Canadian Underwriter September 2014

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

S E PT E M B E R 2 0 14 A Business Information Group Publication #40069240

Damages on Tap

BY ANGELA STELMAKOWICH

Airline Risk Factors

BY JASON B. HUTCHINGS

Alcohol Ignition Interlock

BY NEIL MACLEAN & JOSEPH D. ANTIFAEV

Leverage greater than that of the sum of its partners.

As professional insurance brokers, we count ourselves fortunate to have the best Canadian insurance companies working with us, helping us magnify our presence in Canada’s communities, reinforcing our leverage in the country’s markets, and standing with us as we champion the interests of the insurance consumer.

For this, the 35,000 brokers represented by the Insurance Brokers Association of Canada thank you.

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CANADIAN UNDERWRITER

VOL. 81, NO. 9, September 2014 Canada’s Insurance and Risk Magazine. Published by Business Information Group

www.canadianunderwriter.ca

Cover Story

Damages on Tap

36

Municipalities are perceived to have deep pockets. As a result, the joint and several liability tort systems in Canada mean that when municipalities are named in lawsuits, they tend to absorb proportionately heavier hits than other defendants, but critics say local governments ought not to be insurers of last resort.

By Angela Stelmakowich

features

20

48

Unfriendly Skies

Aidrie Hail Storm

Recent tragedies in Ukraine, Mali and Taiwan have some insurance professionals speculating that rating levels for aviation insurance will need to be renewed.

The August storm in Alberta was labelled a catastrophe, as hail caused numerous vehicle write-offs. Western Financial got calls about mobile homes with dented aluminum siding.

By Jason B. Hutchings

By Blake Reichert

24 Ontario Auto Fraud

52 Absolute Liability

It has been nearly two years since the Auto Insurance Anti-Fraud Task Force in Ontario released its 38 recommendations. The Ontario government has acted on several.

The federal government intends to impose absolute liability, of up to $1 billion, on operators of oil pipelines, and one carrier contends that this requires underwriters to be more diligent.

By Willie Handler

By Greg Meckbach

Damages on Tap

32 Welcome Respite After four years with annual catastrophes averaging $1.12 billion, the first eight months of 2014 have been relatively quiet, with losses at $652 million, mostly from the Alberta hailstorm in August. But insurers should not be lulled into a false sense of security.

Joint and several liability tort systems in Canada have resulted in “deep-pocket” municipalities tending to absorb a bigger hit when named in lawsuits with multiple defendants. Many municipalities say, however, that this inequity can be corrected — and the flow of money Intoproportionate the Breach Alcohol Detection staunched — by adopting liability .

28

56

In most of Canada, people who drive for a living do not have to tell their employers if ANGELA they require an alcohol ignition interlock device to be installed.

By Neil MacLean &

Data breaches — such as the one affecting the National Research Council — have STELMAKOWICH become far too common.

Weak passwords are among the causes of breaches.

Joseph D. Antifaev

writer September 2014 4

Canadian Underwriter September 2014

By Nate Spurrier

By Ted Gregory

60 Perception of Telematics Carriers and brokers providing usage-based auto insurance need to educate their clients on the benefits. Three in four respondents to a recent survey expressed concern that their data collected by telematics devices could be compromised.

By Andrew Lo

2014 Underwriters of the Year

The following individuals understand what the role of an underwriter truly is: to write great business that satisfies the clients’ needs and creates a win-win for the broker and insurer. What sets these underwriters apart from other hard working underwriters is their attitude. They communicate in an open and effective manner, and they go out of their way to explain the reasoning behind their decisions and make suggestions, if necessary, to help our member brokerages place the risk elsewhere. Their consistency and helpful nature have made them outstanding underwriters who are a pleasure to work with.

Michel Aoun

Sharon Braganza

Rhys Carter

Berkley Canada

Intact Insurance

RSA Canada

Karen D’Souza

Mary Robichaud

Bonnie Sample

Economical Insurance

CNA Canada

Encon Group Inc.

Jannel Sandstra

Connie Shepell

Lisa Wolfe

Northbridge Insurance

Wynward Insurance Group

CNA Canada

The Canadian Broker Network is

For more information on the Canadian Broker Network, contact Steve Frye at (416) 368-7990

VOL. 81, NO. 2, FEBRUARY 2014 VOL. 81, NO. 9, September 2014 PROFILE

Editor Angela Stelmakowich astelmakowich@canadianunderwriter.ca (416) 510-6793

profile

Associate Editor Greg Meckbach gmeckbach@canadianunderwriter.ca Twitter: @CU_Greg (416) 510-6796

14 Leading by Example James Cameron, president of Cameron & Associates Insurance Consultants Limited, 18 The Eternal Optimist was recognized by the CIP Stéphan Bernatchez, Society when he received its president-elect of the Established Leader Award.

Insurance Brokers Association

BY ANGELA STELMAKOWICH of Canada (IBAC) and co-owner of Deslauriers & Associés Inc., is “fascinated by how much you can learn from your peers.”

Photo: Eric Myre

Photo: Patrick Thompson

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By Angela Stelmakowich

SPECIAL FOCUS

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Editorial

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Marketplace special focus

56 Moves & Views 14 Editorial 58 Gallery 16 Marketplace 64 Moves & Views 66 Gallery

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Calling all Top Dogs Major Loss Services (MLS) is expanding its global network of major and complex loss adjusters and is looking for General Adjusters, Senior General Adjusters and Executive General Adjusters to join its team.

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editorial

City Counsels

The challenge for the industry is to drive home two key points. One is that it makes little sense for multiple policyholders to share financial risk — such as basement flooding in certain areas — when the risk is neither sudden nor unforeseen.

Greg Meckbach, Associate Editor

gmeckbach@ canadianunderwriter.ca

14 Canadian Underwriter September 2014

Until last month, personal lines insurance carriers in Ontario who were concerned about a mandated 15% reduction in auto rates could look on the bright side. At least property rates are only regulated by consumers who have a choice to shop around.

However, this could change if Toronto City Council gets its way. On August 26, a majority of councillors voted in favour of a motion to ask the provincial government to “review the setting of property insurance premiums in Ontario, similar to its review of auto insurance premiums, and consider legislation to establish limits to premium increases.”

The councillors who tabled the motion are Michael Thompson and Norm Kelly.

Areas within both Thompson and Kelly’s wards were identified by the city as having chronic basement flooding problems. At press time, the Ontario finance ministry had not indicated whether it would regulate home premiums, but a spokesperson did say the province has a competitive market and consumers are encouraged to shop around.

However, if all Toronto property owners agreed with Ontario’s Ministry of Finance, then those homeowners would probably spend their time shopping around for

competitive rates rather than complaining to their city councillors.

Most consumers probably understand that one purpose of insurance is to share risk among policyholders.

Most also understand that it is not actually the insurance carrier’s job to prevent water from flowing into one’s basement. That job is shared by the city and the property owner.

But many consumers — and their elected representatives — appear not to understand two facts that are second nature to those in the property & casualty industry. One is that insurance makes commercial sense only when it covers sudden and unforeseen risk.

The other is that insurance can also be used as a tool to reduce risk.

So the challenge for the industry is to drive home two key points. One is that it makes little sense for multiple policyholders to share financial risk — such as basement flooding in certain areas — when the risk is neither sudden nor unforeseen. The other is that if a carrier does not charge a lower premium to the policyholder with a lower risk, one of its competitors will — unless prohibited from doing so by regulators.

The three-day Toronto City Council meeting in late

August had numerous items in its agenda, including the Basement Flooding Protection Program, on which Toronto Water is projected to spend $962 million from 2014 through 2023.

As of last November, $91 million had been spent to upgrade more than 1,300 kilometres of storm and sanitary sewers, build two surface storage ponds and build one underground storm storage tank, staff noted in a report at the time.

Then in December, City Council voted to spend $61.3 million on the Basement Flooding Protection Program in 2014 — which is about 15% of the rate-supported Toronto Water budget of $403.3 million. It sounds like a lot of money, but $61.3 million is 1.6% of the total 2014 tax-supported operating budget of $3.74 billion. The city has budgeted to spend 2.7 times as much ($167 million) on libraries and 6.3 times as much on parks, forestry and recreation ($287 million), in 2014, as it is on basement flooding protection.

Certainly libraries and parks are important municipal functions. However, one question remains. What function is more germane to city government: Restricting insurance rates or ensuring the storm and sanitary sewer systems are up to the job?

marketplace

Canadian Market SCM buys Granite Global Solutions SCM Insurance Services has acquired the property and casualty businesses of Granite Global Solutions. The terms of the deal were not disclosed.

The businesses acquired include Granite Claims Solutions, a national adjusting firm; Granite Health Solutions, a provider of medical assessments and health services; CKR Global, a national provider of risk mitigation and investigation services; and Rochon Engineering, a forensic engineering and environmental consulting company.

Larry Shumka, president and chief executive officer of SCM Insurance Services, now leads the combined entity.

