, raffles and a live auction.

The event raised $27,000 for the Starlight Starbright Children’s Foundation. ●

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Winmar Toronto opened its doors for its grand opening on Oct. 28. Guests were treated to live music, food, and a tour of the newest Winmar location.

Winmar Toronto is located at 9 Meteor Drive. ●

OUR SIMPLE CLAIM Efficient Objective Reliable A.R.S. has the experience and medical resources necessary to effectively guide the disability management process and ensure that your client has a safe recovery to maximum rehabilitative potential.

• • • • • • •

Independent Medical Evaluations Occupational Therapy Evaluations Labour Market Diagnostic Testing Functional Abilities Evaluations Transferable Skills Analysis Vocational Evaluations File Reviews

416-510-2468 • 1-877-304-2239 • info@arsi.ca • www.arsi.ca

O on the scene More than 60 delegates attended The ARC Group Canada’s 4th annual seminar. The day included a presentation by Rodney Taylor, insurance broker at AON Environmental Services Group, Douglas Hallett, of Hallett Environmental and Technology Group Inc., and John Cherrie, of Cherrie Griffith Professional Insurance Services. Following the presentations and a panel discussion was a cocktail reception at the St. Andrews Club and Conference Centre in Toronto. �

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Health Impact is a physician-operated multidisciplinary organization that provides third party medical examinations to the insurance and occupational fields. It has served the Greater Toronto Area for the past 20 years with two strategically located clinic locations in North York at the Don Valley Parkway and Sheppard Avenue and in Mississauga at Highway 10 and The Queen Elizabeth Way. Each centre is staffed by a wide spectrum of medical subspecialists and licensed health professionals, including and not restricted to: • Physicians • Psychologists • Occupational Therapists • Chiropractors • Vocation Assessors • Registered Nurses • Kinesiologists The clinical expertise of these professionals can be provided by way of single assessments or highly integrated multidisciplinary examinations. Each clinic is also equipped with cardiac stress testing and functional testing laboratories, the latter incorporating the ARCON platform.

All clinical and administrative staff are familiar with legislative and statutory issues related to disability and examination processes. This level of both clinical and administrative expertise ensures examination integrity and comprehensive and efficient reporting.

O on the scene More than 100 guests attended the 30th anniversary celebration of Rosco Group, a division of FirstOnSite, in Montreal on Oct. 29. The event celebrated three milestones: the name change from Rosco Group to PremiereAction; a 30th anniversary; and the completion of a new office complex and operational centre. Guests were treated to live entertainment, gourmet food, a martini bar and more.

The event was held at the new offices in Dorval, Quebec. â—?

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G I F F I N KO E R T H

ANNOUNCEMENT

The clean way to solve dirty problems Giffin Koerth is pleased to announce that Matthew Allen has joined us to head up our Environmental Group.

“The environment is more than bugs and bunnies.

It is where contaminants

Matthew Allen B.Eng., M.Eng., Q.P., P.Eng. Environmental Group

impact our health and affect the safety of our buildings and resources.”

Meet Matt With over a decade of environmental engineering experience, this ex-military man has just about seen and done it all.

As comfortable in the courtroom as he is on site, Matthew can take your loss all the way from emergency response to damage quantification.

A Clean Break Whether it’s a minor fuel spill or a major catastrophe, Matt will orchestrate the power of GK’s cross-disciplinary team to find the true cause and the best course of remedial action.

At GK we stick to what we do best – pure consulting. Our objectivity and independence helps make everyone’s contribution more effective, from agents to adjusters to contractors.

For a fresh approach to environmental claims and litigation needs, contact Matthew Allen by email or phone.

If you'd like to know what the numbers can tell you, call us at 416.368.1700

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mallen@giffinkoerth.com

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giffinkoerth.com

Giffin Koerth is one of Canada’s largest and most respected forensic services firms – uniquely integrating forensic engineering, forensic accounting and computer forensics. It is located in downtown Toronto at 40 University Avenue, Suite 800.

O on the scene Claims professionals were in attendance at the 54th Annual Black Tie Dinner of the Toronto Insurance Conference held on Nov. 21 at the Four Seasons Hotel in Toronto.

The evening's guest speaker was Andrew Coyne, national editor of Macleans. â—?

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GOLD

Sincere thanks to our Gold, Silver and Bronze sponsors who generously supported CIAA’s program for collaborative change in the Property and Casualty Claims Industry.

SILVER

BRONZE

GORE MUTUAL

ACE INA

Professional Membership