Canadian Underwriter January 2013

C A N A D A’ S I N S U R A N C E A N D R I S K M A G A Z I N E . C A N A D I A N U N D E R W R I T E R . C A

JA N U ARY 2 0 1 3 A Business Information Group Publication #40069240

Game Changer

BY ANGELA STELMAKOWICH

Heated Debate

BY MARK MASON & HILLEL DAVID

Wind and Rain

BY GREG MECKBACH

Claims service that puts your customers first Across Canada, Aviva’s team of Regional Claims Relationship Managers are your single point of contact for claims issues. Serving as a liaison between brokers, vendors, and Aviva’s claims professionals, they support our commitment to the broker channel and help you ensure a smooth, hassle-free claims experience for your customers.

Supporting this dedication is our industry-leading Claims Service Satisfaction Guarantee*. That means if your customers aren’t happy with our claims service, and we can’t resolve it, we’ll give them a cheque for the amount of their current premium. That’s our promise, and it’s that simple.

To find out more, speak to your Aviva Business Development representative today.

AvivaPartner.ca Home | Auto | Leisure & Lifestyle | Business | Group | Surety Aviva and the Aviva logo are trademarks of Aviva plc and used under license by Aviva Canada Inc. and its subsidiary companies. *Terms and conditions apply. Visit www.avivacanada.com/claimsguarantee for details.

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VOL. 80, NO. 1, JANUARY 2013 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP

www.canadianunderwriter.ca

COVER STORY

Game Changer

34

Ontario stakeholders have waited a long time for task force recommendations meant to kick auto fraud to the curb. A bit more waiting will be required, but once the recommendations roll out, will they represent a true game changer for the auto insurance system?

BY ANGELA STELMAKOWICH

FEATURES

12

48

Parts Procurement

Winter Tires

The move by some insurance companies to adopt auto parts procurement programs has elicited heat from repair shop owners who argue they are already feeling the fire.

When it comes to safety and performance, detailed information is necessary to properly understand the effect that winter tire use would have had in a collision.

BY CRAIG HARRIS

BY MARK FABBRONI

56

20

16 Sandy Claims

44 Commercial Liability

Hurricane Sandy and its trailing storms have come and gone. With insured losses expected to hit approximately $100 million for Ontario and Quebec alone, what specific claims are insurers seeing?

A Supreme Court of Canada ruling two years ago remains relevant today, raising questions about whether or not some insurance companies need to review their commercial general liability policies.

BY GREG MECKBACH

BY GREG MECKBACH

26 Accident Benefits

52 Obligation to Respond

A recent seminar explored a number of claims-related issues, from no-fault benefits involving transit vehicles to examination under oath and retroactive attendant care.

Ontario’s Superior Court of Justice has highlighted the need for an insurer to respond to a completed accident benefits application whether or not a nexus exists between the insurer and the claimant.

BY DONNA FORD

BY JASON FROST

30 Auto Body Shops Implied Warranty

Networking

Ontario’s high court recently considered who is responsible for damage caused by a leaking hot water tank: the homeowner (or his property insurer) or the tank supplier.

In a people business like insurance, networking is key.

Far too often, however, not enough time and energy is dedicated to developing and enriching this important skill.

BY MARK MASON & HILLEL DAVID

BY PETER MORRIS

New partnerships and the idea of having a national accreditation system to identify top body shops are among the issues possibly on the radar of Canada’s collision industry this year.

BY TOM BISSONNETTE

60 Towing Regulation Ontario’s anti-fraud task force has recommended regulating the towing industry. Is this a non-starter or can hurdles be cleared to get such a system on the road?

BY WILLIE HANDLER

January 2013 Canadian Underwriter

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VOL. 80, NO. 1, JANUARY 2013

PROFILE

Editor Angela Stelmakowich astelmakowich@canadianunderwriter.ca (416) 510-6793 Associate Editor Greg Meckbach gmeckbach@canadianunderwriter.ca (416) 510-6796

10 Education Stake Jo-Ann Eccleston, president of the Ontario Chapter of the Canadian Insurance Claims Managers Association (CICMA), says some claims issues look much the same as they have for years. But that makes member education, a CICMA Ontario staple, no less important.

BY GREG MECKBACH

SPECIAL FOCUS

6

Editorial

8

Marketplace

62 Moves & Views 64 Gallery

Online Editor Harmeet Singh hsingh@canadianunderwriter.ca Twitter: @CU_Harmeet (416) 442-5600 ext. 3652

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Associate Publisher Paul Aquino paul@canadianunderwriter.ca Twitter: @InsuranceCanuk (416) 510-6788 Account Manager Michael Wells michael@canadianunderwriter.ca (416) 510-5122 Account Manager Christine Giovis christine@canadianunderwriter.ca (416) 510-5114 Account Manager Elliot Ford eford@canadianunderwriter.ca (416) 510-5114

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Educate.

Elevate.

Celebrate.

In the ever changing world of insurance, continuous learning isn’t optional—it’s essential.

National Education Week February 25 to March 1, 2013 Elevate your professional development by taking advantage of special seminars and celebratory events offered by the Insurance Institute during National Education Week.

New this year at participating Institutes, event attendees will be asked to share their thoughts on topics in today’s P&C industry. By participating in a video interview, your name will be entered in a draw to win an iPad! To discover what’s going on in your local area, visit our website or talk to your local Institute or Chapter manager.

www.insuranceinstitute.ca/NationalEducationWeek

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EDITORIAL

Settle the Score

OPC issued what amounted to a “tsk-tsk” for an insurer’s failure to emphasize transparency when giving information to policyholders.

Angela Stelmakowich, Editor astelmakowich@ canadianunderwriter.ca

6

Canadian Underwriter January 2013

Be it praised or maligned, credit scoring, used as a predictor tool for future loss, is again back in the news.

A recent ruling by the Office of the Privacy Commissioner of Canada (OPC) could return the issue to the front burner, following the cooling effect applied last fall when a Canadian Council of Insurance Regulators (CCIR) working group was unable to come up with concrete guidance.

OPC issued what amounted to a “tsk-tsk” for an unnamed insurer’s failure to emphasize transparency in providing information to policyholders — something it contends should be regarded as the top priority.

Ruling on a 2009 complaint involving an Ontario couple that saw their home insurance premium rise sharply, OPC noted its concern turns on transparency related to how the information was used and how the insurer informed the policyholders, as well as the belief that most consumers are unaware of how their information is being used.

The CCIR working group said it did not have sufficient information to determine the actual and current, rather than potential, “harms that may be accruing to consumers from the use of credit scores by insurers.” Policymakers should have the final say.

Prince Edward Island wasted little time in speaking its mind, releasing a consultation paper and penning draft regulations that would ban insurers from using personal financial information to deter-

mine eligibility for insurance coverage. (Credit scoring is off limits in some provinces; for auto premiums, it is banned in Ontario and Quebec.)

PEI moved after receiving complaints that use of personal financial information by insurance companies resulted in some individuals not being offered property or auto insurance, or being offered insurance at unaffordable rates.

With companies increasingly making use of personal information, “that, in turn, may lead to significant availability and affordability issues within the province, with respect to these insurance products.”

While OPC had no quarrel with using credit scoring, others do. “Consumers are not being protected under the current regulations, and we need the Ontario government to take action to ban the use of credit scoring in insurance,” argues Randy Carroll, CEO of the Insurance Brokers Association of Ontario.

But some insurers see gold in the data. They contend that how customers manage their finances is among the most accurate indicators of risk, and there is a strong correlation between credit score and insurance losses.

The Co-operators, for example, uses credit score in addition to more traditional rating factors like claims history, age of home and geographical location to determine risk level and, in turn, appropriate home insurance premium, notes information from the company.

“Analysis shows a direct link between a person’s credit score and the frequency and severity of claims. By adopting this factor, we are able to more accurately rate individual clients by customizing rates and charging an appropriate premium for the risk.”

Insurers have (and perhaps should) argue it makes little sense not to use every available tool to come to the most accurate determination of risk.

Failing that, overall costs can be higher and consumers who manage their finances responsibly can be penalized.

But are there better, more accurate tools available?

Brian Stoll, a director at Towers Watson, suggested last fall that telematics (providing details such as vehicle speed, distance travelled and braking pattern information that focus on actual driving behaviour) may reduce the need for proxy underwriting factors, such as credit scoring, in the future.

Use of telematics is potentially “a gamer changer from the automobile point of view,” Brigid Murphy, president and CEO of The Dominion, commented in a recent speech. It “eliminates the whole credit score argument on automobile insurance because if you can see the actual risk, then you don’t need to use a reasonable facsimile,” Murphy said.

Although there is no equivalent to telematics in property lines, that may not always be so. And that may open the door to exploring how closely aligned to behaviour these predictor tools need to be.

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MARKETPLACE Sign up to receive Canadian Underwriter’s free Insurance Headline News Email Alert: http://bit.ly/cuenews

Regulation OSFI SEEKS INPUT ON DRAFT SOLVENCY GUIDELINES The Office of the Superintendent of Financial Institutions (OSFI) is currently seeking stakeholder input on two proposed guidelines.

On December 21, OSFI released its draft guideline for Own Risk and Solvency Assessments (ORSA) for federally regulated property and casualty, and life insurance firms, as well as proposed amendments to Guideline A-4, its current Internal Target Capital Ratio for Insured Companies. (If approved, the guideline would be renamed Regulatory and Internal Target Capital Ratios.)

In an impact analysis statement, OSFI notes that explicit guidance for ORSA around issues such as identifying material risks, as well as assessing the adequacy of risk management and “current and likely future solvency positions,” does not exist. “A new ORSA guideline will build on existing industry practice and OSFI guidance, while considering international practices,” the impact statement adds.

“A guideline developed expressly for the insurance sector, but that adopts

8 Canadian Underwriter January 2013

similar guidance, would facilitate the implementation process and avoid significant duplication effort.”

If the proposed guidelines receive the green light, the new ORSA and amended Guideline A-4 would take effect January 1, 2014.

Comments must be submitted by April 12, 2013.

IBAO WELCOMES NEW AMP REQUIREMENTS The Insurance Brokers Association of Ontario (IBAO) has congratulated the provincial government on new regulations under the Insurance Act that implement Administrative Monetary Penalties (AMPs), a move IBAO argues will support more timely and effective enforcement.

IBAO notes the AMPs, effective January 1, 2013, will allow the Financial Services Commission of Ontario (FSCO) to better enforce Insurance Act violations by permitting the regulator to levy appropriate penalties proportional to an offence.

Changes to the Insurance Act, Automobile Insurance Rate Stabilization Act (2003) and the Compulsory Automobile Insurance Act mean FSCO can implement penalties for infractions of those acts, as well as “breaches of orders, undertakings and

licence conditions.”

FSCO reports that AMPs can apply in situations of its listed Unfair or Deceptive Acts or Practices “by any person or entity, including insurers, agents, brokers, adjusters and those involved in the provision of goods or services to insurance claimants.”

Says Randy Carroll, CEO of IBAO, “This represents one of the most significant advances in consumer protection in many years.”

Claims AVIVA CANADA DENIED REQUEST TO ALTER RULING The Court of Appeal for Ontario has denied a request by Aviva Canada to “withdraw, alter or modify” its decision in Pastore v. Aviva Canada Inc. based on a Supreme Court of Canada (SCC) ruling from this past July.

In Pastore, the appeal court found in favour of a woman claiming catastrophic impairment from her insurer, Aviva Canada. The woman applied to Aviva in 2005 to have her injuries classified as “catastrophic impairment,” spurring a designated assessment centre (DAC) assessment to be done.

In the original decision, the appeal court ruled it was not necessary to have all four

categories of the assessment considered marked impairments for a catastrophic impairment designation.

In its most recent ruling, the court notes new counsel for Aviva asked to bring to its attention the SCC ruling from July. The SCC applied the correctness standard of review to a Copyright Board ruling on the basis the legislative scheme gave concurrent, original jurisdiction to either the board or a court.

In Pastore, Aviva sought to rely on a provision of the legislative scheme in Ontario’s Insurance Act that gives concurrent jurisdiction to adjudicate following both assessment of the claimant and mediation, to an arbitrator or to the court.

Ontario’s appeal court disagreed. “[T]his is not the type of rare circumstance where it is in the interests of justice to withdraw the reasons of the court and rehear the case on its merits.”

Risk Management ONTARIO BEEFS UP INFRASTRUCTURE FUNDING The Ontario government is increasing support for critical road, bridge, water and wastewater projects

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MARKETPLACE

under its Municipal Infrastructure Strategy, up substantially from $51 million announced in August to almost $90 million.

The funding, which will be made available over two years in 2013-2014 and 2014-2015, is meant to help more municipalities maintain and repair their critical infrastructure, notes a press release from Ontario’s Ministry of Infrastructure.

Projects must be completed

by December 31, 2014.

“The Canadian insurance industry has seen substantial increases in property claims costs, partly as a result of infrastructure that was never designed to cope with the weather trends we are seeing today, and we fully support sustained investments that help build resilient communities and a secure economy,” says Ralph Palumbo, the Insurance Bureau of Canada’s vice president for Ontario.

The ministry reports project funding will cover 90%, or $2 million, of total project costs — whichever is lower. Applications for funding were being accepted until January 9, 2013.

Last fall, the Federation of Canadian Municipalities called on Ottawa to create a 20-year plan and to raise municipal infrastructure in-

vestments from $3.25 billion to $5.75 billion annually to address aging infrastructure across the country.

Reinsurance INSURED LOSS ESTIMATE AT LEAST US$65 BILLION Preliminary estimates from Swiss Re indicate that total insured losses from natural catastrophes and man-made disasters will reach at least US$65 billion in 2012 while economic losses will be at least US$140 billion.

Natural catastrophes are expected to account for the lion’s share of insured losses, at about US$60 billion, Swiss Re notes in a report released in December.

Weather events — mainly in the United States — will dominate insured losses for 2012, the report adds.

Citing Hurricane Sandy and the major drought in the U.S., Swiss Re notes loss estimates of US$20 billion to US$25 billion for the former, and US$11 billion, including payouts from federal assistance programs, for the latter.

“Severe weather events continue to affect many parts of the world,” says Kurt Karl, Swiss Re’s chief economist. “In large parts of the globe that are prone to severe weather events,

people and businesses could increase risk-preparedness by eliminating underinsurance,” Karl adds.

The 2012 estimate for insured losses is above the average for the last decade, Swiss Re notes, but far less than in 2011, when these skyrocketed to more than US$120 billion.

REINSURANCE CAN EXPECT “ACCEPTABLE” PROFIT A.M. Best Co. released a report in early January that predicts reinsurance firms will make an “acceptable profit” in 2012, but adds reinsurers will rely on underwriting profits due to low returns on investments.

“A.M. Best expects that even with consideration for the catastrophe loss that occurred recently in the fourth quarter, reinsurers are still well-positioned to put forward an acceptable level of underwriting and overall profit for the full year.”

A.M. Best reports reinsurance firms “rebounded quickly” after catastrophe losses in 2011, but adds there were “unprecedented levels of uncertainty and challenges” in the global economy in 2012. As well, reinsurance firms face low yields on their investments.

“The continuing low

interest rate environment, however, appears to be reinforcing a focus on underwriting discipline, which should translate into a positive for the segment,” the rating agency adds.

MOST 2012 GLOBAL NAT CAT LOSSES IN THE U.S. Ninety per cent of all insured losses and 67% of overall losses worldwide from natural catastrophes in 2012 were attributed to the United States, Munich Re recently reported.

Natural catastrophes caused $160 billion in overall losses and $65 billion in insured losses worldwide, Swiss Re noted.

Chief among these costly weather events was an estimated $25 billion in insured losses as a result of Sandy.

“The heavy losses caused by weather-related natural catastrophes in the USA showed that greater loss-prevention efforts are needed,” says Torsten Jeworrek, a Munich Re board member.

“It would certainly be possible to protect conurbations like New York better from the effects of storm surges.

Such action would make economic sense and insurers could also reflect the reduced exposure in their pricing,” Jeworrek adds.

January 2013 Canadian Underwriter

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PROFILE

Education Stake Greg Meckbach Associate Editor

Jo-Ann Eccleston, head of the Ontario chapter of the Canadian Insurance Claims Managers Association, sees the provincial arm as part of CICMA’s larger effort: to help educate the next generation of claims managers.

The specifics may have changed — accident benefits regulations are changing, carriers’ investment yields are dropping and carriers are competing with one another for talent in their claims departments — but the fundamental issues in claims have not changed in 30 years, Jo-Ann Eccleston suggests.

Education has been and will continue to be a key objective, notes Eccleston, who became president of the Ontario chapter of the Canadian Insurance Claims Managers Association (CICMA) last fall.

During her term, Eccleston is focusing on organizing educational and networking opportunities for her industry colleagues. That goal is aided each year by the chapter’s four scheduled meetings, where a guest speaker is

10 Canadian Underwriter January 2013

always invited, she says.

Still in the education vein, she is also part of a group organizing the 46th annual joint conference of the Ontario chapters of the CICMA and the Canadian Independent Adjusters’ Association (CIAA).

Set for February 5 in downtown Toronto, the focus of the joint conference will be customer service and customer satisfaction, Eccleston reports, two ongoing and current issues in the claims arena. “You’re hearing about anti-fraud; you’re hearing about customer service. And we thought it was timely that we do something like that,” she says.