Granite’s claims, health and investigations businesses will be added to the corresponding business units in SCM Insurance Services, respectively ClaimsPro, Cira Medical Services and Forensic Investigations Canada. Rochon Engineering will continue as a standalone company.

Canadian combined ratio hits 99.8% in 2013 2013 and 2014 reflect stories in severity versus frequency for the property and casualty industry in Canada, Joel Silverthorn, a senior financial analyst for 16 Canadian Underwriter September 2014

A.M. Best Company Inc., said in September during the company’s 2014 Insurance Market Briefing — Canada.

With events such as ice damming, frequent storms and continued water events, this frequency “crept in below retentions,” Siliverthorn told attendees at the briefing in Toronto.

A.M. Best’s special report, published in advance of the briefing, notes the overall p&c industry combined ratio deteriorated to 99.8% in 2013, a 3.6-point increase from the prior year. Over the last five years, the combined ratio was 100.9% in 2009, 100.7% in 2010, 99.1% in 2011, 96.2% in 2012 and 99.8% in 2013.

Silverthorn told delegates that water has now taken over fire as the largest peril.

Technology UBI could bring in non-traditional players The use of telematics technology in auto coverage, and the usage-based insurance (UBI) model, will “act as bridges toward an inevitable future” for the industry, in which “non-traditional” companies could “enter and disrupt” the risk management business, Aite Group LLC suggested in the report, Telematics and Usage-Based Insurance: Notable Players in an Evolving Market.

“There are over 200 vendors in the UBI or telematics space that insurers could look to for assistance or guid-

ance in using this technology to meet the demands of today’s insurance market,” Aite said in the report, adding not all vendors “provide the same capabilities or even those that carriers might want or need.”

Aite predicts that UBI, as a business model, and telematics, as a “technology enabler,” will “act as bridges toward an inevitable future for the insurance industry.”

That future, Aite suggested, includes active risk mitigation (ARM) for businesses and personal risk management (PRM) for individuals.

“ARM will be a set of business tools that work together to provide analysis, predictive observations and warnings, and dynamic action plans to corporate risk managers to prevent or reduce the occurrence, frequency, and severity of insurance claims,” Aite Group predicted.

By contrast, PRM will use “similar sensor and connected smart device technology to reduce risk and negative outcomes for individual consumers or their families,” Aite Group added.

Ontario auto family protection endorsement.

In July 2006, Eckhart Schmitz, whose Ontario auto policy was issued by Lombard, was hit by a car.

The following year, Schmitz sued the driver who hit him for more than the defendant’s liability limit of $1 million.

In 2010, Schmitz sought coverage under his family protection endorsement with Lombard. But Lombard contended the coverage was sought after the expiry of the 12-month limitation period, stipulated in Section 17 of the family protection endorsement.

In a decision released February 4, 2014, the Court of Appeal for Ontario ruled in favour of Schmitz, finding that a policyholder making a claim under a family protection endorsement “suffers a loss ‘caused by’ the underinsured coverage insurer’s omission in failing to satisfy the claim for indemnity the day after the demand for indemnification is made.”

Claims

The Insurance Bureau of Canada announced earlier this month that an August 4 rain storm in Burlington, Ontario caused more than $90 million in insured damage, according to a preliminary estimate from Verisk Analytics Inc.’s Property Claims Services (PCS) unit. In a separate report, PCS estimated that a storm that hit southern

Lombard loses court case on Ontario auto The Supreme Court of Canada in August dismissed an application, from Lombard General Insurance Company of Canada, for leave to appeal a court ruling against Lombard over the limitation period on claims under the

PCS releases storm loss estimates

marketplace

Alberta August 7-8 caused $450 million in insured damage. In Burlington, nearly 200 millimetres of rain fell in three hours, according to the city.

Quake coverage penetration low in Napa Risk Management Solutions Inc. announced in September that it estimates insured losses from the Magnitude 6 August 24 earthquake in California “will not exceed” US$250 million.

Meanwhile, Aon Benfield’s Impact Forecasting unit reported the earthquake insurance penetration rate in Napa County was just 5.3%.

“Residential earthquake insurance penetration rates have gradually lowered in California during the past two decades from 33% in 1996 to roughly 10% today,” Steve Bowen, associate director and meteorologist within Aon Benfield’s Impact Forecasting team, says in a statement.

Total economic losses from the Napa quake are expected to reach US$2 billion.

Reinsurance Third-party capital fuels reinsurance excess capacity: S&P Increased competition and third-party capital, along with declining premiums, is putting pressure on global insurers and could affect their ratings, but many companies are working to mitigate those effects on their business, Standard & Poors says.

Competition in the sector is likely to reduce earnings this year and next, putting capital strength at risk, the rating agency notes in a preview article online, ahead of publishing its annual Global Reinsurance Highlights publication. The agency currently provides ratings for 23 global reinsurers.

Increased competition in the sector has caused premiums to decline, S&P suggests. “An influx of thirdparty capital is fueling excess capacity in the industry, exacerbating the problem,” the report notes.

“The knock-on effects could threaten reinsurers’ competitive positions and their ability to maintain their financial strength. We also see heightened potential for volatility in earnings because of weakened pricing.”

However, overall, reinsurers’ risk-based capital adequacy and enterprise risk management (ERM) strategies — which tend to be stronger among global reinsurers than the insurance industry in general — are allowing for an average financial strength rating of “A,” for the sector, S&P notes.

Risk TSB makes new rail, aviation safety recommendations The Transportation Safety Board (TSB) of Canada is concerned that some small air carriers and flight training schools are not required to

have safety management systems and that railways are not required to have on-board video and voice recorders in locomotives, TSB said in a report to parliament, released in August.

The report covers the period April 1, 2013 through March 31, 2014 and, therefore, does not include two recommendations released in August from its investigation into the July 6, 2013 rail accident in Lac-Mégantic, Quebec, which killed 47.

In a separate report on the Lac-Mégantic tragedy, TSB recommended that the federal government require Canadian railways to “put in place additional physical defences to prevent runaway equipment” and to “audit the safety management systems of railways in sufficient depth and frequency to confirm that the required processes are effective and that corrective actions are implemented to improve safety.”

In its annual report, TSB said it was “concerned that there is no requirement for on-board video and voice recorders on locomotives.”

Another concern was raised in aviation.

“Since 2005, large air carriers in Canada have been required to have safety management systems,” TSB said.

“This requirement doesn’t, however, extend to smaller carriers, such as air taxis, helicopter operators, commuter airlines, and flight training schools, which together are responsible for 94% of all commercial aviation

accidents and 96% of all commercial aviation fatalities. The Board is concerned that, in the absence of (Transport Canada) requirements, the passengers and aircraft of these smaller operators are being placed at unnecessary risk.”

Below-average north Atlantic hurricane activity predicted Hurricane forecasters are predicting “below-average hurricane activity for the remainder of the 2014,” due in part to cooler-thanaverage ocean temperatures on part of the north Atlantic, Willis Re. Inc. suggested in a recent report.

“U.S. landfall probability estimates continue to be low this year, though caution should be exercised due to a recent run of poor U.S. landfall forecasts,” Willis Re noted in its 2014 Atlantic Hurricane Season Outlook.

The report referred to several predictions, from organizations including Colorado State University, the U.S. National Oceanic and Atmospheric Administration Climate Prediction Center, Weather Services International and Tropical Storm Risk, a service affiliated with University College London and sponsored by Aon Benfield and Crawford & Company.

The range in the forecast numbers of named Atlantic storms, from the sources cited by Willis Re, is 8.6 to 12.0, with the average being 10.2.

September 2014 Canadian Underwriter

17

Profile

The Eternal Optimist Angela Stelmakowich Editor

Stéphan Bernatchez, president-elect of Insurance Brokers Association of Canada, sees challenges for brokers, but thinks that working together, these can be solved.

Stéphan Bernatchez understands well that these are changing times for brokers working within Canada’s property and casualty industry.

Still, the president-elect of Insurance Brokers Association of Canada (IBAC) is of the mind that once industry stakeholders wrap their heads around issues and commit to working towards solutions, these can usually be found.

“I’m an eternal optimist,” says Bernatchez, co-founder and co-owner of Deslauriers & Associés Inc. Now is hardly the first or only time that the industry has faced challenges, but many of these have been solved over the last 20 or 25 years, he says. “I think most of the time when people really want to do it, I think we’re able to achieve good results.”

18 Canadian Underwriter September 2014

FLOOD OF CONCERN Flood and water-related damage is one such issue that demands buy-in from all, but this joint approach also offers benefits that will be felt by all: insurers, insureds, brokers, governments and others. “We know that the insurance industry is struggling with that,” Bernatchez says of flood, adding that IBAC is continuing to do “whatever it can to advocate through governments, whether federal, provincial or municipal, back to stakeholders.”

A lot of flood protections are already available for a large portion of commercial lines insurance, Bernatchez points out. “Where we see a bigger issue is on the personal lines,” he says, including with homeowners, tenants and condo unit owners.