The conference will have as its keynote speaker Carl Van, president and CEO of the International Insurance Institute Inc. “He makes it very simple to understand what we can do to help a customer,” she says of Van. Other scheduled speakers are Stephen Scullion, director of professional development for Crawford & Company (Canada) Inc., and Brian Maltman, executive director of General Insurance OmbudService (GIO), which was founded 10 years ago to help clients resolve disputes or concerns with their insurers. GIO’s service is free to home, auto and business policyholders, although it does not handle disputes over rates, availability or matters before the courts.

ON THE RADAR Fraud, one of the main focuses of the joint conference, is seen as an area that can benefit from increased awareness.

(The next CICMA Ontario meeting, scheduled for early March, will include a speaker who will talk about fraud.)

Eccleston, vice-president of national auto claims for Aviva Canada in Toronto, says large carriers, including her employer, have resources in place to deal with fraud.

“But a lot of (CICMA Ontario) members come from small companies, so they can gain a lot of knowledge” by attending the association’s events, she suggests.

Eccleston expects to focus on educational and networking opportunities for her industry colleagues.

In addition to dealing with auto fraud, she reports that many insurance companies are not making as much money on their investments and suggests they are needing to compensate by earning more on premiums, reducing costs or both.

“There has been a real change and a real focus on being profitable, to be able to control costs,” Eccleston says.

“A lot of direct writers are adding competition for us.”

Despite these developments, she suggests the fundamental issues in claims have not changed. “I think what’s

changed is legislation,” Eccleston says, alluding to updates to Ontario’s Statutory Accident Benefits Schedule.

CROSS-COUNTRY Born in Winnipeg, Eccleston has been with Aviva since 1985 and has served on the CICMA Ontario chapter executive for four years.

Before moving from Ottawa to Toronto, she was at the CICMA Ottawa chapter, where she held every position, including president.

Before joining Aviva, Eccleston worked for United States Fidelity and Guaranty Company and was educated in the 1970s at Canadore College in North Bay, where her father was posted with the Royal Canadian Air Force.

“I have lived right across Canada,” she says.

Eccleston had no family or friends in the insurance industry before she started her career. “Back in the day, when I finished college, I didn’t even know what insurance was,” she quips.

Those in college today likely have a much better chance of learning what insurance is all about. The education system in Ontario has changed over the past 30-plus years, Eccleston says, with more colleges providing insurance programs.

She cites as examples Mohawk College, which offers a two-year program both at its Fennell campus in Hamilton and at Sheridan College’s

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PROFILE

Employees are changing jobs more often than before, and retiring baby boomers will need to be

that next level,” she says.

To get the budding claims managers ready, the CICMA is helping educate the next generation by funding scholarships. For example, in 2007, the CICMA Ontario chapter gave $25,000 to Waterloo-based Wilfrid Laurier University. In its October

replaced, Eccleston says.

“We have to make sure that we have the right people in place to manage our business and handle our claims,” she adds.

The foundation is there, but it takes time to build in experience. “We’re finding that in the workforce, there is a gap. There are a lot of junior entry people, but they are not ready yet for

newsletter, the Ontario chapter notes the money is meant for students who intend to pursue a career in insurance, and does not necessarily go to the student with the best academic achievement.

In 2009, an award of $1,000 was paid to Anthony Kapsimalis, while in 2011 an award of $698 was paid to Laura Fyfe. “They don’t give it out all at once,” Eccleston

knowledgeable in casualty and liability, there’s a big demand for those types of people out there.”

BE PREPARED

Photo: Simon Cheung

Mississauga campus, and London-based Fanshawe College, which has a two-year business insurance program that includes underwriting, claims investigation, risk analysis and contracts.

That type of education, as well as specialized knowledge and experience, is valued in

today’s market. “Those folks never have problems finding jobs,” Eccleston says of graduates of the colleges.

In fact, she adds, carriers are competing to attract and retain knowledgeable, experienced claims managers.

“Accident benefits is such a specialized line of work, there is a lot of competition” among employers, she says.

“People who are very highly

says of Wilfred Laurier University, noting that the school earns interest on the initial investment and will award portions of the grant.

CHARITABLE WORKS CICMA Ontario is also involved in charitable activities. For example, last June, the chapter held a golf tournament, with proceeds going towards Camp Oochigeas. The Toronto-based organization offers year-round programs for children with cancer and their siblings, and operates camps in Muskoka, Toronto and at the Hospital for Sick Children. At last year’s event, CICMA Ontario raised $26,000 for the camp.

Other proceeds from last year’s CICMA golf tournament included a $750 contribution for the Doug Hurlbut Award, sponsored by CICMA Ontario and presented once a year by the Insurance Institute. Hurlbut, past-president of CICMA and a former claims manager for Aviva, died two years ago.

In addition to its awards, scholarships and educational programs, the CICMA Ontario chapter provides networking opportunities for claims managers from different firms to exchange ideas. “We can reach out to another company,” she says.

“We get to know one another.”

Eccleston adds CICMA Ontario is “heavily involved” in helping independent adjusters attain the qualifications they require to be licensed in Ontario, by holding monthly education sessions.

January 2013 Canadian Underwriter 11

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Craig Harris Freelance Writer

Some insurance companies have adopted auto parts procurement programs with the intent of getting cars back on the road more quickly.

Many repair shops say these are simply “wolves in sheep’s clothing” that will leach profits and put added pressure on an already hard-hit sector.

At least two large insurance companies have introduced procurement programs designed to streamline the vehicle repair process by establishing a mandatory auto parts ordering service organized by the insurer. And more may be coming, with some collision repair representatives reporting that other companies are lining up to test the market.

Intact Financial Corporation and State Farm Insurance have both recently ramped up their programs, which involve hundreds of repair

12 Canadian Underwriter January 2013

shops in North America. Intact’s parts procurement initiative, which applies to its Rely network of certified repair facilities, was introduced in 2006, but has since expanded to Alberta, Ontario, Quebec and Atlantic Canada.

“We launched this program to facilitate parts selection and ordering,” says Wendy Hillier, vice president of supply chain and procurement at Intact Financial Corporation in Toronto. “Our approach has been to develop an integrated, single portal which provides parts availability and pricing.”

Hillier reports that the 400 repair shops participating in the program “make a decision on what part is most suitable to complete the repair based on three considerations — fit and quality, availability and cost.”

State Farm began a pilot project through its electronic PartsTrader program in the spring of 2012 and now operates in five markets in the United States: Birmingham, Alabama; Charlotte, North Carolina; Chicago, Illinois; Grand Rapids, Michigan; and Tucson, Arizona. PartsTrader — a web-based, collision part sourcing, quoting and ordering system — currently involves 600 of State Farm’s Select Service repair shops.

Illustration by Jillian Ditner/i2iart.com

Parts and Parcel

“State Farm is focused on pursuing initiatives that promote a competitive marketplace and improve repair efficiencies to benefit our customers,” says George Avery, a property and casualty claims consultant for the company.

“State Farm repair programs, including electronic parts ordering, are designed to improve value and enhance the customer experience,” Avery says.

State Farm representatives did not comment directly on expansion plans for PartsTrader to the Canadian market.

However, John Norris, executive director of Hamilton, Ontario-based Collision Industry Information Assistance (CIIA), an association that shares information on the repair industry, reports that “State Farm Insurance has already sent a letter on PartsTrader parts procurement to our shops. Other insurers have told our shops that they are waiting for the current parts procurement program to mature before jumping into a program.”

NEGATIVE FEEDBACK These procurement programs have generated negative feedback from several collision shops and auto repair associations. In the U.S., for example, the Auto Body Association of Connecticut released a position statement that notes the following: “The (PartsTrader) endeavour is a wolf in sheep’s clothing.

It is bad for repairers, part manufacturers, and most importantly, consumers.

The only two enterprises in place to profit — and profit handsomely — are State Farm Insurance and PartsTrader.”

Specifically, repairers argue that the programs reduce profitability, create unnecessary delays and wrest control away from shop owners.

The Automotive Service Association (ASA), the largest trade group representing repair professionals in the U.S., has asked State Farm to provide accurate data to demonstrate how the PartsTrader program benefits collision repairers. Its areas of concern regarding the pilot —

as expressed by collision repairers — include efficiency issues, additional administration costs, reductions in shop profits, potential compromises to local repairer-to-supplier relationships, and increasing insurer involvement in the repair process, notes an ASA statement.

In Canada, collision industry representatives say the procurement projects are a bad deal not just for repairers, but for consumers as well.

“Good, efficient collision repair facilities, who already have electronic ordering, now must have duplicate systems, and lose their local vendors as anticompetitiveness weakens their margin,” Norris comments. “Even though those suppliers can sell to the shop for the same price, and sometimes cheaper, the facility on a parts procurement program must order from often more remote suppliers and at lower margins and lower profits only because the insurer is receiving a special fee from the insurance-approved parts supplier,” he adds.

January 2013 Canadian Underwriter

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FASTER PRICING, FEWER RETURNS Insurance companies maintain that the point behind the procurement programs is to get customers’ vehicles back in shape as quickly as possible. And having a centralized ordering process is crucial to achieving this goal, Hillier says.

Intact’s program provides part pricing and availability in less than 30 minutes, she says. That compares to previous processes that generally took as long as eight hours and, in some cases, multiple days to complete.

But it is about more than faster pricing. Hillier also says centralized ordering has reduced the rate of returned parts because of incorrect part selection or quality to less than 10%.

“The program replaces the traditional process of calling multiple parts suppliers with a portal that is integrated with a shop’s estimating system,” notes Hillier.

“Thus, this process means that shops can start repairs sooner and return the vehicle back to customers in an efficient and timely manner,” she adds.

When asked about efficiency measurements and cost savings, State Farm’s Avery responds the company is “focused on gathering feedback from repairers and working with PartsTrader to continuously improve the electronic parts ordering process, while repairers maintain their focus on quality, efficiency and price in servicing our shared customers.”

PROFIT TRANSFER For Norris, one big bone of contention with these programs is that they represent a “simple transfer of parts profit dollars from shops to insurers. We fear that with restricted labour door rates and an eventual 10% handling fee on parts rather than regular profit, shops will regrettably be closing and cannot afford equipment, training nor technician retention in the future,” he says.

Norris points to the experience in other countries, where procurement programs have existed for several years.

“As we have seen in other countries, insurance company parts procurement means less professional shops, more shop ‘bottom-feeders,’ less profitability and labour impacts in not attracting 14 Canadian Underwriter January 2013

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technicians/apprentices or failing to retain qualified staff,” he says.

New Zealand is often cited as an example of the parts procurement trend.

“We have seen, through the seven years that New Zealand was on this program, a massive reduction in profits as prices lowered (more used and more nonOEM parts) with reduced margins,” Norris reports.

When it comes to claims of efficiency and time-savings for these programs, Norris says he is very skeptical. “The shops that the insurers want on this program already have streamlined or-

The Auto Body Association of Connecticut characterizes one procurement program as a wolf in sheep’s clothing, stating that it is bad for repairers, part manufacturers and consumers. dering programs in place. They already have electronic parts ordering systems and already control returns.The insurer is now on a parts procurement program, set to remove that shop efficiency and replace it with a new level of insurercontracted ‘efficiency,’” he observes.

From his perspective, there is only one major beneficiary to the new procurement programs. “The only thing streamlined is the money gets to the insurer faster as they get a cut on the parts ordering and take a percentage off the

cheque to the shop for their completed repair work,” Norris charges.

In response to this criticism, Intact’s Hillier states: “Our program improves workflows and efficiencies of participating shops and through regular discussions, we work closely with shops in our network to continuously improve our program.”

Some industry watchers have observed that structural auto parts procurement may be just a first step by insurance companies, who are constantly monitoring costs of the supply chain and seeking improved efficiency. Additional avenues could involve paint, among other things.

“Our intent is to focus on structural auto repair parts,” Hillier notes. “However, our platform design has the capability to expand our program to other components that have the potential to drive value and benefits, all while delivering a superior and highly efficient repair service to customers,” she adds.

Norris predicts that insurers will aggressively target other areas of the repair process. “Despite a parts revenue stream shifting from shop owners to insurance companies, none of us expect the revenues to dramatically reduce industry premiums for the average motorist,” he says. “In fact, we expect insurers to look at paint procurement profits next.”

Norris notes this should raise red flags for others involved in the supply chain, and for those expecting that major cost savings will be passed along to consumers. “Eventually this issue becomes a public policy question — if we allow parts procurement programs, should this new income for insurers from shops and from special fees from suppliers be used to reduce Ontario’s vehicle insurance premiums or should it offset their ‘acquisition costs’ of purchasing other companies and brokers?” he asks.

The controversy around parts procurement will likely continue to swirl in North America and create polarized viewpoints among repair professionals and insurance companies. It seems clear, however, that programs, in which insurers have invested significant dollars, are here to stay.

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Storm Watc Greg Meckbach Associate Editor

Insurers in Canada have seen thousands of wind and rain damage claims, along with a few for business interruption, in the wake of the storm that followed Hurricane Sandy. Losses, however, appear not to be as severe as originally envisioned.

Insured losses from Sandy-related severe weather could hit $100 million for Ontario and Quebec alone, with insurance companies reporting a combination of wind and water damage along with some business continuity claims.

Based on information from Property Claim Services Canada (PCS-Canada), the Insurance Bureau of Canada (IBC) released the preliminary estimate on November 28. The thousands of claims are for damage to homes, cars and businesses in parts of Ontario and Quebec (the late-October storm then headed into Atlantic Canada). IBC says PCS-Canada is expected to re-survey insurers for an update, likely toward the end of January.

When the storm moved into Canada, strong winds caused multiple power failures, leaving more than 150,000 people without electricity.

There were also two deaths in Canada in Sandy’s

16 Canadian Underwriter January 2013

wake, including a woman in Toronto who died after a store sign fell on her.

LOSSES MANAGEABLE Despite the damage and losses, the storm’s effects were not as bad as some initially feared.

“The power outages were not as significant as they were in Quebec during the (1998) ice storm,” reports Richard Zamperin, director of claims for Allstate Insurance Company of Canada in Markham, Ontario. “It was not as devastating as it could have been. We really did prepare for the absolute worst, but took a little bit of heart in the fact that it wasn’t as big or as bad as we originally thought it might be,” Zamperin says.

Hurricane Sandy was downgraded to post-tropical storm status when it made landfall in New Jersey on October 29, but still caused major damage south of the border.

Zamperin describes claims received by Allstate Canada as a “mixed bag” of wind, water and wind-driven water.

The Dominion, based in Toronto, had a similar claims experience. Joanne Carmody, assistant vice president of claims operations for The Dominion, says reported claims were for wind damage, with some associated rain damage.

Some policyholders with comprehensive auto policies reported that trees had fallen on their vehicles while others reported damaged vehicle hinges when opened vehicle doors were overex-

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tended by the stormâ&#x20AC;&#x2122;s strong winds.

Toronto-based RSA Canada also received claims relating to vehicle damage, says claims relationship manager Alex Walker. â&#x20AC;&#x153;Debris will get picked up or tree limbs will come down and they will strike peopleâ&#x20AC;&#x2122;s cars,â&#x20AC;? Walker says. â&#x20AC;&#x153;Of course, if a customer doesnâ&#x20AC;&#x2122;t have an all-perils or comprehensive coverage on their car, they sometimes might find themselves in a coverage-gap situation.â&#x20AC;?

Information from IBC defines comprehensive, or allperils auto, as coverage within an automobile physical damage policy to insure against loss or damage resulting from miscellaneous causes such as fire, theft, windstorm, flood and vandalism, but normally not including loss by collision or upset.

Beyond vehicle claims,Walker says that RSA Canada also received those for damage to roofs, fences and outdoor structures. â&#x20AC;&#x153;Usually, itâ&#x20AC;&#x2122;s damage caused by the wind to a roof or flashing around your windows, and the wind is just pounding the rain against the house and it actually comes in. We had some commercial losses like that,â&#x20AC;? he points out.

BY THE MAP Approximately 90% of RSA Canadaâ&#x20AC;&#x2122;s claims originated in Ontario,Walker says, adding that these were concentrated in and around Sarnia in the southwestern part of the province. â&#x20AC;&#x153;We did get some claims in Quebec and a small amount in Atlantic Canada,â&#x20AC;? he adds.

For The Dominionâ&#x20AC;&#x2122;s claims in Ontario, Carmody says, there was damage to various parts of the province, in areas such as Sarnia and Windsor. â&#x20AC;&#x153;The storm damage, from what weâ&#x20AC;&#x2122;ve had in terms of claims reported, does essentially follow the (Highway) 401 right across the province,â&#x20AC;? she writes in an email.

As of early December, The Co-operators Group Ltd. in Guelph, Ontario reported having settled about 65% of its claims, Leonard Sharman, the companyâ&#x20AC;&#x2122;s senior advisor for

Wind can cause debris to scatter or tree limbs to come down on peopleâ&#x20AC;&#x2122;s vehicles.

If customers do not have all-perils or comprehensive coverage on their cars, they could be in a coverage-gap situation. media relations, notes in an email. â&#x20AC;&#x153;We had approximately 680 home claims, 90 farm and commercial, and 65 auto claims reported as a result of the storm,â&#x20AC;? Sharman writes. â&#x20AC;&#x153;Almost 90% of the claims were for wind damage, with a handful from water damage from sewer backup or seepage.â&#x20AC;?