While it is important for consumers to be more aware of how they can transfer risk, it is also vital that brokers help to enhance that awareness. “If we do, as an industry — not just IBAC, but as an industry — if we do try to work on consumer awareness on how to mitigate the risk,” Bernatchez says he expects that progress will be made down the road. “There will be more floods, but maybe they will be better managed in the future,” he notes.

The goal of enhanced awareness may be more attainable as a result of the severity and frequency of

water-related events over the last 18 to 24 months, Bernatchez suggests, which perhaps offer a springboard for deeper discussions.

Progress “will depend on how every government wants to be transparent with the technical works, how the insurers want to try to find a way of getting availability to insureds, how the brokers will try to make consumers aware,” he emphasizes.

EXISTING AND EMERGING Of course, there are other issues on IBAC’s radar for the coming year. There is the Bank Act — Bernatchez characterizes this as “a continuous work in progress”; eDocs — “we’re getting where we want”; and telematics — he suggests there are issues about which consumers should be aware.

At the heart of all IBAC efforts, though, is the need to consider issues from the consumer perspective and to ensure consumer protection.

With regard to telematics, for example, the goal is to ensure that whatever the information, it is “owned by the insured, not by any insurer or influence group,” says Bernatchez. But this can prove challenging in light of how people accept more and more that governments and corporations simply have their information, he says.

Still, Bernatchez sees the tide changing somewhat and

IBAC’s position — which has remained consistent throughout — seems to be on the right side of the wave. Recently, people have started challenging some organizations and social networks about how their personal information is being

“We are entrepreneurs, so whatever is a new idea, a new way of distributing, is great for brokers,” Bernatchez says, but emphasizes that at the end of the day, consumer protection is essential. used, something that did not appear to be as top of mind “two, three, five years ago,” he points out.

“We are entrepreneurs, so whatever is a new idea, a new way of distributing, is great for brokers,” Bernatchez says, but emphasizes that at the end of the day, consumer protection is essential.

Perhaps it is IBAC’s consideration of the views of both consumers and insurers that helps it better serve the former. “It’s like we have it in our DNA, always thinking about that consumer. Is

Profile

are, but how effective that makes us because whatever the issue, we always have somebody who’s having that experience, or who already had it before and dealt with it,” Bernatchez says.

“We have competed with the direct channels for the past 35 years and we’re still there,” he says of the broker experience in Quebec. “We see that other provinces in the rest of Canada are now being a little bit more challenged by the direct channel,” he adds.

Photo: Eric Myre

PEOPLE PERSON

it good for him? Is it the way we should do things?”

Bernatchez says.

Understanding the issues that IBAC is now tackling is also made easier by the breadth of experience — both personal and regional — provided by association representatives, board members and staff.

“I’m a guy who’s fascinated by how much you can learn from your peers,” Bernatchez says. “You’ve got to learn

quickly what are the issues across the whole country to make sure that you really have a global overview of all that,” he notes.

Perhaps what Bernatchez has learned most is that every region of Canada is very different. “Pretty much everyone will have the same issues, but definitely not the same priorities,” he says.

However, with those differences comes strength.

“I learned how different we

Bernatchez has volunteered for professional organizations, such as Regroupement des cabinets de courtage d’assurance du Québec (RCCAQ), as well as sports associations and fundraising efforts for worthy projects.

His interest in meeting new people and learning new things is something that, on the job or off, has not waned.

In his day-to-day paid activities — his position at Deslauriers & Associés, which he and two associates purchased in January 2002 — Bernatchez has plenty of variety. “It’s so interesting to know that in the morning you could be meeting with a guitar manufacturer specialist, talking about paint and varnish, and suddenly in the afternoon, you’re going to meet with a pharmaceutical manufacturer.”

Although the firm was mainly doing personal lines insurance when it was purchased, he says, the commercial lines specialization that the three associates brought to the venture has transformed Deslauriers & Associés into an entity with an 80% concentration of commercial lines.

“We had that vision and we just delivered within that vision,” getting to the point where the “firm was considered the leader within the Quebec industry,” he says. “At the end of the day, I think the teamwork within the firm was what made it so successful.”

It is a lesson that Bernatchez is more than happy to apply elsewhere, including as part of the team at IBAC. In fact, being able to work together may also be what brought him back to a brokerage.

Bernatchez has worked for companies, including as a commercial lines manager at Guardian Insurance Company from 1994 to 1998, but he later left the insurer for a brokerage.

What does he like best about being a broker?

“I would say it’s the relationships with the customers,” Bernatchez says. Although he had other employment opportunities, “I always remember what is important for me at the end of the day is to meet people.”

September 2014 Canadian Underwriter

19

Jason B. Hutchings

Vice President and Team Leader, Aon Risk Solutions

Recent airline hull losses, such as the tragedies in July in Ukraine, Taiwan and Mali, have insurance professionals predicting that rating levels will need to be reviewed.

This underscores the need for underwriters to obtain detailed information on risk factors such as overflight plans and overnight stops.

Earlier this summer, it seemed that every week there was a significant, if not catastrophic, aviation incident reported in the media. What made this even more alarming was that these events were in the wake of Malaysian Airlines Flight 370, which disappeared while travelling from Kuala Lumpur to Beijing on March 8. The shooting down of Malaysian Airlines Flight 17 in July over Ukraine only exasperated the situation and left many stakeholders scratching their heads

20 Canadian Underwriter September 2014

as to how the past seven months will affect the aviation insurance industry and what conditions can be expected leading into the 2014 airline renewal season.

While the two Malaysian Airlines losses were, by far, the most publicly visible losses in mainstream North American media, there were other losses of note, including the following: • Transasia, GE222, which crashed July 23 during approach to the airport in Magong, Taiwan; • Air Algerie/SwiftAir, DAH5017, which crashed July 24 in Mali, on its way to Algiers from Ouagadougou, Burkina Faso; and • Hull war losses in Libya and Pakistan.

Currently, markets are still awaiting the outcome and quantum of this year’s major losses but some insurers have indicated that profitability will be hit and the rating levels will need to be reviewed to ensure longevity of insurers for the global airline industry. The final quantum is yet to be determined, but loss estimates for hull and liability insurance market for the year so far range between US$1.5 billion and US$1.8 billion. This includes an estimate for minor losses based on historic data and does not allow for any further claims that may be incurred during

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the remainder of the year; this already exceeds the estimated annual market earned premium figure for all of 2013.

If the frequency and severity were not enough, the shooting down of MAS17 over the Ukraine is a potential game changer within the aviation war market. Historically, geographic areas that were known conflict zones were excluded or carved out of the worldwide policy territory by a clause known to the industry as LSW 617G. This is a geographic exclusion clause frequently attached to aircraft hull & liability policy wordings as a way to limit worldwide territory coverage, excluding coverage for operations into known conflict zones. However, this clause allowed “for the overflight of any excluded country where the flight is within an internationally recognized air corridor and is performed in accordance with” International Civil Aviation Organization (ICAO) recommendations. The assumptions that allowed for overflights of these conflict areas are now being reconsidered.

Unfortunately, a period of uncertainty will prevail as insurers review their portfolios, consider their loss positions and respond to their senior management accordingly. Until a sustained period of renewal activity begins in the final quarter of this year, a trend is unlikely to become evident. Insurers will have to balance their desire to increase rates and premiums against over-capacity (i.e. the excess of markets able to participate on any single renewal) that still exists.

Another question on the minds of many industry participants is just how far within the aviation insurance industry a reaction to the recent disasters will reach. There is little doubt that commercial operators will be put under the microscope when purchasing hull and liability coverage (including war), but what will the impact be on other lines of aviation insurance? Will product manufacturers be impacted? Will industrial aid operators be impacted?

Will service providers be impacted?

These are all very valid concerns.

It is safe to say that industry par22 Canadian Underwriter September 2014

ticipants can expect a greater focus on quality exposure information. Those participants providing detailed renewal submissions for insurers to review are likely to benefit. At the time of writing, there are no signs of insurers withdrawing from the market and an excess of capacity still exists. This over-capacity should prevent any potential overre-

If the frequency and severity were not enough, the shooting down of MAS17 over the Ukraine is a potential game-changer within the aviation war market. action on rating and premium. It may well be that the market realigns itself to previous rating and premium levels.

However, until the period of uncertainty passes, the exact quantum of losses are understood and the reinsurers have had a chance to review their portfolios, there will be a period of pricing uncertainty for buyers of aviation insurance.

Information that will be important to underwriters of this class of business moving forward will include the following: • current scheduled destinations;

• anticipated charter destinations; • whether the insured currently, or intends to, operate in any of the countries stated in LSW617G and/or Lebanon or Ukraine. Policyholders would be asked to advise on the frequency and/or any overnight stops; • whether the insured has conflict area destinations, and if so, details of the security assessment plans prior to departure; • if the insured has overnight stops in conflict areas, what are security arrangements for the safety of the aircraft?