He says â&#x20AC;&#x153;the total cost is a little less than $5 million, making it the second biggest storm in Ontario for us this year, behind the storm of July 23, and itâ&#x20AC;&#x2122;s much smaller

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The Insurance Brokers Association of Ontario (IBAO) announced today that Ms. Debbie Thompson, CAIB, CRM has been elected as IBAOâ&#x20AC;&#x2122;s 70th President.Debbie was officially inducted at the recent IBAO Convention held at the Royal York in Toronto, and will formally assume her role as President on January 1, 2013.

Debbie started her insurance career at the Citadel Assurance, and received her brokerâ&#x20AC;&#x2122;s license while working at Gellatley Insurance in Toronto. Her insurance career has developed into many roles from a customer service representative to Vice President of Commercial Lines at Sinclair Cockburn.

Debbie is currently the Director of Business Development at Beyond Insurance Brokers in Whitby, Ontario.

Debbieâ&#x20AC;&#x2122;s passion for the insurance industry found her first as a volunteer, taking on the role of Affiliate President with the Insurance Brokers of Toronto Region (IBTR) in 2002. She has worked on a variety of committees with IBAO including serving as Chair of the Education committee, a Facilitator for the CAIB Program and in 2005 she was elected as the Board Director for Territory 10 and was further elected to the Executive committee of IBAO in 2010. Debbie also sat on the National BIP (Broker Identity Program) Committee, representing Ontario for the Insurance Brokers Association of Canada. She also recently sat on the Consumer Engagement and Education Committee as part of the Minister of Finance Automobile Anti-Fraud Task Force.

Debbie is also very active in her community and supports many youth organizations including Big Brothers Big Sisters. â&#x20AC;&#x153;I am committed to encouraging and supporting the youth in our community and believe that can be done by becoming actively involved in such local causes,â&#x20AC;? said Debbie. â&#x20AC;&#x153;Debbie is so passionate about Ontario consumers and the broker brand,â&#x20AC;? said IBAO CEO Randy Carroll. â&#x20AC;&#x153;We are very excited for her to take on her new role as President where she will continue to be a very powerful and educated voice of the association.â&#x20AC;? â&#x20AC;&#x153;The support of my three children, Nathanial, Kya and Christian as well as my partner Richmond have brought me to where I am today,â&#x20AC;? added Debbie. â&#x20AC;&#x153;2013 will sure be an exciting year for the association and I am so proud to lead the executive team on their many exciting initiatives.â&#x20AC;?

January 2013 Canadian Underwriter

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than the hail storms that hit Alberta in July and August.”

IBC previously reported the wind, rain and hail storms that pummelled Calgary and surrounding areas during August caused insured damages of more than $500 million. Overall in Canada, total insured damage in 2012 has been pegged at about $1.19 billion.

When Sandy blew into Eastern Canada at the tail end of October, IBC reports, “trees were toppled and power lines fell when winds reached 100 km/h. The high winds damaged homes and businesses, ripped shingles off roofs and heavy rains resulted in localized flooding and sewer back-up in some residential basements.”

Still, damages in Canada paled in comparison to those in the United States.

Looking at Sandy’s big picture, a number of insurers released loss estimates, all of which were subject to change.

American International Group Inc. reports its pre-tax loss estimate, net of reinsurance, will be about US$2 billion; Swiss Re estimates claims from Sandy

Page 30

As of early December, one insurer had settled about two-thirds of its Sandy-related claims, of which 680 related to home, 90 to farm and commercial, and 65 to auto.

The lion’s share of claims were for wind damage, with a handful for water damage from sewer back-up. will be about US$900 million, net of retrocession and before tax; and ACE Group of Companies estimates its preliminary losses in the fourth quarter of 2012 will be US$380 million after tax, net of reinsurance and including reinstatement premiums.

CLOSED FOR BUSINESS Losses from the storm will not necessarily be confined to property and auto, ratings agency Fitch Inc. reported the

day after Hurricane Sandy made landfall.

There may be significant business interruption (BI) and contingent business interruption claims resulting from that system, Fitch predicted at the time. To claim losses under BI policies, an organization must suffer loss of income from suspension of operations.

Some RSA Canada clients submitted BI claims here at home,Walker reports. “In a couple of cases, businesses had their roofs damaged, or some exterior structures were damaged, and that, of course, impacted the business’s ability to carry on and function,” he notes.

“The key there for any insurance company, and not just RSA, is to make sure there is a quick response from the claims department so that you can help that business get back up and running and make sure they can carry on with their normal day-to-day activities,” Walker emphasizes.

As of press time, The Dominion’s Carmody said the company had not received any third-party liability claims.

Liability insurance is defined as that

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e

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Insured Damage in Canada for 2012 ($Billions) Insured Damage in Canada for 2012 ($Billions)

Estimated Damage from Hurricane Sandy (US$Billions) $50

$50

$45

$0.10

$40 $35 $30

$30

$25

$1.19

$20

$20

$15 $10 $5 $0

Total insured damage in Canada Estimated damage from Hurricane Sandy, Ontario and Quebec Data Source: Property Claim Services Canada

“which agrees to indemnify the insured for sums he may be required by law to pay to third parties as damages for bodily injury or damage to property,” notes information from IBC. “Typically speaking, liability claims are often reported well after the fact,” Carmody writes. “If there were to be a liability claim reported, often in circumstances like this it would be related

$10 Min Forecast insured losses

Forecast total economic damage Data Source: EQECAT, Inc.

to a physical damage claim, such as if we insured a business whose sign was not terribly well-secured and in the wind storm, the sign that should have been able to withstand the force of the wind did not, and had caused damage to somebody else’s property.”

When the storm hit, says Allstate Canada’s Zamperin, employees were on standby and additional staff was de-

ployed to areas affected by the storm.

“We had all of our third-party vendors on their regular state of preparedness, making sure the contractors had staff available in the quantities that we thought they might need to get out there and deal with the immediate disaster restoration, that they had the equipment available to get out there,” he adds.

Restoration Industry D

Max

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Hot Pursuit

Partner, Chair Subrogation & Product Liability Practice Groups McCague Borlack LLP

Hillel David

Associate Lawyer McCague Borlack LLP

The Court of Appeal for Ontario — in the companion cases, Collett v. Reliance Home Comfort Limited Partnership and Szilvasy v. Reliance Home Comfort Limited Partnership — dismissed Reliance Home Comfort’s appeal, and ordered the company to pay costs of $16,000 to the respondents in both

20 Canadian Underwriter January 2013

THE CIRCUMSTANCES The appeals for damages arising from leaking hot water tanks were heard October 23, 2012 and the decisions were released November 27, 2012.

These claims are among the very few that have travelled from Small Claims Court all the way to the Court of Appeal for Ontario.

At the time of loss, the hot water tank in the Szilvasy claim was nine years old and 19 years old in the Collett claim. In both cases, the loss

Illustration by Jillian Ditner/i2iart.com

Mark Mason

Ontario’s appeal court was recently the latest stop for two subrogation claims that began their years-long journeys in Small Claims Court to obtain direction regarding who is responsible for damages caused by leaking hot water tanks — the homeowner (or his property insurer) or the company supplying the tank.

appeals. The cases involve application of section 9(2) of Ontario’s Consumer Protection Act (CPA) to the rental of a hot water heater, following separate incidents in which Shirley Szilvasy, and Geoffrey and Sandra Collett, brought subrogated claims on behalf of their insurers in Small Claims Court, seeking compensation for resulting property damage.

The rulings establish that consumers who lease or rent products will generally receive the protection afforded by the CPA throughout the terms of the leases. The ramifications for the insurance industry are very significant given that insurers pay millions of dollars in claims each year as a result of damages caused by such products.

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was caused by internal corrosion in the tank, and in each case, the plaintiff homeowner had assumed the lease entered into by the original lessee (although both were subrogated claims made by the plaintiffs’ insurer).

In the Szilvasy claim, the hot water heater in an unfinished furnace room in the basement, equipped with a floor drain, leaked while the homeowner was on vacation and soaked the basement carpet. Reliance Home Comfort replaced the heater without charge, as per the rental agreement’s Terms and Conditions, and Szilvasy was later awarded damages at trial of almost $6,000, plus disbursements, costs and interest.

With regard to the Collett claim, the heater leak damaged the carpet and baseboards, again prompting free replacement of the heater and, as part of the subrogated claim, the homeowners were awarded damages of almost $4,000, plus disbursements, costs and interest.

The evidence in both cases indicated it was virtually impossible to detect the internal corrosion and that there was no practical way of maintaining the tank so as to avert the type of failure that took place.

Reliance Home Comfort had sent out a document, titled Water Heater Rental Agreement, to its customers as a billing insert. The document contained selfdescribed Terms and Conditions, including a limitation of liability/exemption clause, although it was conceded by the company that the document did not constitute the contract made between the parties, there being no evidence that Reliance Home Comfort’s customers had agreed to the Terms and Conditions.

Even had there been such evidence, the company would have been faced with the provision within the CPA that renders void any contract term that purports to negate or vary any implied condition or warranty under Ontario’s Sale of Goods Act (SGA). Reliance Home Comfort had also sent out a warning notice reminding customers “there is always a possibility that the product may leak.”

The company did not inspect the heaters, nor would an inspection have

22 Canadian Underwriter January 2013

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been meaningful because the key elements of a heater cannot be assessed without destroying the unit. Furthermore, inspections would not assist in predicting when a particular tank might leak or in averting that eventuality.

All hot water tanks will eventually fail if left in service indefinitely, and it is not possible to predict the life expectancy of any individual tank.

The rental document had self-described Terms and Conditions, including a limitation of liability/ exemption clause, but the company conceded it did not constitute the contract made between the parties.

THE ARGUMENTS The basic underlying issue on the appeals was reflected in the following statement: “This appeal decides who should bear the cost of the property damage — the homeowner (or her property insurer) or the company that

supplied the heater,” Justice Eileen Gillese writes on behalf of the court in Szilvasy. The central issue on the appeals was noted as being “whether s. 9 of the CPA applies to the water heater rental arrangement between the parties.”

Section 9(2) of the CPA provides that the implied conditions applying to the sale of goods by virtue of the SGA are deemed to apply to goods that are leased or otherwise supplied under a “consumer agreement.”That term is defined in the CPA to mean “an agreement between a supplier and a consumer in which the supplier agrees to supply goods or services for payment.”

The plaintiffs were both residential users of the hot water tanks; the tanks were supplied for (rental) payments; and the agreements with Reliance Home Comfort, therefore, were “consumer agreements.”

The company argued the CPA was inapplicable because the lease agreements had been entered into prior to the enactment of the CPA, and retroactive application of the statute was impermissible. That argument was rejected on the ground that the legal effects of the rental agreements were ongoing when the CPA came into force, and the loss-creating events (the leaks) occurred after that time.

The application of the CPA in those circumstances was retrospective, not retroactive.There is no bar to the retrospective application of a statute unless the statute expressly or impliedly prohibits that, which is not the case with the CPA. Reliance Home Comfort then argued one of the preconditions set out in the SGA for the implication of the conditions of reasonable fitness for purpose and merchantable quality had not been met, that being the plaintiffs had informed the company of the particular purpose for which the tanks were required “so as to show that [the plaintiffs] relie[d] on [Reliance’s] skill or judgment.”

The court rejected that argument.The plaintiffs were ordinary homeowners.

Reliance Home Comfort was in the business of supplying hot water tanks to

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regardless of when that may be.

There are sound and compelling reasons why the implied conditions should remain in force throughout the term of a lease, not the least of which is that the CPA is remedial legislation whose whole purpose is to protect consumers.

Any interpretation that would deprive a consumer renting a product of the protection of the implied conditions at a time when the consumer is making a rental payment could hardly be said to be protecting the consumer.

To the contrary, any such interpretation would defeat, rather than promote, the consumer protection purpose of the statute.

These two cases establish the basic principle that consumers who lease or rent products such as hot water tanks, which can be leased for long periods of time, will generally receive the protection afforded by the CPA (unless the preconditions for such protection have not been satisfied, which likely will only rarely occur) throughout the terms of the leases.

residences — in fact, it had approximately 1.2 million tanks on lease to its customers. There was no doubt it knew the purpose for which the plaintiffs rented the tanks, namely to produce hot water at their homes, or that the plaintiffs were each relying on the company’s skill or judgment to provide to them a properly functioning water heater.

There was, therefore, an implied condition in each instance that the water heater would be reasonably fit for its intended purpose of providing hot water in the homes. In view of the fact that the tanks leaked, they were not reasonably fit for that intended purpose.

Reliance Home Comfort argued such an interpretation amounted to a warranty that the tanks would be “as good as new” throughout the lifetime of a lease.That argument, too, was summarily rejected with Justice Gillese’s comment: “The water heater need not be in the same condition as a new heater.

24 Canadian Underwriter January 2013

It can be worn, rusted or otherwise in a less than pristine condition so long as it is reasonably fit for the purpose of heating water — without leaking.”

THE IMPACT The court did not expressly address Reliance Home Comfort's position that the implied conditions of fitness and merchantable quality do not remain in force throughout the term of a lease, but rather only for a reasonable period of time after having entered into the lease. Given the dismissal of the appeals, the effect is that the implied conditions do remain in force throughout a lease’s full term. It was the breach of the implied condition of reasonable fitness for purpose — even years after lease agreements had been made — that was the basis for the company’s liability.

A person who pays for the use of a product is entitled to a working product during the payment period,

Any interpretation that would deprive a consumer renting a product of the protection of the implied conditions at a time when the consumer is making a rental payment could hardly be said to be protecting the consumer.

A mere warning is not sufficient compliance with the implied conditions.

Lessors such as Reliance Home Comfort that leave their products in place indefinitely do so at their own risk.

The question of whether or not some types of leased products (one example might be cars) will have the CPA protection or will have a more limited or different form of protection awaits further clarification.

Reliance Home Comfort has until the end of January 2013 to bring a motion for leave to appeal the decision to the Supreme Court of Canada.

速

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Twelve-Minute Accident Benefit Insurance Litigator Law Society of Upper Canada (Toronto)

Donna Ford LL.B., C.I.P. Freelance Writer

1/23/13

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Transit Connection A recent seminar in Toronto explored a number of issues on the claims front, including no-fault benefits involving public transit vehicles, examination under oath and retroactive attendant care.

“No crash, no cash,” was how Toronto lawyer Tamara Broder summarized Ontario’s law governing claims for no-fault benefits involving public transit vehicles.

This exception — little known to insurance adjusters — should be used more often, Broder, a lawyer with the Toronto Transit Commission (TTC), and Philippa Samworth, a partner at Dutton Brock LLP, suggested during an all-day seminar in Toronto on November 27.

If an insured makes an accident benefit claim to his own insurance company for injuries sustained on a public transit vehicle that were not the result of a collision, “that insurer can

26 Canadian Underwriter January 2013

avail itself, and should avail itself, of this exception,” Broder said during the Law Society of Upper Canada’s Twelve-Minute Accident Benefit Insurance Litigator seminar.

The exception relates to an amendment to section 268 of Ontario’s Insurance Act, which came into force May 12, 2011: “(1.1) …no statutory accident benefits are payable in respect of an occupant of a public transit vehicle, in respect of an incident that occurs on or after the date this subsection comes into force, if the public transit vehicle did not collide with another automobile or any other object in the incident.”

The tradeoff for getting the benefit of the exception, Broder pointed out, is that a plaintiff in tort no longer will be required to establish a threshold, and there will be no deductible for general damages.

ACCIDENT CLAIMS DOWN Before the revised section took effect, statistics compiled by the TTC showed 73% of accident benefit claims arose in the absence of a collision, Broder reported.

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Of those, there were many dubious claims with subjective injuries, and multiple claims by the same persons, she added. Often, these injuries were not reported until weeks later and involved conditions such as chronic pain and whiplash. In addition, the person reporting the condition was the only passenger to do so, either at the time or subsequently.

Specific examples of dubious, subjective claims have followed different situations: a claimant reported being elbowed by another passenger on a transit vehicle; the vehicle stopped abruptly; the vehicle door closed on the person’s foot or hit the person while closing; the individual slipped and fell; or the person bumped into a pole when the vehicle started.

Since the amendment, the results have been “quite astonishing” with accident benefit claims dropping by approximately 70%, Broder said.

As a result of the “exception,” the TTC has saved $6 million to $7 million in payouts in accident benefit claims over the first three quarters of 2012, she said.

To date, there has not been a spike in tort claims, Broder pointed out, suggesting that this may be because the claimants no longer have the same incentive to stay off work and do not have accident benefits’ funding.

Broder emphasized, however, that tort claims that have “merit or serious injury” are being advanced.

Although the phrases “collide with” and “or any other object” are not defined, she said the TTC has not had many grey-area claims.The commission is taking “a common-sense approach that a curb is part of a road, that an object is a pole,” she said.

The TTC sometimes has the benefit of video downloads from its vehicles, something that should clear up some of those situations, Broder added.

EXAMINATION UNDER OATH The seminar also featured a discussion of Examinations Under Oath (EUO).

Pursuant to section 33 of the Statutory Accident Benefits Schedule (SABS), only in-

Page 29

As a result of the transit vehicle “exception,” the TTC has saved about $6 million to $7 million in payouts in accident benefit claims for the first three quarters of 2012.

surers can examine an insured under oath, noted plaintiff lawyer Alexander Voudouris, a senior litigator with Pace Law Firm in Toronto.

“I would love, I would relish, the opportunity to examine under oath an insurer adjuster and help them substantiate my claim for a special award,” Voudouris said.“But we are not afforded those rights.”

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January 2013 Canadian Underwriter

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EUOs are extremely beneficial to an insurer and equally detrimental to an insured. Plaintiff counsel are encouraged to continue to challenge the scope of EUOs and resist them, but are also warned to be careful since there may be consequences.

Voudouris made several references to Aviva Insurance Company of Canada v. Balvers, a 2007 decision by Ontario’s Superior Court of Justice, in both his remarks and a written paper. (In that case, claimant’s counsel had refused to allow certain questions — such as the applicant’s current address, employment status, employer and medical treatment — to be answered at an EUO. As a result, the insurer brought an application to determine the nature and scope of its rights).

With regard to the scope of allowable questions in an EUO, Voudouris said the court in Balvers “ruled, in my opinion, that essentially anything goes.”

For example, the question about the claimant’s current address was ruled to be relevant in terms of his entitlement to accident benefits, Voudouris said, but added, “I’m not quite sure how that really follows.”

Voudouris pointed out the only consequence of failing to attend an EUO is cessation of a benefit or all benefits, and not the adjournment of the arbitration hearing. However, if the insurer does not do everything properly in the notice, an EUO is not deemed to have been properly scheduled.

There are apparently no time lines under which an EUO must be requested or conducted,Voudouris said. Although not raised in Balvers, he said he would rely on section 36 of the SABS, that may be modified by section 32(10), and he would vigorously resist requests by an insurer after one or two years to an EUO that deals with specified benefits

28 Canadian Underwriter January 2013

(that is, income replacement benefits, housekeeping or caregiving claims).

EUOs are extremely beneficial to an insurer and equally detrimental to an insured,Voudouris commented. He encouraged plaintiff counsel to continue to challenge the scope of EUOs and resist them, but also cautioned counsel to “be careful because there are consequences.”

Defence lawyer Eric Grossman, a partner with Zarek Taylor Grossman Hanrahan LLP, spoke about a recent EUO conducted by someone in his office.

On the record, Grossman reported, the paralegal acting for the claimant acknowledged he had authored some of the treatment plans that were in dispute, he was going to make personal gains from being a service provider, and he saw no conflict whatsoever in what he was doing.

Since the Law Society has taken over the monitoring and supervision of paralegals from the Financial Services Commission of Ontario (FSCO), things have gotten worse, Grossman argued.

“FSCO was doing a reasonably good job of keeping in check the paralegals that were troublesome. They would even bar them from hearings and pre-hearings and acting where they perceived that they weren’t out for the best interests of the system,” he said.

ATTENDANT CARE Changes are also currently taking place with regard to retroactive attendant care.

Samworth pointed out that this is one of the most rapidly growing areas in her

practice, adding she has had files where the claimant did not ask the insurer for retroactive attendant care benefits for as long as 20 years after an accident.

Samworth was counsel for the insurance company in T.N. and The Personal Insurance Company of Canada, a FSCO arbitrator ruling released last July 26.

In that case, the application for retroactive attendant care, by a claimant who had sustained a brain injury in a motor vehicle accident in October 2000, was sent to the insurer about six years after the accident occurred. The applicant did not request physical custodial care, but rather 24-hour “on call” or “phone” care, claiming that she needed to have someone available on the phone if she had questions about her judgment, Samworth said.

The insurer determined the claimant needed some attendant care — although not for 24 hours a day — and began making payments.

Issues at arbitration included T.N.’s claim for retroactive on-call attendant care, Samworth reported.The arbitrator ordered, among other things, that the insurer must pay T.N. attendant care benefits from the date of the accident in October 2000 and ongoing, at the rate of $5,056.80 monthly, less any amounts already paid.

The arbitrator’s conclusions in T.N., if upheld on appeal, “may very well change the landscape of the way in which both insureds and insurers practice in terms of retroactive attendant care,” Samworth commented.

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Risk and

d r a w Re

Opinion/Analysis

The formation of new partnerships and the need for a national accreditation system that identifies top body shops, perhaps rewarding them with a better Tom Bissonnette door rate, are among the Owner issues potentially on the Parr Auto Body Canadian Collision Industry Forum’s radar this year.

It is hard to believe I have served as chairman of the Canadian Collision Industry Forum (CCIF) for two years.The position has proved somewhat of a learning curve for me.

As a shop owner myself, coming from a province with a single insurer like Saskatchewan Government Insurance (SGI) did not prepare me for how body shops in other parts of the country deal with multiple insurance companies, each with

30 Canadian Underwriter January 2013

their own rules and estimating systems. No matter the differences, my personal view is that body shops have many things in common and it is on those areas that CCIF has focused its efforts.

Industry challenges that CCIF has tackled — and continues to address — include the following: • the shortage of both skilled technicians staying and young people entering the industry; • advanced vehicle technology that is making it more difficult for shops to repair today’s vehicles and, in fact, is contributing to potentially more total losses; • the need for a national accreditation program; • a lack of repair standards being consistently employed by some collision shops and some insurers throughout the country; and • the big one — the lack of profitability of collision shops, something that I personally believe is at the root of most of the industry’s woes.

SUPPLY AND DEMAND It has been said there are too many body shops and not enough work to go around, particularly in eastern Canada and the Maritimes. If that is

t arges l s ’ a d Cana e-owned n r e t “ Eas employe –on e 100% ing servic senting t e adjus und, repr ing d ro the g th outstan i d you w tment an 24/7.” i comm al service n perso

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true, though, why does the industry continue to have a shortage of skilled labour? It would seem that some of these shops could simply close their doors and go work for somebody else.

By remaining open, all collision shops are dragged down to a lower labour rate because the law of supply and demand kicks in and justifies these low rates.

Or does it?

It would be acceptable to keep all shops at a lower labour rate — if they were all equal.That is not the case: some

If shops in a “best case scenario” with government insurance cannot make a buck, are shops in other areas that have less than $1 million in sales doing any better? shops do not spend money on training staff or buying new equipment; they do not take the time to hire apprentices and help develop their skills; and they do not participate in initiatives such as Skills Canada or I-CAR training. In fact, some shops continue to coast and drag down the rest of the industry.

Recently, CCIF commissioned the national accounting firm, Meyers Norris Penny (MNP), to carry out a study on Saskatchewan’s collision industry. The results were very similar to those flowing from an industry study in Manitoba two years ago.

Compared with the rest of Canada, MNP found that Saskatchewan’s government-run insurance system pays better than what the average shop in Canada could expect in terms of remuneration.The concern is that 246 of the 321 shops in Saskatchewan have sales of $1 million or less, meaning they cannot afford to invest in training or new equipment, or in developing new employees.The only shops making enough money to properly invest in their busi-

32 Canadian Underwriter January 2013

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nesses were those who have more than $2 million in sales, representing just 9% of the industry.

What do these results have to do with body shops elsewhere in the country? If shops in a “best case scenario” with government insurance cannot make a buck, are shops in other areas that have less than $1 million in sales doing any better?

NATIONAL ACCREDITATION Why should insurers pay any more to get their claimant’s vehicles repaired?

While it may not be necessary to pay all body shops more, if a national accreditation system was in place to identify the top shops, it would certainly be advisable to pay a better door rate to shops that have made the commitment to train and equip their shops to the highest levels. Perhaps, those who do not make those investments should not be rewarded with a better door rate.

The “worst case scenario” would be to keep door rates suppressed and chance having “good” shops opt to pack it in and go do something more profitable.

Maybe one such enterprise could be opening businesses that specialize in “diminished value” lawsuits to deal with the workmanship of all the hanger-oners.

If a business cannot make a reasonable profit, sooner or later it is going to stop operating. Current business owners are hanging on because, quite frankly, running a collision shop is all they know.

What happens when they retire? What bank will give a loan to a young entrepreneur when the business is unable to sustain itself?

Most current shop owners will soon figure out that they can rent or sell their facilities for more money — and fewer headaches — and that is what they will do. Just ask any shop owner if he wants his children to take over the business.

So what is the solution?

There is currently no clear answer, although that is not to say the answer is not out there. Insurers and collision

shops alike need to engage in meaningful consultations to protect both of our futures. Repair shops need to be financially viable and insurers need competent shops to service your clients.

With its new direction beginning in January 2013, CCIF can serve as a forum through which these necessary consultations can be achieved. For example, CCIF is looking to team up with the Automotive Industries Association of Canada (AIA), a national trade association that represents the country’s automotive aftermarket industry.

The aftermarket is a $19.4-billion industry that employs more than 420,000 people. It is composed of companies that manufacture, distribute and install automotive replacement parts, accessories, tools and equipment.

AIA represents manufacturers, rebuilders, manufacturers’ agents, warehouse distributors, national distributors, buying groups, wholesalers, machine shops, retailers and, through its councils, the interests of collision repair

The “worst case scenario” would be to keep door rates suppressed and chance having “good” shops opt to pack it in and go do something more profitable. shops and automotive service and repair outlets. Its mandate is to promote, educate and represent members in all areas that impact the growth and prosperity of the industry.

These folks have the resources in place to help us do things such as develop a national accreditation program that will benefit all stakeholders. As the entity that keeps I-CAR training going here in Canada, AIA is also CCIF’s best hope to stay on top of rapidly changing vehicle technology that is confounding so many shops and insurers.

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Game Changer Will recommendations contained in the Ontario Automobile Insurance Anti-Fraud Task Force report be a game changer, addressing what has become an increasingly organized and expensive problem? Or could implementation and timing issues threaten to alter the carefully plotted road map for improving the system?

ANGELA STELMAKOWICH

34 Canadian Underwriter January 2013

O

ntario stakeholders now have as a new guide 38 task force recommendations, released in November, on how best to proceed with efforts to combat auto insurance fraud in the province.

Generally well-received, the recommendations have been characterized by many as thoughtful and thorough. But it may be circumstances that have nothing to do with the meat of the proposals â&#x20AC;&#x201D; from the possibility of longer timeframes imposed by the proroguing of the Ontario legislature to demands to flesh out recommendations before moving forward â&#x20AC;&#x201D; that threaten to transform green light to red, at least in the short term.

Short-term forward movement will likely be important to sustaining momentum on what has become an expensive problem, one that KPMG pegs at $769 million to $1.6 billion annually and to which Ernst & Young might add $130 million to $260 million each year.

All indications are that this problem shows few signs of righting itself absent tough, concrete actions over time.

January 2013 Canadian Underwriter 35

COVER STORY

Game Changer IN THE NEWS Auto fraud in Ontario seems to be an increasingly frequent topic of conversation among government officials, elected representatives, regulators, insurers and all manner of players in related service and medical fields. But that apparent negative has a positive side.

The auto insurance fraud conversation was freshened recently with separate announcements about charges alleging fraudulent activities. In December, police for York Region — part of the Greater Toronto Area, the identified epicentre for auto insurance fraud in Ontario — reported that nine individuals had been arrested and charged as part of Project Sideswipe, on ongoing investigation.

York Regional Police alleged fraud revolving round staged collisions and false insurance claims at medical rehabilitation and assessment centres in Brampton, Toronto and Mississauga. Of the 41 charges, these include participate in criminal organization, possession of proceeds of crime over $5,000, money laundering, conspiracy and fraud. The nine charged individuals have been identified as current or former owners, principals, managers or key medical or legal service providers, while the facilities include medical assessment centres, injury treatment clinics, legal services offices and auto repair shops.

“For the first time, we see medical practitioners allegedly operating at private, for-profit medical clinics included in the charges,” Rick Dubin, vice president of investigative services for the Insurance Bureau of Canada (IBC), said in a statement after the charges were announced. The nature of the criminal charges “speak to the suspected highly organized exploitation of the insurance system,” Dubin added.

“It’s not just about auto fraud, it’s about organized crime,” says Kadey B.J. Schultz, a partner with Hughes Amys LLP. Calling it a societal issue, Schultz says auto insurance fraud “is a way the criminals access money to fund their other much more harmful activities.”

In January, talk of auto insurance fraud was also on the lips of the Financial 36 Canadian Underwriter January 2013

Services Commission of Ontario (FSCO), which is expected to serve a pivotal role as Ontario’s anti-fraud efforts roll out. FSCO announced 84 charges under the Insurance Act against two Toronto rehabilitation clinics and four people.

The clinics were each charged with seven counts of knowingly making false or misleading statements to an auto insurer to obtain payment for goods and services provided to an insured, and seven counts of engaging in an unfair or deceptive act or practice.

The licensing of health clinics is critical given what is seen as explosive growth in accident benefit claims over the past three to four years that cannot be explained by health inflation, accident incidence or population growth. But the program must have teeth.

ADDRESSING ASSESSING The long-awaited task force report, more than a year in the making, has inspired surprisingly consistent support.

One example would be the Insurance Brokers Association of Ontario (IBAO), which supports the entirety of the report, says CEO Randy Carroll.

A few recommendations have attracted significant comment, including the call to license health clinics. The task force noted the provincial government

should require the licensing of health clinics that treat and assess auto insurance claimants and empower FSCO to regulate their business practices.

Daniel Strigberger, a partner in the Insurance Litigation Group for Miller Thomson LLP’s office in Waterloo, Ontario, regards the recommendation as the task force’s most important.

Carroll would agree it is among the most important recommendations. In his view, the task force report makes clear that licensing health clinics is critical given the “explosive growth in accident benefit claims in the past three to four years that cannot be explained by health inflation, accident incidence or population growth.”

Strigberger says it is essential, however, that the licensing program have teeth. “If a clinic is unlicensed, the insurer should not have to pay any expenses in relation to that clinic. If a clinic contravenes the terms of a licence, it should be subject to suspension and/or revocation,” he argues.

“I have seen way too many claims where the dispute is solely between the clinic and the insurer — not the claimant and insurer. And in many such cases, it seems like the claimant’s lawyer or paralegal is acting for the clinic and not the claimant,” Strigberger reports.

In an open letter to finance minister Dwight Duncan, Rhona DesRoches, board chair of FAIR Association of Victims for Accident Insurance Reform, charges “the proliferation of poor quality [independent medical examiners, IMEs] in the system is undoubtedly part of the core problem of the backlog of cases waiting to be heard at FSCO.” Rocco Guerriero, president of the Association of Independent Assessment Centres (AIAC), noted in a letter sent to Canadian Underwriter last December that IME “companies undergo stringent quality assurance measures independently and by insurers to ensure they meet the highest standards and adhere to all regulations.”

“We certainly support the development and even more important, the enforcement, of some kind of

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COVER STORY

Game Changer a standard for independent medical examiners so that we have more of a peer-to-peer review and comment area than we currently do,” says Laurie Davis, executive director of the Alliance of Community Medical and Rehabilitation Providers.

As part of consumer education and engagement, Davis notes, it would also be helpful for the denial rate or patterns of IMEs to be known. “That would go a long way toward restoring some checks and balances to the system.”

With regard to the task force’s health clinic recommendations, AIAC suggests there is a need to better understand these before rushing forward. “We would want to sit down with government officials to better understand what a licensing regime would look like in order to determine if it would deliver real benefits to Ontario policyholders,” notes AIAC, members of which perform the bulk of the neutral third-party assessments annually.

The association identifies what it regards as a hole in task force reasoning.

The group “critically misses its core mandate of identifying how best to deter fraud when it fails to distinguish between the claimant-side assessment and treatment sector, and the work of the independent medical assessment for the insurer sector,” AIAC adds.

“The task force’s recommendations to create a new, large government bureaucracy to license and regulate many insurance support services, from towing to health clinics, is worrisome. We believe many more practical tools exist to prevent fraud, without finding new ways for the government to add large regulatory and licensing costs to the sector,” the association contends.

STRONGER FSCO “Health clinic licensing is a subset of giving FSCO more authority to investigate and enforce fraud and abuse claims. So the two go hand in hand,” says IBAO’s Randy Carroll.

The task force has recommended beefing up FSCO powers with regard to, among other things, the following: 38 Canadian Underwriter January 2013

• investigating and sanctioning unfair or deceptive acts or practices; • overseeing and auditing the business and billing practices of health clinics and individual practitioners who invoice auto insurers; • having a range of sanctions that can be applied where clinics are not following FSCO’s business practice standards; and • having investigators working in the private sector provide information to FSCO where it would be relevant to

With some of the recommendations requiring legislative change, there is concern momentum for the effort will be lost with all the political instability Ontario is facing. detecting, investigating and enforcing sanctions against those engaged in organized or premeditated auto fraud.

“We agree with the task force’s observation that FSCO’s mandate should change from the regulator of the auto insurance industry to the regulator of the auto insurance marketplace, and we support the recommendations that have been put in place to accomplish this,” says Karin Ots, senior vice president of regulatory and government relations for Aviva Canada.

FSCO appears up to the task if comments following the announcement of the most recent charges are any indication. “When fraudsters falsify accident treatment bills, Ontario drivers take the hit through higher premiums,” says Philip Howell, superintendent and CEO of FSCO. “FSCO will continue to crack down on those who cheat Ontario drivers by abusing the auto insurance system,” Howell adds.

Ralph Palumbo, IBC’s vice president for Ontario, has said the FSCO charges make clear “the need for the Ontario government to immediately implement the (task force) recommendations.”

But some of those recommendations, including greater FSCO authority, will depend on amending legislation, which has been stalled by the proroguing of the provincial legislature.

“We are concerned the momentum for change will be lost with all the political instability Ontario is facing,” says Carroll. “Even if a new premier makes this a priority, the opposition could bring down the government, which would delay implementation of the report for at least six months to a year.”