• details of any aircraft on wet lease and dry lease to other operators and areas of operation; • details of the insured’s main hub airport and estimated highest potential aggregation of aircraft at such locations; • whether the insured plans overflights of the countries listed in LSW617G or other conflict zones; • what security is in place for current operations; • what proactive aircraft safety awareness the policyholder has put in place (i.e. withdrawing routes/destinations because of safety concerns before a conflict escalates); and • details of proactive safety initiatives procedures undertaken prior to the operation of new routes or destinations.

With four months of 2014 left for underwriters to both earn premium and pay claims, the year may indeed leave many underwriters facing red ink come December 31. As indicated, a period of uncertainty will prevail over the next few months until trends emerge from the airline renewal season in the fourth quarter. It is only when the airline renewal trends are identified and combined with the reaction of reinsurers for 2015 aviation treaties, will the industry have a true understanding of what the industry reaction will be to the events of 2014. Until that time, understanding an insured’s exposure to geographic areas with changing conflict environments will be key to ensuring appropriate coverage is in place.

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It has been nearly two years since the Ontario Auto Insurance Anti-Fraud Task Force delivered its final report, with 38 recommendations. A number of regulatory changes were made and with the Liberals re-elected with a majority, it is expected that adoption of the remaining recommendations will accelerate.

Willie Handler

Consultant, Willie Handler & Associates

It has been nearly two years since Ontario’s Auto Insurance Anti-Fraud Task Force delivered its final report to the Liberal government. The task force’s final report was the result of a 16-month review and contained 38 recommendations dealing with fraud prevention, fraud detection, investigation and enforcement, as well as regulatory responsibilities.

Following the release of task force report, it seems as if every auto insurance announcement released by the Ontario government has mentioned fraud. This is a strong indication that the government is very aware of the impact of fraud.

To its credit, the government and the industry began implementing task force recommendations as soon as the report hit the streets. Despite all the work undertaken to implement the task force recommendations there still remain recommended action that are outstanding.

More power to FSCO The Financial Services Commission of Ontario (FSCO) and the insurance industry have created educational material in different media that instruct consumers at critical moments — such as when they learn to drive, select an insurer, collide with another vehicle or make an insurance claim — on how to avoid, detect and report improper activity. Insurance Bureau of Canada (IBC) and FSCO are active on social media, pro-

24 Canadian Underwriter September 2014

viding consumers with valuable tips and information.

It is now easier to report suspected fraud. Both IBC and FSCO operate fraud hotlines that consumers can use to provide anonymous tips of suspicious activity.

The government amended Ontario’s Insurance Act in 2013 to enhance FSCO’s powers. The Superintendent is now able to investigate anyone who was previously in the business of insurance; licensed service providers; or anyone else the superintendent considers may be engaged in unfair or deceptive acts or practices. This would include examining records, books and other information held by a licensed service provider.

A number of regulatory changes also became effective in 2013 specifically to combat fraud.

The government has amended the Statutory Accident Benefits Schedule (SABS) so that claimants play a more active role in helping to detect and prevent fraud. As well, the list of unfair or deceptive acts or practices has been expanded.

Insurers now 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 with respect to questionable claims.

Finally, the government has broadened the terms of reference for the required review by

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the superintendent of Part VI of the InsuranceAct to reflect the additional powers and responsibilities assigned to FSCO. In addition, the amended Insurance Act provision now requires the review to be conducted at least every three years.

A WORK IN PROGRESS Although there has been considerable progress made in developing tools and mechanisms to combat fraud, there are still outstanding task force recommendations. The previous government’s minority status and the recent election have contributed to delays in implementing a number of recommendations. Now that the Liberals have returned to power with a majority, it is expected that adoption of the remaining task force recommendations will accelerate.

A positive sign was the introduction of Bill 15, Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 shortly after the spring election.

Should Bill 15 be passed by the legislature — and there is no reason to believe it will not be — it will implement a number of outstanding task force recommendations.

Included are provisions to transform Ontario’s auto insurance dispute resolution system into a more robust system.

Responsibility would be transferred to the Licence Appeal Tribunal under the Minister of the Attorney General.

Other provisions would regulate the towing and vehicle storage industries through measures that tackle questionable practices. The bill would amend provisions in the Repair and Storage Liens Act and give the province authority to change the current 60-day period that a vehicle can be stored after an accident, accruing charges, without notice to the owner.

In 2013, the insurance industry established CANATICS, or Canadian National Insurance Crime Services, a not-for-profit organization focused on using state-of-the-art analytical tools to identify potentially suspicious claims in insurance industry pooled data, to facilitate further investigation by individual insurers. CANATICS recently added a 26 Canadian Underwriter September 2014

10th insurer as a member and now has access to data from 75% of the market based on direct written premiums in Ontario. CANATICS is expected to begin operations in 2015.

Health Claims for Auto Insurance (HCAI) has developed the Professional Credential Tracker to assist regulated health professionals in preventing their identities from being misused by health care facilities. HCAI continues to look at additional anti-fraud tools.

FSCO is well on its way to licensing health clinics that treat and assess auto insurance claimants and to sanction clinics that are not following FSCO’s business-practice standards. FSCO has a

There were a number of recommendations that dealt with information sharing that have yet to be developed. wide range of sanctions at its disposal, including the ability to limit or curtail a facility’s access to HCAI. The licensing system is expected to be operational in December 2014.

There are a number of other ongoing initiatives identified by the task force that the insurance industry is eager to see completed. FSCO continues to lead the work on developing treatment protocols for minor injuries that are based on scientific evidence. Meanwhile, the Ministry of Transportation is still working on its Electronic Collision System project.

MORE WORK TO BE DONE Although it is anticipated that Bill 15 will pass, there are still a number of legislative and regulatory changes recommended by the task force that the government has not acted on. There still has been no legislation introduced to protect individuals who report suspected fraud from reprisals and retribution.

The government has also not amended the regulation to permit insurers to collect a cancellation fee from claimants who fail to attend a medical exami-

nation without a good reason, and to suspend income replacement benefits when there is compelling evidence the claimant has submitted a fraudulent claim for medical or rehabilitation accident benefits.

There were also a number of recommendations that dealt with information sharing that have yet to be developed.

There is a need for protocols for active information sharing about suspicious cases among the investigative divisions of FSCO, the Workplace Safety and Insurance Board, the Law Society of Upper Canada and the Ontario Health Insurance Plan.

In addition, protocols are needed to permit FSCO investigators to exchange information with investigators from relevant federal entities (such as the Canada Revenue Agency).

The insurance industry is still waiting for these regulatory bodies and agencies to begin work out these issues.

The task force report contained several recommendations directed at introducing greater transparency with respect to independent assessments that have not been implemented. This includes requiring insurers to disclose publicly how they choose and assess the performance of independent medical examiners they refer consumers to see. Health regulatory colleges are also expected to work together to develop professional standards, guidelines and best practices to improve the quality of independent assessments of auto insurance claimants conducted by their members.

The fight against fraud is far from over but progress has been made. Under prevention, consumer awareness has been enhanced and a new licensing system for service providers will soon be operational. The industry will be in a better position to detect fraud when CANATICS is fully operational next year.

FSCO’s powers have been expanded to allow for more effective fraud investigation and enforcement. All this would not have been possible without the cooperation of government, the insurance industry, police services and service providers.

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Critical Condition

Neil MacLean Partner, Guild Yule LLP

Joseph D. Antifaev

Articled Student, Guild Yule LLP

What happens when employees do not tell their employers they require ignition interlock devices (IIDs) to drive, and are at fault in auto accidents while driving company vehicles? Will insurers still provide coverage to the employers?

The answer is that an employer cannot control everything an employee does, but can improve the likelihood of coverage and even reduce premiums. Ignition interlock programs (IIPs) have insurance implications for commercial fleet owners and there are several best practices that policyholders can implement in order to improve coverage and reduce the cost of insurance.

IIPs are provincial programs designed to reduce drinking and driving recidivism. All Canadian provinces and territories except for Nunavut have unique IIPs. Participants in IIPs are typically drivers who have been convicted of driving while impaired. Such a conviction carries with it a federal minimum driving prohibition of one year; however, in some provinces the length of this prohibition can be reduced if the person convicted is registered in an IIP. An IID measures a driver’s breath alcohol level and is connected to a vehicle’s ignition system.

28 Canadian Underwriter September 2014

In order for a vehicle equipped with an IID to start, the driver provides a breath sample into the IID that does not contain any detectable alcohol. Additional breath samples must be randomly given after a vehicle has been started in order to prevent someone other than the driver from providing an initial clean breath sample.

A built-in data logger records every event associated with the use of the IID, including any readings where the driver provided a breath sample containing alcohol. Periodically, a participant in an IIP is required to report to an IID installation facility to service the IID and check the data log. Many IIPs require several consecutive months of exclusively clean breath samples in order for a driver to have his or her full licence reinstated.

In Manitoba, Quebec, Newfoundland and Labrador, New Brunswick, Yukon and Northwest Territories, enrolment in an IIP is voluntary for first-time offenders and allows drivers with a suspended licence to get back on the road early. In British Columbia, Alberta, Saskatchewan, Ontario, and Prince Edward Island, enrolment into an IIP is mandatory for a person

Illustration by Dave Whamond

In most Canadian jurisdictions, people who drive motor vehicles as part of their employment duties have no statutory duty to tell their employers if they require an alcohol ignition interlock device as a condition of driving. However, there are several measures that commercial fleet policyholders can take to manage this risk.

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convicted of impaired driving to be able to drive again. Each province has made its respective administrative licensing authority responsible for implementing and administering its IIP. Persons participating in IIPs must apply for admission, and once enrolled, are restricted to driving only those vehicles fitted with an IID, including leased or employer-owned vehicles.

The role of the insurance company is somewhat different in B.C., Saskatchewan and Manitoba, where the Insurance Corporation of British Columbia (ICBC), Saskatchewan Government Insurance (SGI), and Manitoba Public Insurance (MPI) are all Crown corporations and have monopolies on automobile insurance. In Quebec, la Société de l’assurance du Québec (SAAQ) has a monopoly on insurance against personal injuries. Through regulation, these Crown corporations are able to more easily ensure that drivers with the additional risk of an IID licensing requirement are not breaching their restricted licences.

Manitoba appears to be unique in Canada in permitting drivers enrolled in IIPs to drive their employers’ vehicles without IIDs installed, provided that the registrar is satisfied that permitting the driver to drive is necessary for him or her to be employed, and the appeal board has given the driver permission.

In most provinces, no one has any statutory or common law duty to inform an employer of an employee’s driving restrictions. This means that without an employer taking the right steps to be informed about its drivers, an employee could illegally drive an employer’s IID-unequipped vehicle without the employer knowing.

Employers can obtain employee driver abstracts (sometimes called motor vehicle records) to become informed of any driving restrictions.

There is typically a modest fee.

In B.C., there is a limited statutory duty on drivers of commercial vehicles to disclose related accidents, violations and convictions to their employers. This duty only applies to drivers of certain 30 Canadian Underwriter September 2014

vehicles, and requires that the driver inform his or her employer within 15 days of the accident, violation or conviction. Commercial vehicle fleet owners are statutorily obligated to obtain a driver abstract when hiring a new driver, obtain a new driver abstract for each driver at least once every 12 months, and maintain accessible records of drivers for a period of four years.

Without an employer taking the right steps to be informed about its drivers, an employee could illegally drive an employer’s ignition interlock deviceunequipped vehicle without the employer knowing.

There are risks in employing drivers who are enrolled in IIPs. Apart from insurance issues, if an employer knowingly allows an employee to drive a commercial vehicle that is not equipped with a required IID, the employer can, in some provinces, face severe statutory penalties, including a fine of up to $20,000. Also, a higher-risk employee can increase accident frequency, causing property losses and affecting the employer’s reputation.

However, the real risk to the employer is that an insurer will deny coverage

in the event of a claim arising from an accident.

Assume the employee is at fault in an accident while driving a company car, prompting a claim from an injured third party. If the commercial vehicle fleet owner knew the employee was prohibited from driving a vehicle without an IID, and did not pass this information onto the insurer, the insurer could deem it a failure to disclose a material change in risk. The most likely outcome is a denial of coverage and the owner being vicariously liable for any damages.

Conversely, if the fleet owner was unaware of an employee’s enrollment in an IIP, an insurer would extend coverage, with one key caveat — the owner must have made appropriate prudent inquiries of the employee’s driving record.

Insurers may not accept a claim where the owner ought to have known about an employee’s driving restrictions and failed to make inquiries.

In order to increase the chances of coverage, an employer can implement best practices for hiring and managing drivers. Best practices include requiring new applicants to submit a written application with a driver abstract and reference checks, and having an employee sign an agreement requiring him or her to inform the employer of any accidents, violations, convictions or licensing changes.

Obtaining updated driver abstracts for all drivers is prudent. When an employer is informed about its drivers there is less room for an insurer to deny coverage on the grounds that the employer failed to disclose a change in material risk about which it should have known.

For insurers, these best practices also signal good fleet management, which can help to reduce insurance premiums. Implementing best practices has the additional benefit of reducing the risks of a claim, loss of property and interruption of business, as best practices result in employing better drivers. Even if a commercial vehicle fleet owner sets the gold standard in best practices, insurers may expect more

in the future. It never hurts to revisit those practices.

An insurer will obtain information about an owner’s fleet management practices through the broker or by directly inspecting the risk. The results may affect the decision to insure that owner, or on the premium being charged, so implementing best practices can have a direct positive impact on risk financing.

Best practices for commercial vehicle fleets generally include the following, which were compiled from fleet risk management and underwriting sources. These recommended steps may not be suitable for every owner but each owner should at least be aware of them: • conduct annual fleet safety program audits, including review of management policy, driver qualification, driver training, driver supervision, vehicle selection and maintenance, routing and scheduling, and accident reporting, recording and analysis; • actively promote safe driving practices; • provide suitable and well-maintained vehicles, with safety equipment; • conduct periodic training in key safety areas; • establish clear policies and procedures for the use of hand-held and other electronic devices, for carrying passengers who are not employees and for driving company vehicles for personal use; and • assign responsibility for fleet safety and establish an accountability system.

Best practices for driver hiring include the following: • using written application forms; • reviewing driver abstract for all applicants, focusing on violations and accidents of the past three years; • conducting in-person interviews to review past driving experience, determine the applicant’s attitude towards safe driving and get reason for gaps in employment; • conducting background and previous employer reference checks; • skill testing by requiring completion of a well-designed road test and a written exam testing the applicant’s

safety knowledge; • establishing minimum driving experience and maximum accident, violation, and conviction standards; and • having employees sign agreement acknowledging and accepting best practices as a condition of employment and requiring immediate disclosure of any accidents, violations, or convictions.

Best practices for driver monitoring and

training include the following: • checking driver abstracts for all drivers at least once per year (or more frequently, depending on size of fleet); • investing in on-board computing (telematics) to actively monitor drivers; • requiring remedial training for risk taking drivers; and • conducting periodic evaluation of driver skills.

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Welcome Respite Ted Gregory

Operations Manager, Property Claims Services, a unit of Verisk Analytics Inc.

Canadian property & casualty insurers suffered $652 million in losses from catastrophes during the first six months of 2014, while annual losses from 2009 through 2012 averaged $1.12 billion per year.

A calm year provides an opportunity to prepare for an active one.

The first eight months of 2014 were relatively quiet. Five months passed before the first PCSdesignated catastrophe event struck Canada. By the end of June, only two designated events had occurred, amounting to nearly $100 million in insured losses. Activity increased in the second half of the year with two events designated in August accounting for another $553.4 million.

This follows the most active year in the history of the PCS Canada service, in which six designated events caused more than $3 billion in losses.

32 Canadian Underwriter September 2014

While it may be tempting to view this year as a welcome respite from the major events of 2013, insurers should instead remain vigilant.

Frequency does not indicate severity. A major event could come at any time, and if it does, it could have a fundamental impact on the market overnight. Rather than slip into a false sense of security, insurers should continue to examine and revise their catastrophe plans, fine-tuning them to address an ever- changing marketplace.

A Record-Setting Year?

Two PCS Canada-designated catastrophes occurred during the first half of 2014: the tornado that hit Angus, Ontario in June, and a wind and thunderstorm event in Manitoba and Saskatchewan. In addition, two events were designated as catastrophes in August.

If this year’s low levels of catastrophe activity continue, 2014 could set a new record in Canada. With losses at $652 million this year (with two more events designated and under review

by PCS), it could become the quietest catastrophe year in the history of the PCS Canada service.

Based on early indicators, it appears unlikely that the two August events designated by PCS will cause a significant change in the prevailing small

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Annual Canadian Catastrophe Losses $3,500

3.3b

Millions

$3,000 $2,500 $2,000

1.6b

$1,500 $1,000

934m

1.1b 815m

652m

$500 2009

2010

2011

2012

2013 2014YTD

Distribution of YTD 2014 Canadian Catastrophe

24% Auto 6%

Commercial Personal

70%

catastrophe trend, and absent a tropical storm on the East Coast, major threats will become less likely as the year continues.

All four events designated by PCS this year are wind and thunderstorm events, which — in the absence of flooding — tend to result in lower losses than some other natural perils. These storms caused the most damage in personal lines claims, which account for 70% of the year’s losses, with auto claims accounting for 24% and commercial claims accounting for 6%.

The largest event of the year was the wind and thunderstorm event in Alberta, which is responsible for 71% of 34 Canadian Underwriter September 2014

the reported 2014 catastrophe losses sustained by the Canadian p&c insurance industry. Ontario is the most catastrophe-prone province of 2014, having been included in two of the four events designated so far this year.

The situation was much different in 2013. Last year was the busiest catastrophe year on record with $3.2 billion in insured losses across six events. The two most significant events of the year resulted in a combined total of nearly $2.7 billion in losses.