Since the legislature is not sitting, “changes that do not require active participation from government should be the first priority,” says Andrew Murray, president of the Ontario Trial Lawyers Association (OTLA). “A number of recommendations were directed to FSCO, and it is our hope that FSCO has already begun the process of initiating the necessary changes. Similarly, insurers were directed to collect and share statistics on the tow truck industry, collision repair facilities and health clinics, which we hope is something that is made a first priority,” Murray adds.

IN THE WORKS Scott Blodgett, senior media relations advisor for Ontario’s Ministry of Finance, says amendments to regulations can proceed while the legislature is prorogued. A proposed Lieutenant Governor in Council regulation — posted January 9 — noted at the time that changes to Ontario regulations that address the

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COVER STORY

Game Changer statutory accident benefits schedule (SABS), disputes between insurers, and unfair or deceptive acts or practices were being considered. Specifically, the amendments related to the following task force recommendations: • the government should reduce uncertainty and delay for those who have legitimate auto insurance claims by moving aggressively to amend the SABS to make it clear that insurers are required to provide claimants with a full explanation whenever refusing to pay for treatment, assessment or other benefits; • the government should amend rules so that claimants play a more active role in helping to detect and prevent fraud, specifically by requiring claimants to confirm attendance at treatment facilities and receipt of goods and services billed to insurers, and by requiring insurers to itemize the list of invoices they have received when they provide a benefits statement to a claimant every two months; • insurers should have the ability to examine a claimant under oath, where this is necessary to determine which insurer should be responsible for coverage, without prejudice to the right for an examination under oath that now exists; • the government should add the following to the list of activities described as unfair or deceptive acts or practices subject to sanctions under the SABS — charging insurers much more for goods or services than the ordinary retail price, and requesting a claimant to sign a blank form; and • the government should clarify the exemption for lawyers and paralegals in the unfair or deceptive acts or practices regulation so that it applies to lawyers and paralegals only when they are acting in a legal capacity.

In January, the government announced that draft changes, expected to take effect June 1, include requiring insurers to provide claimants all reasons for denying a claim; giving claimants the right to receive a bi-monthly, detailed statement of benefits paid out on their behalf; 40 Canadian Underwriter January 2013

increasing the role of claimants in fraud prevention (e.g., require them to confirm attendance at health clinics); and making providers subject to sanctions for overcharging insurers for goods and services and banning them from asking consumers to sign blank claims forms.

WHO PAYS? Blodgett says that most of the task force recommendations do not include costs for the government. “The recommendations to be carried out by FSCO are costrecoverable from the insurance industry,”

The favourable impact seen through any fraud reductions would help offset the inflationary pressures that the industry continues to experience. The antifraud initiative alone, however, would likely not lead to widespread rate reductions. he notes, adding that if FSCO expands its anti-fraud investigation resources, “costs will be recoverable from the insurance industry which, in turn, should benefit from reduced fraud activity.”

Palumbo says that government will need to do its part, especially with regard to FSCO and things like licensing of clinics and auditing of business practices. “What cannot happen is the fiscal restraints that the government is

implementing now applies to this because if it does, I don’t think the results that are anticipated by all stakeholders and the task force will be realized.”

Aviva’s Ots suggests “the most significant resources and costs required will be to implement the recommendations pertaining to the licensing and regulation of health care providers. The health care industry should bear those costs as the price of admission into the Ontario auto system.”

Schultz says she does not have a great deal of optimism that the recommendations can be implemented in a timely manner without appropriate resources. Until there is some budget put to the effort, she notes, “I’m concerned that there’s not going to be a lot of uptake on the recommendations because we need to have money to follow through.”

Ultimately, savings achieved from reducing fraud will be “passed on to consumers through lower premiums,” Blodgett says. Ots, however, is careful to temper expectations. “The favourable impact seen through any fraud reductions would help offset the inflationary pressures that the industry continues to experience. While we are consistently looking for ways to reduce the cost of insurance for all consumers, this initiative alone would likely not lead to widespread rate reductions.”

Says Palumbo, “Until these reforms are acted on, it’s difficult to say what is going to happen with premiums. And even when they are, it does take time to get the rotten apples out of the system.”

PUBLIC BUY-IN In releasing the final task force report, finance minister Dwight Duncan noted that “a vital part of combating auto insurance fraud in Ontario is informing and engaging drivers so they can detect fraud and avoid becoming victims.”

Public and consumer education is regarded as one way to keep momentum going. The public “cannot only help identify and prevent fraud, but to also understand and embrace the changes required to stamp it out,” Carroll says.

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The government has begun the process of bringing stakeholders together to implement the task force recommendation that government join forces with insurers to form an Anti-Fraud Awareness Implementation Group to put in place a consumer engagement and education strategy.

Blodgett reports that the province has begun the process of bringing stakeholders together to implement the task force recommendation that government join forces with insurers to form an Anti-Fraud Awareness Implementation Group to put in place a consumer engagement and education strategy.

The Alliance of Community Medical and Rehabilitation Providers’ Laurie Davis is pleased with the emphasis on consumer engagement. “People really do not understand the product.”

The easiest recommendations to implement will be those directed at “insurers themselves as they are already uniquely poised to change their own practices and should have an inside track on trends, data and the release of such data,” says the OTLA’s Andrew Murray.

Davis says the alliance firmly supports having insurers provide more specific medical reasons for denial. “We think this contributes enormously to the dispute and also to the barriers for treatment of legitimate claimants,” she adds.

“As providers and insurers wait on resolution of those disputes, there’s a certain lack of clarity in terms of how the current system is working,” she says.

Dealing with the backlog is key “so going forward with any further changes, we can do so in a way that we won’t feel like we’ll be waiting months or years sometimes for issues to be resolved.”

With regard to the backlog, Palumbo says “we need a new system, a system that will get the disputes resolved quickly so that insurers know exactly what it is that they’re underwriting, what their costs are, and will make sure that injured claimants are treated properly.”

42 Canadian Underwriter January 2013

MISSING PIECES With regard to the contents of the task force report, Aviva would have “liked to see more comprehensive recommendations on enforcement and prosecution, particularly as it relates to organized fraud,” Ots says.

“Partnerships with Crime Stoppers and other key stakeholders in law enforcement are essential to beating increasingly sophisticated insurance crime,” the IBC’s Rick Dubin notes in a statement. “We believe that raising awareness and encouraging people to take the time to report insurance crime will significantly improve the detection and conviction of fraudsters,” he adds.

Another missing piece in the report, Ots suggests, is that “the task force’s scope of review did not include a review of the auto insurance product. Aviva believes there are systemic problems within the current product that the government needs to tackle in order to fully address the causes of fraud,” she says.

The OTLA, for its part, has expressed concern about several recommendations “which are unfair to the members of the public, and add extra layers of cost and complexity to our insurance system. Specifically, we oppose the $500 penalty suggested for a missed insurer medical exam. This suggestion has nothing to do with combating fraud,” Murray argues.

“Moreover, there are already drastic sanctions within the existing accident benefits schedule to deal with missed insurer exams,” he contends.

Carroll’s view is that the fee for missing appointments makes sense. “I get charged a fee if I miss a scheduled

appointment with my doctor or dentist.

Why should this not be the same for medical examination appointments?”

AIAC notes it has a general concern that many task force recommendations “seem to reflect a view that greater government involvement and regulation of auto insurance is the ultimate panacea.” The group suggests “the Ontario public is unlikely to welcome the costs associated with a large, new bureaucracy or believe that greater government regulation will lead to reduced premium costs.”

Despite the many positives, and the general support, “there is a lot of work that remains to be done in order to better understand what these recommendations would look like in practice,” AIAC emphasizes.

“When fraudsters take advantage of the system, legitimate insurance claims may be delayed for people in real need,” IBC reports. “The result is that all claimants have to go through the same tough system aimed at fraud artists and the extra costs for insurers result in higher insurance costs for everyone.”

Passing regulations and passing legislation “doesn’t accomplish much if it’s not rigorously enforced,” Davis adds.

“The fraudsters are the entrepreneurs. They are the ones who lead the harvesting of the insurance money.

They are the ones who come up with the tactics and execution. They know how to make the money and they know how to make it quickly,” Schultz says. “If we are constantly in a situation of responding, it’s going to be hard to mitigate these losses in any real, tangible way.”

Most people would never commit insurance fraud.

So why is everyone paying for it?

Only a small number of people engage in it, but insurance fraud costs everyone.

Aviva’s investigation teams fight fraud at the front end, heading off potential problems before they take root. Through early detection, investigation and deterrence, we’ve expanded our anti-fraud management program to address this serious and costly issue.

“Aviva is a leader when it comes to combating fraud.

I’m encouraged by their zero tolerance approach and expanded commitment to investigation.”

Nick Kidd SVP, Personal Lines Aon Canada, Toronto, ON

Together with our broker partners, Aviva is stepping up the fight against fraud to ultimately keep insurance costs down.

AvivaPartner.ca

Home | Auto | Leisure & Lifestyle | Business | Group | Surety Aviva and the Aviva logo are trademarks of Aviva plc and used under license by Aviva Canada Inc. and its subsidiary companies.

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Constructing Liability Greg Meckbach Associate Editor

A Supreme Court of Canada decision that explored how a poorly built home can be construed as an accident, rejecting an insurer’s claim from construction contractors who blamed defective work on subcontractors, remains relevant today.

A Supreme Court of Canada decision two years ago involving a commercial general liability (CGL) claim from a construction firm remains relevant today, raising questions with respect to whether or not some CGL policies of some insurance firms are in need of a reno.

In the September 2010 decision, Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, the highest court in the land ruled against Lombard General Insurance when it determined that the insurer had a duty to defend Progressive Homes, a general contractor, against a claim by the British Columbia Housing Management Commission (BCHMC). The court did not rule on the merits of BCHMC’s claim, which alleged

44 Canadian Underwriter January 2013

negligence and breach of contract after some buildings suffered water damage.

That case — and others it cited — addressed numerous issues: whether or not negligence constitutes an accident; if CGL policies for construction companies are intended to cover poor workmanship; what responsibility general contractors have for the work of their subcontractors; and the overall purpose of liability insurance.

“This case has fundamentally changed the law that had been adopted by various lower courts previously,” suggests Thomas Heintzman, a litigation lawyer in the Toronto office of McCarthy Tetrault. Heintzman suggests there may be instances where an insurer will need to be more specific in its exclusions. “If the exclusion is intended to be limited to the work done by the contractor, then I think the insurance company has to understand that it will be interpreted to apply to everything else.”

In a blog post last September, Heintzman noted that an April, 2011 ruling out of British Columbia had applied the Progressive Homes decision.The case at bar, Bulldog Bag Ltd. v. AXA Pacific Insurance Company, revolved around a claim by Bulldog Bag on a policy issued by the insurer.

In 2008, Bulldog Bag made printed plastic

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packaging for soil and manure to be sold by a different firm, Sure-Gro, to Canadian Tire, but ink on the bag damaged the product. Bulldog Bag reimbursed Sure-Gro for more than $832,000 and made a claim of approximately $732,000 on its liability insurance policy with AXA. AXA initially denied the claim, citing an exclusion clause on “goods or products manufactured or sold by the insured,” but B.C.’s Court of Appeal disagreed and ordered AXA to indemnify Bulldog Bag for its claim.

In ruling against AXA, the province’s appeal court cited Progressive Homes v. Lombard, noting that the Supreme Court of Canada confirmed the “primary interpretive principle” for insurance policies is that “when the language of the policy is unambiguous, the court should give effect to clear language, reading the contract as a whole.”

In overturning a decision from the B.C. Court of Appeal, which upheld a lower court ruling, Canada’s high court also

The Supreme Court of Canada noted that “property damage” in such policies is not limited to damage to “third-party property,” but can include damage from part of a building to another part. noted that “property damage” in such policies is not limited to damage to “third-party property,” but can include damage from part of a building to another part. “The term ‘accident’ may, depending on the facts of each case, include the consequences of defective workmanship...,” the court added.

ALLEGATIONS OF NEGLIGENCE BCHMC had initiated four separate actions against Progressive Homes, claiming “significant water damage caused rot, infestation and deterioration” to four condominium developments. The housing authority alleged that the general contractor breached its contract

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and was negligent.

The defects and damage are alleged to have included water leaking through the exterior walls, improper and incomplete installation and construction of framing, stucco walls, vinyl siding, windows, sheathing paper, flashings, ventilation, walkway membranes, flashing membranes, eavestroughs, downspouts, gutters, drains, balcony decks, pedestrian walkways, railings, roofs and patio doors.

For its part, the court noted, Progressive Homes alleged the “inadequate construction” was completed by subcontractors responsible for the installation of vinyl decking, a waterproof membrane and a ventilation system.

Several commercial general liability insurance policies that Progressive Homes had with Lombard required the latter “to defend and indemnify Progressive when Progressive is legally obligated to pay damages because of property damage

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caused by an occurrence or accident.”

However, Judge Bruce Cohen of the Supreme Court of British Columbia, who initially heard the case in 2007, found that the claims of Progressive Homes “did not fall within the initial grant of coverage under the policies and, therefore, Lombard did not owe a duty to defend.”

B.C.’s appeal court upheld Judge Cohen’s ruling two years later, noting the purpose of insurance is to transfer “fortuitous contingent risk” and that the “expected consequences of poor workmanship can hardly be classified as fortuitous.”

The Supreme Court of Canada disagreed, overturning that decision and ruling that Lombard had an obligation to defend Progressive Homes.

HAVING SUBCONTRACTOR INVOLVEMENT A GOOD IDEA Commenting on Progressive Homes, “there has been perhaps an increased awareness of the need to review the involvement of subcontractors in a construction project, and perhaps there has been some slight modification in the approach our underwriters take to rate our coverage of those projects,” reports Roger Keightley, a consultant for Aviva’s commercial lines property group.

“Aside from that, our appetite for this type of risk hasn’t changed as a result of that court case,” Keightley says.

The approach taken by Aviva is based on another case involving Lombard, one that was subject to a ruling by the Court of Appeal for Ontario in 2006. A construction contractor with a Lombard liability insurance policy, Bridgewood Building Corp., was constructing houses in Brampton, west of Toronto, which ended up having cracked foundations that were considered unsafe. Bridgewood blamed the problem on a subcontractor, Dominion Concrete.

“The faulty concrete caused damage to the homes such that the footings and foundation walls would not support the weight of the structures,” Judge Elizabeth Stewart of Ontario’s Superior Court of Justice, notes in her 2005 rul-

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ing. “Indeed, the concrete material had deteriorated to the extent that, in extreme cases, it could be scooped out by hand,” the decision notes.

Bridgewood was required to provide new homeowners with a seven-year warranty for major structural defects under the Ontario New Home Warranties Plan Act. Judge Stewart’s ruling notes Lombard agreed the policy it provided for Bridgewood applied to damages “that are sought in an action for which (Bridgewood is) legally obligated to pay by reason of property damage.”

But Lombard countered that Bridgewood failed to qualify for coverage because “there must be some demonstration of fault on the part of the

If insurance companies do not wish to indemnify general contractors for the shortcomings of their subcontractors, they need only say so in clear and unambiguous language in their policies: Ontario court. applicants, or a determination that they are ‘legally obligated to pay,’ before liability can be brought to bear,” despite Bridgewood’s obligations under the new home warranty law.

Lombard argued at the time that if general liability coverage was provided for the subcontractor’s work, then “liability policy effectively becomes ‘enormously expanded,’ opening the floodgates to claims that would include building code infractions, substitution of sinks, repair of chipped tiles, drywall repair and essentially all of the (contractor’s) work.”

Judge Stewart ruled against Lombard, a decision that was then upheld on appeal.

Ruling in favour of Bridgewood, the Ontario Court of Appeal noted: “If insurance companies do not wish to indemnify general contractors for the shortcomings of their subcontractors, they need only say so in clear and unambiguous language in their policies.”

With regard to exclusion clauses for subcontractors’ work, Heintzman said what Lombard sought to do in the Progressive Homes case “was to argue that the exclusion had a wider impact, that it applied not just to the work done by the contractor but to, let’s say, work done by the subcontractors, or consequential damage to other property.”

DEFECTIVE WORK NOT COVERED It was never the intent of CGL policies to cover defective work of a subcontractor, a spokesperson for the Insurance Bureau of Canada notes in an email response. Although the Supreme Court of Canada “decision was with respect to the duty to defend, where the threshold is lower than the duty to indemnify, the intent has never been to cover defective work of either the insured, or any subcontractor working on its behalf,” the spokesperson writes.

Heintzman does not believe insurance firms are going to try to have the rules on CGL changed. “I just think they want to understand.... what they’re covering, and now they are being told by the Supreme Court that they’re covering such things as work done by others and not by the contractor, consequential damage to other property and things like that,” he says.

“They may have to charge a larger premium for that. It’s a question of, what is the risk and have they properly allowed for it?”

In deciding if something is an accident, the key question is whether or not it was intentional, comments Mike Riley, assistant vice-president and national claims counsel at Aviva.

In Lombard, says Riley, the court explained “unless you intentionally go out to create a defective building, that’s an accident, it’s unintended, unforeseen.” If something is done incorrectly, “that’s what a third-party liability policy is intended to pick up.”

If an accident does not include negligence, Heintzman says, then a CGL policy could become meaningless. “If it’s not covering negligence, then we’re not going to have anything to cover.”

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You’ll take away new strategies from thought-provoking speakers, top-quality sessions and the latest industry innovations. Whether your risk responsibilities include implementing an enterprise risk management program, attacking cyber risks or exploring your organization’s risk appetite, RIMS ’13 is for you.