The largest on record at PCS was the wind and thunderstorm event that struck Alberta in June of 2103, causing $1.7 billion in insured losses, due

largely to the covered flooding that followed the event. In July, a similar event unfolded in Ontario, resulting in nearly $950 million in insured losses.

Those two events fundamentally changed the year, which otherwise would have had losses of only $500 million and would have been the quietest year on record by 38%.

Of course, 2013 was an anomaly.

The year’s aggregate losses were nearly three times the average annual loss reported by PCS of $1.12 billion (2009 to 2012), with event frequency that

Smaller events, especially when frequency increases, can erode retentions and impair insurer balance sheets, resulting in unexpected losses. was on par with the annual average of 7 (6.5) events. In fact, 2013 was the most severe year in the history of PCS Canada by a factor of three; the storm in Alberta alone would have made 2013 the worst year on record. Absent that significant event, 2013 would have been Canada’s second-lowest catastrophe claims year since 2010.

For now, at least, 2014 looks like it will fall well below the annual average.

With that in mind, only a significant increase in small-event frequency or a major catastrophe event would be necessary to bring 2014 close to average.

Staying Vigilant Could an unexpected twist happen in 2014? History suggests that is unlikely.

Superstorm Sandy, which made landfall in Ontario and Quebec in 2012, caused $100 million in reported insured losses.

As the year moves forward, the risk of convective storm losses declines, reducing the likelihood of high-frequency, low-severity events. That said, it is important to keep the anomalies in mind.

A major event — or a series of winter storms — could belie such predictions.

The problem, of course, is uncertainty. Insurers need to be ready for the unknown.

Calm years should be as instructive as active ones. While the big losses make headlines and remind the insurance industry that major events can strike at any time, years with lower losses should serve as an opportunity to refocus on the tasks that can protect a company when conditions turn. They provide the chance to refine catastrophe plans, train adjusters and shore up relationships with the vendors that can be crucial to keeping customers happy and containing loss adjustment expense (LAE).

The first step is to examine the past.

Review both industry-wide and company historical catastrophe claim data to identify the trends — and anomalies — that can mean the difference between a smooth operation and high losses and expenses. Refine plans based on both trends and specific experiences to equip adjusters to serve customers faster and more effectively. Affected customers will be able to move on with their lives and

While the big losses make headlines and remind the insurance industry that major events can strike at any time, years with lower losses should serve as an opportunity to refocus on the tasks that can protect a company when conditions turn. can create word-of-mouth recommendations that insurers rely on in a highly competitive, post-catastrophe market.

Training is always a concern. Small mistakes can have profound consequences when magnified by large numbers of adjusters seeing several customers a day.

Training can also include plans for spot corrections and improvements during an event. Using industry-wide benchmark data, catastrophe coordinators can identify overpayment or underpayment trends that could either be unnecessarily costly or put the insurer at risk of alienating customers at a sensitive time.

Strengthening and formalizing vendor relationships can result in lower LAE when an event does occur. Defining agreements with salvage companies, tree removal services, and independent adjusters during quiet catastrophe years can lead to measurable savings when a catastrophe strikes, potentially shaving points off combined ratios and protecting earnings and shareholder value.

invest in preparedness Even quiet years can threaten the metrics that ultimately lead to the creation of shareholder wealth. Smaller events, especially when frequency increases, can erode retentions and impair insurer balance sheets, resulting in unexpected losses. Investing in preparedness when losses are low can lead to increased efficiency, customer satisfaction, and financial performance when a major event occurs.

Damages on Tap

Joint and several liability tort systems in Canada have resulted in “deep-pocket” municipalities tending to absorb a bigger hit when named in lawsuits with multiple defendants. Many municipalities say, however, that this inequity can be corrected — and the flow of money staunched — by adopting proportionate liability .

ANGELA STELMAKOWICH

36 Canadian Underwriter September 2014

T

he phrase, “what happens in Vegas, stays in Vegas,” may elicit collective and knowing head nods. But with joint and several rules, “what happens in” an Ontario municipality, a Saskatchewan city or a British Columbia town is inspiring an unwelcome mix of head nodding and head shaking from municipalities.

Municipalities face plenty of challenges — from managing a multitude of risks to providing services, balancing the books and dealing with the unexpected. Although not a specific ticket on the insurance list, real and potential effects of existing joint and several regimes are, nonetheless, a consideration across the country. Many would argue that ever-present concern clearly illustrates the need for reform to restore the health of the system.

At its heart, the tort principle of joint and several liability means any defendant, including municipalities, are exposed to as much as 100% of any damage award in a liability case involving multiple defendants when the other defendants cannot pay. This applies even if the defendant in question is found to be only 1% liable.

That is the principle; the reality is that municipalities are more likely having to dig into “deep pockets” and foot a bigger portion of the ultimate bill. Someone has to pay, and courts are unlikely to want victims to leave empty-handed.

September 2014 Canadian Underwriter 37

COVER STORY

Damages on Tap BROKEN SYSTEM Municipalities “have no specific mechanisms available to help protect them from the application of joint and several liability, which results in the deepest pocket funding claim settlements and judgments,” notes the 2013 bulletin, Municipal Legislative Reform - Tort Exposures, from Frank Cowan Company. “This means that every road, facility, sidewalk, etc. must be kept in a state of perfect condition, not only for reasonable use, but for every circumstance, which is an expansive duty of care,” it adds.

“There has been a long-term trend of judicial recognition of a wider scope of liability on the part of municipalities and police,” says Neil Robertson, an associate with Robb & Dowling in Regina, who has a focus on local government law, adding that “a reasonable balance has to be struck.”

Doug Brown, risk manager at the City of Regina, sees a “fairly desperate need” to reform joint and several liability requirements to reduce the impact on municipalities. “I do not think that the issues are really worsening, but I think municipalities are seeing claimants becoming more litigious than in the past.”

Roman Parzei, director of revenue and risk management for the City of Brampton, which borders Toronto to the west, agrees things are not worsening. That said, “we’re certainly finding ourselves being dragged into more and more claims,” Parzei reports.

Tom Barnes, chief executive officer and general counsel for the Municipal Insurance Association of B.C. (MIABC), agrees reform is necessary. “Other jurisdictions have already implemented some reforms and B.C. local governments deserve the same consideration,” Barnes reports.

Concerns around joint and several persist despite having different systems in place. For example, Ontario’s Negligence Act stipulates that where damages have been caused or contributed to by the fault or neglect of two or more persons and where two or more persons are found at fault or negligent, they are jointly and severally liable to the person suffer38 Canadian Underwriter September 2014

ing the loss or damage. Saskatchewan’s Contributory Negligence Act provides that if a defendant cannot fund its proportion of liability, as found by the court, the uncollectible amount will be apportioned between all parties, including the plain-

“The current situation is unacceptable — and morally wrong. Lawyers are abusing legal conventions to take advantage of municipal property taxpayers.

Most taxpayers don’t even know it, and it’s costing them millions.

It won’t stop until the Ontario government creates rational limits,” charges the Association of Municipalities of Ontario’s Gary McNamara. tiff where the plaintiff is found contributorily negligent. British Columbia’s Negligence Act still contains language of joint and several liability, although the province has implemented a form of proportional liability.

The issue in Ontario — seemingly on the provincial government’s front burner since the release of an Association of

Municipalities of Ontario (AMO) paper in 2010 — has been unceremoniously shunted to the back burner.

“Joint and several liability encourages plaintiffs to target so-called ‘deep pocket’ defendants who are generally insured,” the paper notes. “The obvious result of this is an exponential rise in insurance claims, a corresponding rise in the cost of insurance and the unavailability of insurance at all in some cases, effectively crippling riskexposed defendants.”

As of late July, Madeleine Meilleur, Ontario’s attorney general, responded to a question in the provincial legislature that a couple of options to reform continued to be available. One month later, the reforms had been scrapped.

“After considering the feedback we received from all stakeholders, Ontario has decided not to move forward with changes to the rule of joint and several liability at this time,” says Brendan Crawley, senior co-ordinator of media relations for Ontario’s Ministry of the Attorney General. “Significant concerns have been identified, including the potential burden that making changes to joint and several liability would place on injured plaintiffs in lawsuits,” Crawley reports.

“The current situation is unacceptable — and morally wrong. Lawyers are abusing legal conventions to take advantage of municipal property taxpayers.

Most taxpayers don’t even know it, and it’s costing them millions. It won’t stop until the Ontario government creates rational limits,” charges AMO’s incoming president, Gary McNamara.

“With the news that matters will stay status quo, Ontario municipalities will continue to incur increased claims costs regardless of the municipalities’ percentage of contributory negligence,” says Nahla Hanna, president and attorney in fact for OMEX, the Ontario Municipal Insurance Exchange, a notfor-profit reciprocal.

“OMEX believes fair settlements should be made to parties who suffer injuries and losses,” Hanna says.

“However, we do not agree with the

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COVER STORY

Damages on Tap inequity of settlements assessed against municipalities, simply because of deeppocket perception and the application of joint and several liability or the 1% rule,” she emphasizes.

Brown echoes the sentiment. “If society wishes to ensure that all victims are fully compensated for loss,” he says, “then there should be a different way of funding that compensation.”

Says Crawley, “We appreciate the concerns that municipalities have expressed about increasing insurance costs.

However, we have not seen enough evidence that making changes to joint and several liability would have an impact on those costs.”

lion to $50 million; and Perth County saw a 54% increase in its 2011 renewal.

“The J&S issue has resulted in an automatic increase of 20% (from 2012 to 2014) for most of our clients,” notes Christopher Sinardo, vice president and associate, public sector national practice leader for BFL Canada Risk and Insurance Services Inc. “We estimate the total annual liability premium for all Ontario municipalities at $100 million — the total needed to grow to cover off the large losses recently paid to injured third parties.”

RATES UP IN ONTARIO In 2011, AMO reported in its first-ever comprehensive survey — results were weighted from a sample size of 97 to 122 municipalities representing approximately 50% of the Ontario population — of municipal insurance costs that liability premiums have increased by 22.2% since 2007.

Canadian Underwriter reported at the time that the survey showed municipal insurance costs in 2011 were $155.2 million, with liability premiums accounting for $85.5 million of the total. “The per capita insurance costs for communities with populations under 10,000 are $37.56. By comparison, per capita costs in large communities with populations over 75,000 are $7.71.”

Noting the figures do not include legal fees, self-insurance costs, settlements, risk management expenses or court-mandated awards, AMO reported that based on current trends, insurance costs would rise to $214 million annually by 2020.

Increases have been significant for some municipalities. Canadian Underwriter previously reported that Essex County saw its municipal insurance premium increase by 47.5% when it renewed its policy in 2010, and by 41.7% more when it renewed in 2011; the Town of Amherstburg had a 22% increase for 2010; the Township of Wellington North saw a 6% hike and was advised to increase its liability coverage from $25 mil40 Canadian Underwriter September 2014

“The most critical impacts of the joint and several regime are felt at service levels, as local governments frequently choose to limit or eliminate services or facilities because of liability fears,” argues Tom Barnes of the Municipal Insurance Association of B.C. In 2013, Frank Cowan Company reported that over the previous two years, the company had paid out approximately $94 million for settlements or judgments for large claims against municipalities.

Approximately one-quarter of payments were the result of the application of joint and several liability.

With awards increasing, especially in Ontario, insurance companies will likely respond in two ways, suggests Julie Boyd, national director, public sector for Zurich Canada. “First, companies may want to increase deductibles, to ensure municipal clients have more ‘skin in the game,’ so to speak. Second, companies may increase rates to get the correct price for the exposures based on the settlements we’re seeing now.”

Hanna says OMEX, an insurer that exclusively handles municipalities, has witnessed an increase in claims cost, and a rise in the number of claims exceeding $1 million directly related to the 1% rule. “Along with higher claims costs, municipalities now are opting for higher deductibles, or significantly increasing their self-insurance retentions, and yet still face the increase in premium cost.”

Sinardo notes BFL Canada’s minimum for deductibles has moved from $2,500 to $5,000. “In the past, our recommendation for our clients (a benchmark) for their deductible should be $1 per capita,” but medium to larger municipalities “are now looking at $2 to $5 per capita,” he reports.

In a 2005 paper, Legislation and Liability of Saskatchewan Municipalities - Restoring Balance, Robb & Dowling’s Neil Robertson notes “the City of Regina has been fortunate to maintain coverage with its existing insurers, due in part to its good loss history, but its premiums doubled from 2001 to 2004. At the same time, the city’s deductibles also doubled, such that most claims now fall within the deductible limit, resulting in a situation of selfinsurance for most civic tort litigation.”

A Canadian Underwriter article from 2010 cites David Boghosian, then of Boghosian + Associates, who noted the retention for Toronto was $5 million, $1 million for Mississauga and $500,000 for Brampton. “So, any claims under those thresholds come out of the general revenue of those municipalities. It is having an effect on the bottom line.”

Brampton moved from a $100,000 deductible to $500,000 about three years ago, Parzei says. Although the city’s claims experience has shown

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COVER STORY

Damages on Tap that about 85% of claims fall within the $100,000 range, “by increasing to $500,000, we had a huge reduction in our premiums,” he reports.

COST DRIVERS Just what events lead to municipalities being named in lawsuits depends on numerous factors. In general, though, Robertson says “the big areas for claims would be automobile collisions/roadways, slip and fall on sidewalks and in public buildings, claims in nuisance and negligence for water and sewer breaks and back-up, building failures attributable to negligent building approval and inspection, negligent misrepresentation in zoning or building approvals, and police liability for assault and wrongful arrest.”

In British Columbia, “claims arising out of defective construction and motor vehicle accidents are the biggest risk to B.C. local governments,” says MIABC’s Tom Barnes. “The former have arisen out of chronic quality control problems in the construction industry, combined with uneven liability insurance coverage. In B.C., the motor vehicle claims seem to be the result of low mandatory (Insurance Corporation of B.C.) limits forcing parties (and ICBC) to look for deeper pockets,” Barnes says.

Charles Painter, a partner with the Toronto office of Paterson MacDougall, LLP, suggests the most significant unfairness of the 1% rule imposes on Ontario municipalities is in the context of highway maintenance claims. “The worst sort of example in terms of the most unfair scenario is where you have a passenger in a motor vehicle who is catastrophically injured, and the allegation is that this is partly due to the negligence of the driver of the vehicle they’re a passenger in, and partly due to something wrong with the road,” he explains.

The typical motor vehicle owner has only $1 million of third-party liability insurance, Painter says. If, for example, a younger passenger, through no fault of his own, is catastrophically injured and requires 24-hour attendant care, there could easily be a $20 million to $30 million claim for damages, he explains.

42 Canadian Underwriter September 2014

The AMO paper notes that the minimum compulsory insurance coverage for auto accidents in Ontario is $200,000, “just a fraction of the funds necessary to cover catastrophic injury claims, and a situation which often compels plaintiffs to seek out those with deep pockets to provide for longterm care.”

“I would say the province should seriously look at raising the minimum auto policy liability to at least $1 million, better still $2 million,” contends the City of Brampton’s Roman Parzei.

Parzei advocates increasing the minimum requirement for liability coverage in Ontario so that other defendants actually have some financial resources. “I would say the province should seriously look at raising the minimum auto policy liability to at least $1 million, better still $2 million.”

Hanna points to an Ontario case in the AMO paper in which a driver — impaired, speeding and not wearing a seat belt — was driving on a township road under construction. As the driver was overtaking another vehicle where the pavement turned to gravel, the driver lost control and was killed; the passenger, also not wearing a seat belt, suffered a catastrophic brain injury.

The claim settled for $9.39 million, with the driver’s insurer contributing $2.67 million and the township’s insur-

er paying the remaining $6.72 million as a result of the application of joint and several liability.

“The existence of the 1% rule leads to the settlement of a number of these claims, not on the merits of the defence that the municipality may have, but on the sheer massive exposure for damages that they face,” argues Painter.

“That’s the big harm, that municipalities that I deal with are most concerned with and I believe rightly so, because it’s transferring the burden of the health care and future medical care for these tort victims onto the municipal taxpayer.”

Doug Brown from the City of Regina says that since few cases are appealed to the Supreme Court of Canada, for whatever reason, “municipalities are stuck with the often-vexing decisions of lower courts who seem to have a penchant for finding the flimsiest of reasons to award damages to plaintiffs.”

CLEAR SOLUTIONS Proportionate liability — compensation to an injured plaintiff would reflect the extent to which any defendant is found liable — appears to be the clear winner when asked about the remedy for what ails municipalities on the joint and several issue.

An alert issued by the Ontario Good Roads Association (OGRA) this spring (before the provincial government announced things would remain status quo) outlines three options that had earlier been advanced by the Ministry of the Attorney General as part of the review process: • The Saskatchewan Model: Where there is a shortfall due to one defendant being insolvent and the plaintiff’s own negligence contributed to the harm, the shortfall is divided among the remaining defendants and the plaintiff in proportion to their fault. This model would apply to all types of defendants in all types of negligence claims.

• The Multiplier Model: In road authority cases, where there is a shortfall due to one defendant being insolvent, the municipality would never be liable for more than two times its proportion

COVER STORY

Damages on Tap of damages, even if this means that a plaintiff does not fully recover. The model would be limited to municipalities and the specific subset of road authority cases.

• The Combined Model: In cases where both models apply (a road authority case involving contributory negligence on the part of the plaintiff) the Saskatchewan model would be applied, followed by the multiplier model if needed to ensure that the municipality would not be liable for more than two times its proportion of damages.

“Our first choice and one that OGRA will continue to press is the abolition of joint and several liability completely. The combined model represents a good first step,” the alert noted.