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Conference Finale Howie Mandel, Comedian and Author, Here’s the Deal: Don’t Touch Me

Go.RIMS.org/RIMS13CU

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Separating Fact from Friction

Forensic Engineer Giffin Koerth

Winter driving season is back — and with it, the winter tire debate is again in full swing.

Advertisers are promoting the benefits of winter tires; media coverage is feeding the perception that not using winter tires is the sole cause of the latest multi-vehicle pileup; and good old “Uncle John” is repeating his now-familiar caution that he has used all-season tires for years during the winter and winter tires are just a waste of money.

48 Canadian Underwriter January 2013

With so much misinformation out there these days, it can be difficult to distinguish the root cause of a collision from things that may be contributing factors or, worse yet, simply unrelated circumstances. There seems to be a lack of understanding of what makes winter tires different from all-season tires, what those differences mean in terms of vehicle performance, and how winter tires should be used.

Exacerbating the problem is the Internet, which — for better or worse — provides a forum for anyone proclaiming to be a “car expert” to offer advice to the driving population. Contradictory information is abundant and confusing, but there is little disagreement among engineers as to the truth of the matter.

WINTER V. ALL-SEASON The objective of winter tire designers is straightforward: design a tire that can readily move loose snow and ice out of the way so the tire can make contact with the hard packed surface below and, subsequently, adhere to that surface even if it is ice-covered and the temperature is very low.

Illustration by Jillian Ditner/i2iart.com

Mark Fabbroni

Winter weather is here and so is the debate over whether or not a lack of winter tire use is causing collisions. To go beyond generalizations, detailed information is essential to properly understand the effect that winter tire use would have had in a given collision.

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There is an optimal level of “softness” sharply at sub-zero temperatures.

There are two primary differences between winter tires and their all-season for any given temperature. At low temWhen temperatures drop well below CanStar Careers - City Wide Distribution includes: Herald, Lance, Metro, Times, Headliner & Uptown. cousins, those being the tread patterns peratures, the softer winter tires provide zero and there is snow on the roadway, than all-season tires, winter tires in good condition will sigused and the materials from which the better performance Prepared by the HR ADWORKS SERVICE TEAM tires are constructed. For obvious rea- and at high temperatures, the situation nificantly outperform their all-season ORDER TAKEN: DESIGNED: PROOFED: ESTIMATED: sons, winter tire designs often include is reversed. The transition temperature counterparts; when temperatures are Lily an intricate network of large channels to at whichJulie most winter tires begin out- above zero and roads are clear, the difassist with the bulk movement of snow performing most all-season tires on ferences in performance between the and ice from beneath the tire. dry asphalt is generally accepted to tires is marginal; and when temperaOften overlooked, however, are the be approximately 7 degrees Celsius. tures creep into the teens during a thaw finer details.These include greater use of The difference in performance increases period, a vehicle may actually perform “sipes” — thin slits cut into the rubber — that significantly increase traction in wet and icy conditions.

As for tire materials, the compounds used in winter tires are generally “softer” than those used in all-season tires and are formulated to better adhere to ice and snow.

The Wawanesa Mutual Insurance Company announces the following recent appointments:

Tracy L. Nelson, BA, FLMI/M, CHRP, CIP

Often overlooked, however, are the finer details. These include greater use of “sipes” — thin slits cut into the rubber — that significantly increase traction in wet and icy conditions.

In general, tire “softness” decreases as the temperature drops. Softness, however, carries with it a trade-off in terms of vehicle performance: a tire that is too soft will not be able to generate the loads required for good handling and braking performance and will wear prematurely. Conversely, if a tire is too hard, then traction suffers.

Tracy L. Nelson, BA, FLMI/M, CHRP, CIP, as Vice President, Regional Insurance Operations, Executive Office, Winnipeg. In her new role, Ms. Nelson will be responsible for providing oversight of all Canadian insurance operations excluding marketing, business development and broker relations. She will also be responsible for development of business processes that are effective, efficient and consistently applied within the company’s Canadian insurance operations. Ms. Nelson joined Wawanesa Life in 1978 and held various positions of increasing responsibility within Wawanesa Life including Manager, Accounting & Financial Reporting and Manager, Individual Life Administration until being appointed Manager, Human Resources in Wawanesa Mutual’s Executive Office in 2003.

In 2005, she was appointed Vice President, Human Resources.

Ms. Nelson holds a Bachelor of Arts from the University of Winnipeg and has earned her Master Fellow, Life Management Institute (FLMI/M), Certified Human Resources Professional (CHRP) and Chartered Insurance Professional (CIP) designations.

Jodi E. Carradice, BSc, CHRP Jodi E. Carradice, BSc, CHRP as Vice President, Human Resources, Executive Office, Winnipeg.

In her new role, Ms. Carradice will oversee the Human Resources function at Wawanesa and will be responsible for developing and implementing key HR strategies and programs that are aligned with and contribute to the achievement of the company’s strategic goals and business objectives. Additionally, she will be responsible for ensuring customer-focused HR services are delivered in a consistent, effective and efficient manner. Ms. Carradice joined Wawanesa in 2007 as Human Resources Coordinator, bringing many years of extensive Human Resources experience. In 2008, she was appointed Manager, Human Resources, and in January, 2012, was appointed Director, Human Resources.

Ms. Carradice holds a Bachelor of Science from the University of Calgary and has earned her Certified Human Resources Professional (CHRP) designation.

The Wawanesa, established in 1896, is a Canadian-owned leader in the insurance industry. The Company conducts business throughout Canada, California and Oregon and has combined assets of over $7 billion and annual premiums exceeding $2 billion.

January 2013 Canadian Underwriter

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better if equipped with all-season tires (regardless of what the calendar says).

The last point is a contentious one that sparked some controversy in Quebec several years ago when it became mandatory to use winter tires during the winter. Concern was expressed that the provincial government was mandating the use of a technology that may, in some conditions, make the vehicle less “safe.”

Limited testing has been done to compare the performance of winter tires in dry conditions above freezing to all-season alternatives, but this seems to suggest the difference in performance may be small at the temperature highs that Quebec could realistically see during winter months.

The net result is that mandating winter tire use may have negligibly reduced vehicle performance a small percentage of the time while overwhelmingly improving vehicle performance the majority of the time. Not surprisingly, the result has been a reduction in the number of winter collisions.

COLLIDE OR AVOID To determine whether or not improvements in tire performance would make the difference between colliding with or avoiding another vehicle in a particular instance, it is necessary to assess how much traction is being demanded of the tires during a particular vehicle manoeuvre. Driving on tires that perform worse than others in the same conditions is not ideal — but it may be more than enough to be safe under the circumstances.

The differences in performance only become an issue when a driver demands something of the tire that it is incapable of providing at a given moment.This is a key point that must be considered in any assessment of causation.

Beyond these issues, the variety of configurations in which winter tires are mounted on vehicles has further clouded the debate.

In practice, it is not uncommon to see vehicles equipped with a mix of allseason and winter tires. Conventional

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wisdom generally results in a configuration in which two winter tires are mounted on the drive axle while allseason tires are left on the undriven axle.The oft-cited reason for this type of setup is the need for good traction on the drive axle to be able to accelerate out of deep snow.

However, this reasoning is wrong, since there is much more to vehicle performance than just acceleration.

The differences in performance only become an issue when a driver demands something of the tire that it is incapable of providing at a given moment.

This is a key point that must be considered in any assessment of causation.

Vehicle stability, particularly during heavy steering or braking in slippery conditions, is arguably more important from a safety standpoint and it is significantly compromised when a vehicle’s four tires do not have the same performance capabilities.

While “snow tires on the drive wheels only” configuration was never optimal for vehicle performance, it was less dangerous in the days of rear-wheel drive vehicles. With the domination of front-wheel drive vehicles in the marketplace today, however, the conven-

tional wisdom can have catastrophic results.

As a collision reconstructionist, I have seen many examples of vehicles that have lost control in winter conditions, causing them to veer into oncoming traffic or off the road in part because they were equipped with winter tires on only the front axle.The simple explanation for this is that vehicles are less stable under braking and steering when the tires with the most traction are located on the front axle, than when the situation is reversed.

That said, most tire manufacturers correctly point out that the maximum benefit derived from the use of winter tires occurs when they are placed on all four wheels of a vehicle.This is not only optimal for stability reasons, but for performance as well.

Testing has demonstrated that vehicles equipped with four winter tires in winter conditions will stop shorter than vehicles with various configurations of winter tires mixed with all-season tires.

All of the foregoing is true regardless of the type of technology with which the vehicle in question is equipped. Antilock brake, traction control, stability control and all-wheel drive systems are great assets to have in winter driving conditions; however, these systems merely take advantage of the tractive capabilities of a given tire, rather than changing what those capabilities are.

As such, they, too, are entirely dependent on good tire performance to be of any assistance.

Establishing whether or not use of a specific type of tire had any effect on a given collision is highly dependent on the specifics of the weather conditions at the time, the condition and type of tires involved, and where on the vehicle the tires were installed. All of these factors must be assessed within the context of the driving manoeuvres attempted and the vehicle speeds involved to identify if tire type or use was a contributory cause.

The winter tire debate is far more complex than is typically reported or advertised.

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Denial, Deflection and Duty to Pay A decision by Ontario’s Superior Court of Justice highlights the need for an insurer to respond to a completed Application for Accident Benefits whether or not a nexus exists between the insurer and the claimant.

Jason Frost

Associate Hughes Amys LLP

Hughes Amys LLP is a member of The ARC Group Canada.

Every motor vehicle liability policy in Ontario provides statutory accident benefits coverage as set out in the Statutory Accident Benefits Schedule (SABS), pursuant to section 268 of the Insurance Act. Ontario Regulation 283/95 — Disputes Between Insurers (O. Reg. 283/95) — sets out the process for disputing the obligation to pay accident benefits. The intent of the priority dispute scheme is to ensure that the first insurer to receive an application for benefits “pays pending” the resolution of the dispute. Historically, insurers have denied any obligation to respond to an accident benefits claim or to comply with O. Reg. 283/95 on the basis that they have no connection or “nexus” with the claimant.

With Auto Bulletin A-07/10, the Financial Services Commission of Ontario (FSCO) highlighted changes to the regulation to ensure compliance by all insurers in the province.

Additionally, these changes were designed to ensure that claimants receive accident benefits in a timely fashion while priority disputes are resolved between insurers.

The changes to O. Reg. 283/95 appeared to mostly eliminate the common law “nexus test” for determining whether or not an insurer in Ontario is required to comply with the regulation to transfer an accident benefits claim to a priority insurer.

O. Reg. 283/95 now provides that any “insurer”

52 Canadian Underwriter January 2013

who receives a completed Application for Accident Benefits (OCF-1) is obligated to accept that application and pay accident benefits, pending the result of the priority dispute.

This was designed to prevent an insurer from denying or deflecting the claim on the basis that it did not insure the claimant or did not have a valid policy at the time of the accident.

Importantly, subsection 2(2) of O. Reg. 283/95 provides that the requirement to respond to the OCF-1 and “pay pending” applies retroactively “in respect of benefits that may be payable as a result of an accident that occurs before September 1, 2010.”

ZURICH INSURANCE V. CHUBB INSURANCE Zurich v. Chubb is a recent SABS priority dispute appeal relating to an accident in 2006. Justice Robert Goldstein of the Superior Court of Justice held that the priority arbitrator erred in finding that Chubb was not an insurer for the purposes of O. Reg. 283/95.

The facts are relatively straightforward: the claimant rented a vehicle from Wheels4Rent, which was insured with Zurich. At the time of rental, she declined an optional policy for accidental loss of life and injury coverage offered

by Chubb. The claimant was then injured as a result of a motor vehicle accident on September 23, 2006 and submitted an OCF-1 to Chubb.

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Chubb denied the claim for accident benefits on the basis that it was not an insurer under either SABS or O. Reg. 283/95, because it did not offer or underwrite a policy of motor vehicle liability insurance. Rather, the offered product of insurance was simply a commercial policy for accidental loss or injury.

Following Chubb’s denial of benefits, Zurich eventually paid benefits to the claimant. Zurich then commenced a priority dispute with Chubb, arguing that Chubb improperly deflected the claim and ought to have accepted the OCF-1 pending any priority dispute.

Arbitrator Stanley Tessis accepted Chubb’s position that the offered policy was commercial and not a motor vehicle liability policy. Tessis, therefore, found that there was no nexus or connection between Chubb and the claimant for the purposes of section 268 of the Insurance Act and O. Reg. 283/95. As such, Chubb was not required to pay any accident benefits or obligated to comply with O. Reg. 283/95.

On appeal, Justice Goldstein relied on the Insurance Act definitions of “insurer” and “motor vehicle liability insurer” to find that Chubb was obligated to both respond to the OCF-1 and to comply with the priority dispute scheme.

Section 1 of Ontario’s Insurance Act provides as follows: “insurer” means the person who undertakes or agrees or offers to undertake a contract. ... “motor vehicle liability policy” means a policy or part of a policy evidencing a contract insuring, (a) The owner or driver of an automobile, ... against liability arising out of bodily injury to or the death of a person, or loss or damage to property caused by an automobile or the use or operation thereof.

Justice Goldstein observed that simply calling a policy a commercial policy does not necessarily make it so. The policy offered by Chubb insured the driver of

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a motor vehicle against damages caused by the use of a vehicle. Accordingly, it was a motor vehicle liability policy and Chubb was, therefore, an insurer for the purposes of O. Reg. 283/95.

Justice Goldstein also reviewed the “nexus test” discussed in the 2007 decision by the Court of Appeal for Ontario, Kingsway General v. Ontario.The nexus test provides that an insurer cannot avoid its obligation to “pay pending” on the basis that another insurer should pay or that its policy was cancelled prior to the accident. So long as there is a nexus or connection between the insurer and the claimant, the insurer must pay accident benefits pending the determination of its obligation to do so.

Justice Goldstein applied the nexus test to find that the choice of Chubb by

Chubb denied the claim for accident benefits on the basis that it was not an insurer under either SABS or O. Reg. 283/95, because it did not offer or underwrite a policy of motor vehicle liability insurance. the applicant was not arbitrary; there was a connection between the claimant and Chubb.Arguably, based on the changes to subsection 2(2) of O. Reg. 283/95, there was no need for a finding that Chubb had a nexus with the claimant. All that was really required was a finding that Chubb was an insurer that agreed or offered to undertake a contract insuring any owner or driver of an automobile for damages related to its use or operation.

The matter was remitted back to the arbitrator to determine the remaining issues in arbitration, including whether Chubb complied with procedural requirements of O. Reg. 283/95, and whether the consequence of its failure to do so should result in an obligation to pay accident benefits, as well as the amount of any indemnification owed to Zurich.

In Wawanesa Mutual Insurance Company v.

Lombard Canada, released in 2010, the Court of Appeal for Ontario found no error in law regarding the arbitrator’s

determination that a breach of section 2 of O. Reg. 283/95 ought not to result in an obligation to pay benefits indefinitely.

However, the Kingsway decision “left the door open” for the arbitrator to conclude that Kingway’s deflection and failure to comply with the 90-day priority notice should result in its obligation to pay benefits indefinitely.

In a proper case, it remains open for a priority arbitrator to conclude that an insurer’s decision to deflect the accident benefits claim to another insurer and not comply with O. Reg. 283/95 should result in the first insurer’s obligation to pay the claim indefinitely.

DENY OR DEFLECT AT PERIL The changes to O. Reg. 283/95 and the Chubb v. Zurich decision highlight the increased duty of insurers in Ontario to respond to a completed OCF-1, regardless of whether or not a nexus exists between the insurer and claimant. Insurers continue to deny or deflect claims at their peril.

Any insurer licensed in Ontario that offers or underwrites a policy insuring the owner or driver of a motor vehicle is obligated to comply with O. Reg. 283/95. This means the insurer is obligated to respond to a completed OCF-1, pay accident benefits in the interim, and comply with O. Reg. 283/95 to transfer the claim to the priority insurer.

This broad obligation is particularly relevant for insurers who offer “nontraditional” policies of insurance related to the use or operation of a motor vehicle, such as add-on policies through employment, educational, recreational and rental relationships.

The December 13, 2012 FSCO appeal decision, MVAC(F) and Buckle, further reminds the insurance industry that there may also be broader exposure for insurers of golf carts, pocket bikes, ATVs and other off road-type vehicles that are not traditionally considered to be motor vehicles, depending on the particular facts of the case.

Last, the Power of Attorney and Undertaking continues to apply to mean that extra-provincial insurer signatories are held to the same standard as all other insurers in Ontario.

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Peter Morris

Vice President Strategic Resource Consultants

The importance of networking and building a solid support system is regularly touted as being important, but often not enough effort is put into developing, enriching and augmenting this key skill.

In a people industry like insurance, that may put players at a disadvantage.

Everyone is familiar with the expression: “It’s not what you know, it’s who you know.” When it comes to insurance, however, perhaps a more accurate expression would be: “It’s not only what you know, it’s also who you get to know.”

Over the past decades, the insurance industry has become more dependent on technology.

While this trend will almost certainly continue, bringing with it an increase in communication through email and through social media, being able to establish connections in face-to-face sit-

56 Canadian Underwriter January 2013

uations will remain important. The insurance industry is very much a business that rewards those who are able to network effectively.

To be clear, the “what you know” part of the equation is important. A formal education lays the foundation for establishing a career in insurance. When an employer is looking to bring new talent on board or to promote from within, education level is certainly a consideration, if not a requirement.

That requirement is sometimes expressed in terms of a college diploma or university degree; at other times, it relates to completion, or at least progress towards completion, of a designation through Canada’s Insurance Institute, namely either a CIP or FCIP. For more senior level positions, there may be a stated preference for candidates with both a college/university education as well as institute training.

Landing that first job in insurance is only the beginning; what comes after that is determined by many factors.Too often, the assumption is that the brightest individual will naturally be the one to get ahead, but the reality is there are many skills needed to advance up the corporate

Illustration by Jillian Ditner/i2iart.com

Net Value

ladder — and to stay there.

Among these skills is the ability to develop a network of professional contacts: people who will mentor you; people who will inform you of opportunities as they arise; and people who will put in a good word for you when needed. Good networking skills can help a person develop a wide group of such contacts.

The flip side is that poor networking skills can result in a perilously thin group of these valuable contacts or — for those who really lack skill — a network of people who hinder, not help,

The flip side is that poor networking skills can result in a perilously thin group of those valuable contacts or — for those who really lack skill — a network of people who hinder, not help, by erecting obstacles in their career paths. by erecting obstacles in their career paths. It is difficult enough to advance your career in a competitive employment market without having to clear unnecessary hurdles.

GIFT OF THE GAB Susan RoAne, in her book Face to Face, describes a study by Thomas Harrell, Ph.D., professor emeritus at Stanford University in California. Looking at a group of MBAs a decade after their graduations, Dr. Harrell sought to identify the traits of those who were most successful. Grade-point average turned out to have no bearing on success.

One common trait that did emerge among the most successful was verbal fluency: the ability to speak easily and well in virtually any situation. Recognizing its value, each of these top business people had the ability to start with small talk before segueing into medium talk and, last, moving on to big talk about business, interests, technology and trends. Clearly, for anyone who is inter-

ested in succeeding, verbal fluency is ignored at great peril.

Although it may sound like a crude oversimplification, a key message emerges from RoAne’s study: “You schmooze or you lose.”

The importance of networking is often overlooked. Even when networking is seen as one of the building blocks in establishing a career, its importance can be undervalued. A job description may

reference attending industry events.

However, success in expanding a professional network is not something typically discussed during performance reviews; nor is it a skill that company training programs focus on developing or enhancing.

In her book, Confessions of an Introvert, Meghan Wier describes a professional network as a support system. Wier advises that a person’s network “will guide

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January 2013 Canadian Underwriter

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you, teach you, push you, and ask for the same in return. As you learn about how your network of friends and business associates interweaves with your life and success, you will be taken to a higher level of understanding of yourself, your career, how others see you, and your role in the business world. I cannot stress more the importance of knowing your network.”

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dence and my new contact’s response was, “Yes, that was me.”

Needless to say, paying more attention to the tie clip than to the person wearing it did little to help build a supportive network.

How then should a person properly work the room? To start the networking process, someone needs to make the first move. Most people are, by nature, reticent about approaching someone

GETTING STARTED So how do you go about establishing this network? First and foremost, the insurance industry is a people industry, meaning advancement will hinge on being someone who genuinely likes people. It then becomes a question of making the most of available opportunities to build a network of good contacts.

Company or industry events are excellent opportunities to meet people and expand networks. Although these events can certainly be fun, they still demand a person’s attention.

Early in my career, I attended a company cocktail party at the head office in New York where one of the first people I spoke to was the brother-in-law of my boss’s boss’s boss. I introduced myself and as we chatted, I noticed he was wearing a very distinctive tie clip. After going our separate ways, I introduced myself to someone else at the party about 10 or 15 minutes later and while talking, noticed he was wearing the same tie clip. I mentioned the coinci-

Although it happens rarely, an introduction can be met with chilly silence. The rebuff may be hurtful, but is not fatal. The best thing to do is be polite and just move on. they do not know and starting a conversation. Except for natural extroverts, it is far more comfortable to speak only with people you already know or to stand by the buffet table, waiting for someone else to introduce themselves.

In her book, How to Work a Room, RoAne identifies the following five cautions that contribute to stopping us from mingling and getting to know new people: • don’t talk to strangers; • wait to be properly introduced; • don’t be pushy — good things come to those who wait; • better safe than sorry; and • a warm, open, friendly introduction

may be misconstrued as an invitation to something more.

GOOD RISK To make the most of social situations, it is necessary to take some risk — even if that means the risk of being brushed aside. Although it happens rarely, an introduction can be met with chilly silence. The rebuff may be hurtful, but is not fatal. The best thing to do is be polite and just move on.

Of course, industry events are not the only way to build a network. Online social media such as Facebook, Twitter, HootSuite and LinkedIn offer forums through which to create a professional image and network.While social media can provide a convenient way to establish and maintain connections, they should not completely replace opportunities to establish rapport through face-to-face conversation.

When it comes to networking, one side of the coin is expanding your own list of connections; the other side is having people want to connect with you. Is it often said that nothing succeeds like success. Indeed, it is easier to expand your network of contacts if you are perceived as someone who is successful.

The ability to build and maintain a network is among the many skills that contribute to a successful career, but remains one whose value is often underestimated. It demands effort and care to be fully realized.

January 2013 Canadian Underwriter

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Tough Haul Opinion/Analysis

Willie Handler Consultant Willie Handler and Associates

Is self-regulation for the Ontario towing industry a non-starter?

Despite previous failed attempts to get a system rolling, the Ontario Automobile Insurance Anti-Fraud Task Force has recommended trying one more time.

The recently released report of the Ontario Automobile Insurance Anti-Fraud Task Force recommends province-wide regulation of the towing industry, which has strong support from the insurance industry.The task force would like to see a province-wide licensing scheme administered by an as-yet undetermined administrative authority.

But a few hurdles need to be cleared, including establishing a regulatory authority within government, before contemplating transfer of control to the private sector.

Over the past decade, there have been a number of attempts to review and/or regulate the cost of towing and storage of vehicles in Ontario, several of which I had some involvement.

In 2003, the government tried to introduce a $300 cap on towing and storage costs through a revision to the Ontario Automobile Policy (OAP 1), but the effort was abandoned out of concern that consumers would be responsible for any excess charges.

In 2004, the province’s Ministry of Finance and the Financial Services Commission of Ontario (FSCO) formed a working group with representatives from government, the insurance industry, police services and the towing industry to address some of the abuse reported by consumers and insurers.There was no consensus coming out of the working group and it was eventually abandoned.

60 Canadian Underwriter January 2013

Four years later, on June, 4, 2008, MPP David Zimmer introduced Bill 87 that would have provided for the self-regulation of the towing industry in Ontario. The bill never proceeded beyond second reading, although Zimmer reintroduced it as Bill 147 on December 10, 2010.Again, however, it failed to proceed beyond second reading.

The key to the task force’s recommendations on regulating the towing industry is the formation of an administrative authority to act as the regulator. Personally, I have some concerns with these recommendations.

MODEL MODEL? Will the administrative authority model work for Ontario’s towing sector?

The province’s Ministry of Consumer Services has oversight responsibility for eight of the authorities currently in operation. With the exception of the Vintners Quality Alliance (VQA) sector, the provincial government had previously regulated the other seven sectors directly.

The seven were selected for delegated responsibility because they were mature sectors that had not only demonstrated the ability to work in partnership with government, but also had a track record for addressing and resolving consumer and public safety concerns. In all but the VQA sector, there were pre-existing statutory standards.

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The first problem with a proposed towing administrative authority is that no existing provincial public authority is currently regulating the sector. There are municipal authorities that issue business licences, but they do not really regulate the industry. As such, there is no store of regulatory expertise or knowledge to transfer to the private sector.

There are municipal authorities that issue business licences, but they do not really regulate the industry. As such, there is no store of regulatory expertise or knowledge to transfer to the private sector.

In addition, one could argue the towing sector does not have the maturity or track record in dealing with consumer complaints and public safety issues.

Representatives from the towing sector — the Provincial Towing Association (Ontario) and the Ontario Recovery Group — met with task force members to express support for self-regulation, but their enthusiasm cannot make up for the lack of regulatory expertise.

The task force noted that participants repeatedly complained towing operators are engaged in organized or premeditated auto insurance fraud. Concerns were expressed regarding road safety concerns, insufficiently trained employees, improper equipment, a lack of clarity around fees and illegal referral fees.

Industry representatives reported they have been unable to deal with corruption in their industry, and legitimate operators have become so frustrated that they have begun leaving the industry. This does not sound like a good environment in which to create a self-regulating body.

I am not suggesting that an administrative authority model for the towing sector can never happen. To its credit, the task force points out there is a need for capacity building in the towing industry. This simply means that the past approach employed by Ontario’s Ministry of Consumer Services is un-

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likely to work in this instance.

Initially, a towing administrative authority would not be able to have as much delegated authority. The council or board overseeing the authority would likely have a smaller proportion of representatives coming from regulated sectors and would need to rely on directors with some experience in regulatory administration.

AUTHORITATIVE HISTORY Administrative authorities are not new to Ontario. In 1976, the provincial government established its first administrative authority when the Board of Funeral Services was established by the Funeral Services Act to regulate funeral services. As well, Tarion (formerly the Ontario New Home Warranty Program) was established by the Ontario New Home Warranties Plan Act to administer warranty coverage to new homebuyers.

In 1996, the Safety and Consumer Statutes Administration Act came into effect, clearing the way for the creation of a number of administrative authorities.

Between 1997 and 1999, the Ontario government delegated authority and responsibility for day-to-day regulatory administration to the following sectors under the act: • Motor vehicle dealers and salespersons — Ontario Motor Vehicle Industry Council; • Real estate salespersons and brokers — Real Estate Council of Ontario; • Travel retailers and wholesalers — Travel Industry Council of Ontario; • Electrical inspections and safety — Electrical Safety Authority; and • Safety of amusement devices, boilers and pressure vessels, elevating devices, fuels, operating engineers, ski lifts and upholstered and stuffed articles — Technical Standards & Safety Authority (TSSA).

With regard to regulatory authority, in 2000,VQA Ontario was designated as the not-for-profit corporation responsible for administering the provincial Vintners Quality Alliance Act; on May 1, 2010, the TSSA became a statutory corporation with enhanced accountability requirements upon the proclamation of the Technical Standards and Safety Statute

Law Amendment Act,2009; and the Retirement Homes Act, 2010 established the Retirement Homes Regulatory Authority and sets out its role, responsibilities and powers with respect to care, safety standards and other requirements applying to licensed retirement homes in the province, with oversight by the Ontario Senior’s Secretariat.

Key objectives of the administrative authority model in the 1990s was to reduce government expenditures, deliver services more efficiently, avoid unnecessary regulatory burden and harmonize regulatory regimes across jurisdictions in response to mounting trade pressures.

PUBLIC PROTECTION So where can towing go from here?

The current patchwork of municipal licensing systems is not protecting the public, and the task force is correct in concluding a province-wide regulatory framework needs to be established.

I believe the first step to creating a towing administrative authority is to establish a regulatory authority within government to develop and enforce industry standards. If the government is contemplating creating a government-

The council or board that oversees the authority would likely have a smaller proportion of representatives coming from regulated sectors and would need to rely on directors with some experience in regulatory administration. run regulatory system for treatment and assessment facilities, then it should also consider establishing one for towing operators.

Only after a regulatory system has been established should consideration be given to transferring it to the private sector. This will provide the towing industry and related associations time to gain some experience working with government, working with consumers and establishing some credibility.

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MOVES & VIEWS UPCOMING EVENTS: FOR A COMPLETE LIST VISIT

www.canadianunderwriter.ca

AND CLICK ‘MY EVENTS CALENDAR” ON THE HOME PAGE

1

W. R. Berkley Corp. recently announced that Andrew Steen has been named president of Berkley Canada, effective January 7.

Steen has more than 20 years of experience in the property and casualty insurance industry in Canada. Berkley Canada, based in Toronto, provides commercial lines, professional liability, surety and executive risk products to commercial enterprises throughout the country. Berkley Canada is the trade name for the Canadian branch of Berkley Insurance Company, a member company of W. R. Berkley Corp.

2

The Insurance Brokers Association of Ontario (IBAO) has announced that Debbie Thompson [2] has been elected as the association’s 70th president.

Thompson, who is currently director of business development at Beyond Insurance Brokers in Whitby, Ontario, was officially inducted at the IBAO Convention in October.

She formally assumed her role as president January 1, 2013. Thompson began her career at the Citadel Assurance, and received her broker’s licence while working at Gellatley Insurance in Toronto. She was chair of the IBAO education committee and sat on the Consumer Engagement and Education Committee as part of the Minister of Finance Automobile Anti-Fraud Task Force.

62 Canadian Underwriter January 2013

2

3

The Canadian Automobile Association Insurance Company (Ontario) has installed Guidewire Software Inc.’s InsuranceSuite software for its personal auto and property lines of business. Foster City, California-based Guidewire recently announced that as of December 1, all 40 retail locations of CAA Insurance (Ontario), and its call centre north of Toronto in Markham, were using InsuranceSuite.

In a press release, Guidewire states that CAA Ontario is using InsuranceSuite to “increase analytical capabilities” and to “more easily integrate” with third-party software. The announcement follows the conclusion of a 14-month implementation project in which all InsuranceSuite systems were completed in parallel, including many external integrations. “An implementation of this size, done in this amount of time, needed to adopt a full Agile methodology to be successful,” says Matthew Turack [3], vice president of insurance for CAA South Central Ontario. InsuranceSuite includes three software

3 applications — dubbed PolicyCenter, BillingCenter and ClaimCenter — all of which are available separately. ClaimCenter lets users enter new claims, using wizards. Features of PolicyCenter, designed for property and casualty insurance firms, include product definition, underwriting, quoting, binding, endorsements and renewals. The third module of InsuranceSuite, BillingCenter, handles payment plans and agent commissions. CAA Insurance (Ontario) is owned

by CAA South Central Ontario.

4

RIMS, the Risk Management Society, has announced that John Phelps [4] will lead the society as president for the 2013 term, effective January 1.

Phelps is director of business risk solutions for Blue Cross and Blue Shield of Florida Inc. He has been a member of RIMS for almost 33 years and on its Board of Directors for nine years. Previously, Phelps served as vice president and board liaison to the society’s External Affairs Committee and RIMS Canada Council.

He is a member of RIMS

4 Northeast Florida Chapter.

The other officers on the RIMS 2013 Board of Directors are vice president Dan Kugler, assistant treasurer of risk management for Snap-On Inc.; treasurer Nowell Seaman, manager of risk management and insurance services for the University of Saskatchewan; and corporate secretary Carolyn Snow, director of risk management for Humana Inc. New board members include Gordon Adams, chief risk officer of Tri-Marine International Inc., and Grace Crickette, chief risk officer of the University of California.

5

FirstOnSite has developed its own software, dubbed mobileCT, which will allow project managers to compile site reports of damaged properties and to generate electronic records for claims adjusters.

The firm opted to develop its software in-house rather than buy commercial off-the-shelf software. “There are bits and pieces of solutions which you can put together, but we’re dealing with security and privacy issues,” FirstOnSite chief operating officer Bruce

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MOVES & VIEWS

6 Derraugh said in an interview with Canadian Underwriter.

“We’re not just going to be running it off someone’s laptop or an iPad.” Mississauga, Ontario-based FirstOnSite, which cleans up and repairs properties after catastrophes, floods and fires, has 100-plus project managers assessing damage on insured properties.

In the past, Derraugh says, the process was manual, so when a project manager visited a damaged property, the initial report would be on paper. Along with photos and sketches, that report would be brought back to the firm’s office and entered into its software. With mobileCT, the project manager can generate both a report for the insurance carrier and a work order the same day.

6

Burns and Wilcox Canada announced that Lalita Mohabir [6] has joined the company as senior personal accident underwriter in the company’s Toronto office. The firm was created as a result of the acquisition last year of Londonbased Chesterfield Group Ltd.

by H.W. Kaufman Financial

7a

7b

Group. Mohabir brings more than 26 years of industry experience to Burns and Wilcox Canada and will lead the company’s personal accident team, offering accidental death and dismemberment (AD&D) coverage. In her most recent role, Mohabir served for 12 years as a senior underwriter with William J. Sutton & Co. Ltd. In this capacity, she provided special risk assessment for a variety of prospective policy contracts, including rating and analysis for life and accident, disability, expatriate major medical insurance and special contingency policies.

will operate as an independent subsidiary of CBN with its own leadership team, name and brand. “This acquisition is a tremendous opportunity as it allows us to enter an important segment of the brokerage industry,” CBN chair Daryn McLean [7a] notes in the press statement.

“Under the strategic direction of CBN, South Western will be well-positioned to better serve the needs of insurance brokers across the country,” adds Intact president and CEO Louis Gagnon [7b].

7

Canadian Broker Network (CBN) and Intact Financial Corp. announced that they have reached an agreement whereby CBN will acquire Intact affiliate South Western Insurance Group Ltd., a wholesale insurance intermediary that provides brokerages with specialty and niche insurance markets. Terms of the transaction, which was expected to close by the end of 2012, were not disclosed.

Upon closing, South Western

8

CARSTAR Automotive Canada is entering 2013 with the launch of 25 new franchise partners across Canada. The company’s recent NAPA Autopro transition will account for the conversion of 20 new locations throughout Quebec in January, with more locations expected to be added in the early part of 2013. In Alberta, a new location will open in Medicine Hat, while in Atlantic Canada, a new location will be opened in Amherst, Nova Scotia. Both locations are new centres. In British Columbia, new locations are

9 being added in Duncan and 100 Mile House. In Ontario, CARSTAR Kincardine also recently joined the network.

9

The Co-operators Group Limited announced in December that its TIC travel insurance subsidiary has been recognized as one of the best small and medium employers in Canada. It is also on a list of the best employers in the greater Toronto area (GTA) for 2013. The Best GTA employer list is compiled by AON Hewitt Human Resources, in partnership with the Kingston, Ontario-based Queen’s University School of Business. The list uses results of confidential employee engagement surveys.

“We received solid scores in areas, including co-workers, work/life balance and physical environment,” David Hartman [9], president and CEO of TIC, says in a press release. TIC is owned by The Co-operators Life Insurance Company, part of the Guelph, Ontario-based Co-operators Group.

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http://twitter.com/CdnUnderwriter

January 2013 Canadian Underwriter 63

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4 GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

Zurich Canada hosted its “Trendworks” North American road show event exclusively for its broker community at the newly constructed Shangri-La Hotel in downtown Toronto on November 1. At the event, brokers were able to meet with some of Zurich’s business leaders who discussed emerging risks, issues and trends within the industry. In addition to a general session, there were in-depth sessions on Complex Supply Chains, Unexpected Disruptions; Building Canada: Construction Industry Risks & Trends; The Risks of Global Expansion; and Security and Privacy Risk: New Challenges, New Opportunities.

64 Canadian Underwriter January 2013

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GALLERY

Chubb Insurance Company of Canada participated in the 13th Annual North American Chubb Charity Challenge Golf Tournament at the The Ritz Carlton Lodge at Reynolds Plantation in Georgia on November 15-16, 2012. Chubb Canada was represented by three teams from across the country: The CG&B Group Inc. from Toronto; Lloyd Sadd Insurance Brokers from Calgary; and Aon Risk Solutions from Montreal. In 2012, the Chubb Charity Challenge raised $925,000 for local charities in Canada and the United States, and almost $11 million over the 13 years since the effort was launched in 2000. This

year, 45 teams, out of 330 that competed, won their regional qualifying rounds and were invited to participate in the North American finals. During two championship rounds, each team of brokers and customers are paired with a Chubb branch manager or senior executive to help them compete for the prize purse. In 2011, Jones Brown Inc., a Canadian team from Calgary, finished first, winning the North American tournament and resulting in a $50,000 donation being made to the team’s local charity, the Hospital for Sick Children.

This year, the Calgary branch partnering with Lloyd Sadd Insurance Brokers was again the top-performing Canadian

team, finishing fourth overall and winning $35,000 for their local charity, Habitat for Humanity - Edmonton Society.

The Toronto branch represented

by The CG&B Group finished in 14th place, claiming $10,000 for their charity, the Markham Stouffville Hospital Foundation, while the Montreal branch playing with Aon Montreal finished in 28th place, winning $7,000 for the Centraide of Greater Montreal. Local charities in Canada have benefitted through the Chubb Charity Challenge.

Thanks to the continued support of our key partnering brokers and the strong play of our teams at the North American finals, this year Chubb Insurance Company of Canada is happy to

announce we have surpassed $1 million dollars in total donations to local charities.

André Asselin chooses Miller Thomson

We are pleased to announce that André Asselin has joined the Montreal office as a Partner specializing in insurance law.

Mr. Asselin has more than 40 years of experience in professional and product liability claims as well as those involving municipal issues. He is one of the most respected insurance lawyers in Quebec.

André Asselin aasselin@millerthomson.com 514.871.5471

Added experience. Added clarity. Added value.

Miller Thomson SENCRL

millerthomson.com

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January 2013 Canadian Underwriter

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INSURANCE INTERNET DIRECTORY ASSOCIATIONS Canadian Independent Adjusters' Association (CIAA) "The voice of Independent Adjusters in Canada" www.ciaa-adjusters.ca Honourable Order of the Blue Goose—Ontario Pond Our fraternal organization has been dedicated to fellowship and charity since 1908. www.bluegooseontario.org The Insurance Institute of Canada The professional educational arm of the industry. www.insuranceinstitute.ca Risk & Insurance Management Society Inc. Dedicated to advancing the practice of effective risk management. www.rims.org

CLAIMS ADJUSTING FIRMS ClaimsPro Inc. Committed to providing leading-edge claims management services. www.scm.ca Crawford & Company (Canada) Inc. Enhancing the customer experience, every day. www.crawfordandcompany.com

PCA Adjusters Limited Adjusting to Meet your needs™ www.pca-adj.com

GRAPHIC COMMUNICATIONS Quelmec Loss Adjusters Identifying, Investigating, Resolving... for over a quarter century! www.quelmec.ca

Cameron & Associates Insurance Consultants Ltd. Insurance & Risk Management Consultants. www.cameronassociates.com Keal Technologies Complete technology solutions for insurance brokers. www.keal.com

CONSTRUCTION CONSULTANTS MKA Canada, Inc. Providing creative solutions to the Construction, Legal and Insurance Industries. www.mkainc.ca

DAMAGE COST CONSULTANTS SPECS Ltd. (Specialized Property Evaluation Control Services) Providing Innovative Solutions to Control Property Claim Costs www.specs.ca

EMPLOYMENT ONLINE I-HIRE.CA Canada's Insurance Career Destination. www.i-hire.ca

Cunningham Lindsey International independent claims services. www.cunninghamlindsey.com

ENGINEERING SERVICES

Granite Claims Solutions Global Adjusters and Marine Surveyors www.graniteclaims.com

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Informco Inc. Integrated Graphic Communications Specialists. www.informco.com

INSURANCE SOFTWARE APPLICATIONS Kanetix Ltd. - SAAS Division We provide corporate clients with fast & reliable insurance quoting systems, web services, web systems and hosting. www.kanetix.ca/about_dev_services

INSURANCE COMPANIES CONSULTING FIRMS

CRU Adjusters Calm in the face of a storm. www.cruadjusters.com

Kernaghan Adjusters Doing What Is Right®. www.kernaghan.com

complex engineering incidents. www.waltersforensic.com

Giffin Koerth Forensic Engineering and Science Investigate Understand Communicate www.giffinkoerth.com Rochon Engineering Inc. Forensic Consulting Engineers & Code Consultants. www.rochons.com Walters Forensic Engineering Inc. Providing scientific answers to

Aviva Canada Inc. Home Auto and Business Assurance. www.avivacanada.com Catlin Canada Underwriting Ambition. www.catlincanada.com Chartis Insurance Company of Canada Your world, insured. www.chartisinsurance.com FM Global The leader in property loss prevention. www.fmglobal.com Grain Insurance and Guarantee Company Commercial Lines Underwriters www.graininsurance.com RSA Leading car, home and business insurer. www.rsagroup.ca Sovereign General Insurance Company of Canada Since 1953 www.sovereigngeneral.com The Guarantee Company of North America “Specialized insurance products...professional service” www.gcna.com

Keal Technologies Complete technology solutions for insurance brokers. www.keal.com

REINSURANCE Guy Carpenter & Company The world’s leading reinsurance intermediary. www.guycarp.com Munich Reinsurance Company of Canada Complete reinsurance coverage from Canada’s largest reinsurer. www.mroc.com Swiss Reinsurance Company Canada The leading P&C reinsurer in Canada. www.swissre.com Transatlantic Reinsurance Company For all your reinsurance needs. www.transre.com

RESTORATION SERVICES Winmar Property Restoration Specialists Coming Through For You! www.winmar.on.ca

RISK MANAGEMENT

Wawanesa Insurance Earning your trust since 1896. www.wawanesa.com

The ARC Group Canada Inc. Your Partner in Insurance Law and Risk Management. www.thearcgroup.ca

INSURANCE LAW

SPECIALTY INSURANCE

The ARC Group Canada Inc. Your Partner in Insurance Law & Risk Management. www.thearcgroup.ca

William J. Sutton & Co. Ltd. Insuring Special Risks since 1978 www.wjsutton.com

GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

The Insurance Institute of Ontario held an “At the Forefront” breakfast series event at its offices in Toronto on November 20, titled: “The Road Ahead: Challenges & Opportunities for 2012,” featuring guest speaker Patrick Lundy, president and chief executive officer, Zurich Canada. Topics discussed included international economies, catastrophes and the soft market; industrial stability, corporate responsibility and market share growth; and Canadian P&C market prospects.

“At the Forefront” offers an opportunity for senior executives, management and future leaders to hear from top professionals on leading-edge issues.

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Steve Wilson: steve@canadianunderwriter.ca

Official Publication of the Insurance Brokers Association of Ontario (IBAO)

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SCOR held its annual celebration of the Beaujolais Nouveau Wines release on November 15, 2012 at the Rosewater Room in Toronto. While enjoying the company of industry colleagues, guests sampled a selection of the 2012 Beaujolais Nouveau wines in addition to gourmet offerings prepared by the Rosewater.

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MDD Forensic Accountants hosted their Annual American Thanksgiving Open House on November 22, 2012 at Real Sports Bar & Grill in Toronto.

The event also served as a fundraiser for the Starlight Childrenâ&#x20AC;&#x2122;s Foundation.

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To Read the Full Story for Each Press Release visit insPRESS.ca CARSTAR opens newest location in Western Canada – CARSTAR Medicine Hat

by CARSTAR Automotive Canada – Jan. 18 Announcing a New Franchisee to the PAUL DAVIS SYSTEMS Network

by Paul Davis Systems – Jan. 11 HealthQuotes.ca Announces the Online Addition of Blue Vision Global Health Plan

by HealthQuotes.ca – Jan. 10 STRONE and Itech Employees Open their Hearts this Christmas

by STRONE-Itech – Dec. 20 Crawford & Company (Canada) Inc. Selected as One of Waterloo Region’s Top 15 Employers for Fifth Consecutive Year

by Crawford & Company (Canada) Inc. – Dec.17 FIC Acquires Niche Investigative Firm Executive Risk Management

by SCM Insurance Services – Dec. 13 Karen Seward to Lead Cira Medical Services as its President

by SCM Insurance Services – Dec. 10 ClaimsPro Continues Expansion with Acquisition of Westman Claims Adjusters

by SCM Insurance Services – Dec. 5 Bruce Martin Joins Granite Claims Solutions Team as Vice President, Strategic Solutions

by Granite Claims Solutions – Dec. 4 WINMAR Announces New Opening in Kamloops, British Columbia

by WINMAR – Dec. 4 ClaimsPro Grows its Team in Ontario with Appointment of Two New Vice-Presidents

by SCM Insurance Services – Dec. 4

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Friends of Hughes Amys LLP gathered at the Irish Embassy in Toronto for the firm's annual Holiday Cocktail Party on November 29. Attendees enjoyed hors d'ouevres while listening to music and talking to colleagues.

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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

The Ontario Pond of the Honourable Order of the Blue Goose hosted its annual Christmas party entitled â&#x20AC;&#x153;Galabrationâ&#x20AC;? at the Malaparte at the TIFF Bell Lightbox in Toronto on December 5, 2012.

More than 100 ganders and guests attended an elegant evening of fellowship and dining in the true spirit of the season.

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e r i W a n o s d r i B Property & Casualty Insurance Newswire Insurance and Risk News and Information In Realtime A Dynamic Content Stream from Twitter That Auto-Refreshes on the Page

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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

The annual OIAA Christmas Party was held at the Westin Harbour Castle in Toronto on December 12, 2012.

The sold-out event had over 1,200 guests who enjoyed holiday cocktails followed by dinner and dancing. Over $6,000 was raised and donated to Big Brothers and Sisters.

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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

The Ontario Chapter of the Risk & Insurance Management Society (ORIMS) held its Christmas Luncheon on December 13, 2012, at the Westin Harbour Castle in Toronto. More than 700 attended. In keeping with the spirit of giving, the ORIMS executive chose to raise funds for The Daily Bread Food Bank. In all, $8,500 and hundreds of pounds of food were raised to help the food bank in its fight to eliminate hunger in and around Toronto.

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A family in southwestern Ontario will have access to a vehicle thanks to CARSTAR Niagara Falls and Thorold Auto Parts.

As part of the Niagara Falls-based charity, Project SHARE, a 2011 Versa was presented to a single mother and her son on Friday, notes a release from CARSTAR Collision & Glass Centres, one of the largest automotive repair franchises in North America, with more than 400 locations. Earlier in 2012, Project SHARE

asked families to submit an essay explaining why they are deserving of the vehicle and how it would change their lives. As a multi-service organization, Project SHARE assists people who live on a low income in Niagara Falls through programs that help with providing basic needs.

“To be able to donate a vehicle to a Niagara Falls family in need, especially during the holidays, is great and I am honoured to have partnered with Project

SHARE and Thorold Auto Parts for this initiative,” says Mario Cicchino, co-owner of CARSTAR Niagara Falls. “Today’s winner was absolutely thrilled and I think her smile spoke a thousand words,” adds Jeff Moriarty, CARSTAR regional manager for Hamilton, Halton & Niagara.

CARSTAR Niagara Falls has helped Project SHARE with a number of charity initiatives, from collecting canned food goods to painting a van at no cost.

ADVERTISERS’ INDEX ACE INA Insurance The ARC Group Canada Inc Aviva Canada Inc. Canadian Litigation Councel

84 (OBC) 37 2 (IFC), 43 13

CanadianUnderwriter.ca

57

CARSTAR Automotive Canada

39

Crawford & Company (Canada) Inc.

23

CSN Collision & Glass

15

Cunningham Lindsey Canada The Economical Insurance Group FirstOnSite Restoration The Guarantee Company of North America Granite Claims Solutions insPRESS.ca Insurance Brokers Association of Ontario (IBAO) Insurance Institute of Canada

7 21 18, 19 29 41 55, 71 17 5, 51, 58, 83 (IBC)

Insurance Internet Directory

66

The Insurance Marketer - InsuranceMarketer.com

73

inswire.ca – Property & Casualty Insurance Newswire

75

Miller Thomson LLP

65

Ontario Insurance Directory 2013 Edition

69

PCA Adjusters

27

Plant Hope Adjusters Ltd.

31

RIMS

47

ServiceMaster of Canada Limited

25

Starlight Insurance Gala

53

The Ontario Broker magazine (IBAO)

67

Wawanesa Insurance

49

WICC

33

WINMAR

45

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On December 6, 2012, Canadian Underwriter received an email with the accompanying photo from Dave Duliban, broker/owner of Duliban Insurance Brokers Ltd. in Welland, Ontario (+ Dunsville + Beamsville locations). Amanda Norton and Dave gave Canadian Underwriter permission to publish the email/photo. Thanks Amanda and Dave – we’re glad to see the magazine rates as material for a nice fireside read...

“This is one of my staff: Amanda Norton, Amanda is a ‘Bright light’ within our brokerage and has worked within the industry for approx. 4 years now, she is working on her CAIB, and recently the day before this photo was taken, had recently moved into her new home. She is shown here finally relaxing after a difficult move into the new place.

And the first thing she does is curl up with her dogs and her Canadian Underwriter magazine! Thought you would like to see this!

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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

On November 22, WICC Ottawa hosted its 3rd annual Wine & Cheese at Canadaâ&#x20AC;&#x2122;s premier aeronautical museum, the Ottawa Aviation Museum. Recognized as one of the most beautiful museums of its type and housing some of the worldâ&#x20AC;&#x2122;s most priceless aviation treasures, the Aviation Museum made for a dramatic backdrop to the annual cancer fundraiser. The WICC Ottawa event raised $33,000 towards cancer research.

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GALLERY Canadian Insurance Claims Managers Association (CICMA) Provincial Updates

National CICMA Executive at the Annual General Meeting in September 2012 in Fredericton, New Brunswick • First Row: John Russell (Treasurer, British Columbia), Lynn Ross (President, Nova Scotia), Lynn Prescott (Secretary, New Brunswick) • Second Row: Patrick O’Hara (Northern Alberta), Robert Lepine (Quebec), Sharon Clark (Vice President, Ontario), Lyndon Friesen (Manitoba) • Last Row: Robert Hertner (Past President, Ottawa), Hall Noble (Southern Alberta), Dan Langer (Ontario), Wes Moroziuk (Saskatchewan), Alex Lethbridge (Newfoundland)

CICMA Ontario Chapter Executive for the 2012-2013 membership year. (From left to right): Dan Langer (Treasurer and Website), Alex Walker (Vice President), John Mendezcuria (Arbitration), Sharon Clark (Communications), Cathy Wismer (Secretary), Mavis Haws (Past President), Jo-Ann Eccleston (President), Teresa Drijber (Program Director), Kevin Chasty (Licensing) and Keith Dyson (Membership)

Andrea Digdon of the CICMA Bluenose Chapter, presenting a $500 Top FCIP Graduate Award at the Insurance Institute, November 1, 2012 to Breanna Pettis of Royal SunAlliance

Wes Moroziuk of the CICMA Saskatchewn Chapter, presenting Top CIP Award at the Insurance Institute, November 28, 2012, to Jesse Boehm for Fraud Awareness

Robert Hertner, (Past) President of CICMA Ottawa Chapter, on behalf of the Ottawa Chapter presenting awards at the Insurance Institute on November 16, 2012:

Nathaniel McPhee receives 1st runner up to Top Local CIP Grad Award 82

Canadian Underwriter January 2013

Suzanne Muise receives Top 1st Year FCIP Student Award

Lynn Prescott of CICMA New Brunswick Chapter, presenting a Life Membership to Rick Embleton on September 24, 2012 at the National CICMA AGM

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