Parzei agrees. “It’s not to say it’s the best solution for municipalities, but it’s better than what we have now,” he says of the combined model.

Ralph Palumbo, vice president, Ontario for Insurance Bureau of Canada (IBC), says “we continue to believe that a defendant who only contributed marginally to a loss should not be compelled to take on a significantly disproportionate amount of the damages awarded because of a non-contributing defendant.”

One recommendation is to expand reform options to include claims for property damage and bodily injury losses arising from the use and operation of motor vehicles in Ontario, Palumbo says.

“This would help minimize the potential shift of liability costs to other defendants and contribute to lowering the cost of auto insurance for consumers.”

Parzei also recommends the Ontario legislature consider legislating that all municipalities be part of a reciprocal, which would provide both economies of scale and the specific coverage municipalities require. “We would have a different kind of scenario where when it comes to joint and several or when it comes to settling other claims, I think financially we’ll be able to handle it.”

FOCUS ON RISK “Legislative reform is certainly part of the solution, but one cannot lose sight of the prime imperative that munici44 Canadian Underwriter September 2014

palities exist to serve the community,” Robertson emphasizes. “When municipalities do inadvertently cause harm to individuals, they should be willing to remedy the harm and take steps to avoid its recurrence. Financial savings should

tions and that when something goes wrong, they pay when they are liable and defend against claims when they are not liable,” Brown adds.

Parzei says Brampton is doing what it can with regard to risk management and ensuring it meets minimum provincial maintenance standards that apply to roads in Ontario. This will “at least show before the courts that we have done our due diligence, and if there is any fault to be attached to any party, and we’re one of those defendants, that our share is very minimal.”

SERVICE REDUCTION?

“Legislative reform is certainly part of the solution, but one cannot lose sight of the prime imperative that municipalities exist to serve the community,” says Robb & Dowling’s Neil Robertson. “When municipalities do inadvertently cause harm to individuals, they should be willing to remedy the harm and take steps to avoid its recurrence.” be a collateral benefit, not the prime motivator, of risk management.”

Robertson suggests municipalities can take simple but important steps, such as good recordkeeping, essential to defending claims, to “harden the target.”

Municipalities must “try and ensure that they operate prudently, that reasonable risk management strategies are employed in their day-to-day opera-

Are costs having a negative effect on services that municipalities are able to provide? Robertson says he does not believe so.

“Claims against municipalities are a problem, but not the main cause of current municipal funding issues. The greater problem for municipal government is public and political unwillingness to pay/levy taxes than an inability to pay,” he contends.

But Barnes is not convinced. “The most critical impacts of the joint and several regime are felt at service levels, as local governments frequently choose to limit or eliminate services or facilities because of liability fears,” he argues. “It is unquestionable that the additional risks posed by the threat of joint and several liability adversely impacts services provided by B.C. local government.”

Brown points out that “while increased costs can be challenging in the short term, I believe that municipalities in most Canadian jurisdictions have adequate options available to deal with these short-term challenges in the form of access to the traditional insurance marketplace, reciprocals and captives, and by employing better business practices and risk management strategies.”

Is there potentially a bigger effect on smaller municipalities? Robertson says smaller municipalities “are less able to absorb unexpected losses. They are similarly less able to fund the cost of defending actions, regardless of whether an award is made.”

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Damages on Tap

“We are seeing some companies enter this segment and write business at what we believe are artificially depressed rates based on the nature of the risk,” Julie Boyd of Zurich Canada says. “That approach to the market may lead to short-term gain, but inevitably creates long-term pain at some point when the claims start to come in.”

Parzei suggests that most smaller municipalities “totally rely on their insurance policy to cover whatever financial settlements they have been hit with.”

And in most cases, they carry a very low deductible, which means a much higher premium.

“As more and more (joint and several) cases get settled and (smaller municipalities are) involved, their premiums begin to skyrocket, hitting them even more, which puts a huge pressure on their actual budget,” Parzei says.

Parzei reports that he has heard some insurers are insisting that smaller municipalities increase their deductibles — say, moving from $25,000 to $100,000 or more.

“Insurance is often viewed as a line in the budget which has to be controlled.

As they look for ways to control or cut costs, municipalities issue (requests for proposals) in search of a reduced price,” OMEX’s Nahla Hanna says. “Some end up in a vicious cycle of tendering for insurance services, securing lower price, and then as their claims experience develops, they are again faced with increased premiums,” she explains.

“If these significant claims continue and if premiums get to a point where municipalities cannot get insurance, then you would face a significant problem, beyond that which is already in existence,” says Painter. “If we get to a breaking point where they can’t find insurance, there are no insurers willing to write the risk unless you pay an outrageous exorbitant premium, in order 46 Canadian Underwriter September 2014

to justify the taking on of that risk,” he says, “at that point, things will definitely change one way or the other.”

“We are seeing some companies enter this segment and write business at what we believe are artificially depressed rates based on the nature of the risk,” says Zurich Canada’s Julie Boyd.

“That approach to the market may lead to short-term gain, but inevitably creates long-term pain at some point when the claims start to come in. Municipal clients and their brokers should be wary of such low pricing in a segment that is defined by long-tail claims,” Boyd emphasizes.

The “long-tail nature” of municipal liability claims means an incident may occur in one policy year, but the claims may not be presented until several years later and can take several more to settle, Frank Cowan Company has noted. That makes predicting future costs more difficult.

“Recently, there was hope to reform the joint and several liability issue, and now with the recent decision (Ontario government announcement), some insurers might decide to stop writing municipal insurance. This might lead us to a municipal insurance crisis — yet again,” Hanna says.

MIABC has not seen premiums or deductibles increase, Barnes reports.

“We have sufficient capital to buffer our members from a series of shock losses, so we expect costs to remain stable, even in the event of an uptick in claims,” he notes.

And although there are fewer players in the market, “coverage is still readily available,” Barnes suggests.

Boyd recommends that brokers and insureds “look to the stability and experience of the carriers for public sector insurance and avoid choosing based on price alone. The current upward trend in the size of awards means that municipalities can be exposed to severe financial consequences, even if they experience only a few claims.”

The AMO paper points out “Ontario municipalities ought not to be insurers of last resort, targeted deliberately in some instances because of joint and several. If this situation is allowed to continue, the scaling back on public services in order to limit liability exposure and insurance costs will only continue.”

The system puts great pressure “on municipal budgets, to be that sort of go-to pocket to make people whole with their financial settlements,” Parzei says. And with the announcement that things will remain status quo, “everybody is in shock. Everybody is wondering, ‘What happened?’”

Noting that law commissions in Ontario, other provinces and other countries have examined joint and several liability, Brendan Crawley of Ontario’s Ministry of the Attorney General says they have “determined that the rule of joint and several liability is the fairest way of dealing with a shortfall in damages.”

That is unlikely to sit well with municipalities — again... or still.

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Lessons from Airdrie The last two summers have brought record levels of hail damage to Alberta, and last month’s storm in Aidrie was labeled as catastrophic.

Unfortunately, some vehicle owners mistakenly believe their liability policy covers hail, while some property owners are unaware of coverage limitations on certain materials used in siding.

Senior Regional Vice President Sales, Alberta Region, Western Financial Group

48 Canadian Underwriter September 2014

August was unique. Instead of passing through, the mass of ice and wind hung over Airdrie for approximately 15 minutes, which caused significantly more damage.

Bill Adams, vice president Western and Pacific of Insurance Bureau of Canada (IBC), recently stated that the severity and frequency of harsh weather is on the rise across Canada. Indeed, the last two summers have brought record levels of hail damage to Alberta alone, notes Agriculture and Rural Development Alberta.

But regardless of where ones lives, everyone can be better prepared to protect their property from this type of damage, as the frequency of these storms increases.

Understanding coverage In a recent Western Financial Group survey, 70% of the Canadians asked said insurance protection against bad weather is important, yet 19% said they do not know the extent of their current plan.

Multi-peril insurance and more comprehensive plans will look after things that are not typically covered, such as hail damage to a car.

Illustration by Dave Whamond

Blake Reichert

When a sudden and furious hail storm pelted Airdrie, Alberta in early August, windshields were smashed and significant damage was caused to homes and vehicles. Who could have guessed that more hail would strike shortly after the first storm?

After the storms, images of the damage had been posted online and insurance companies began dealing with a mass of damage claims (some of the hail was as large as a tennis ball).

The events were labeled “catastrophic,” by the Insurance Bureau of Canada (IBC), as the estimated damage cost exceeded $25 million.

Most “notice of loss” calls made to Western Financial Group’s after-hours claims line were from clients reporting damaged personal property. About 60% of these calls reported damage to residential property while the other 40% were for automobile claims.

Although hail storms (caused when rain is lifted into the atmosphere during a thunderstorm and cooled below freezing, turning it into ice) are expected from June through September in Alberta, that first storm to hit Airdrie in early

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Coverage limitations for hail damage are changing

Indoor parking is not just for winter

Many companies have made changes to coverage of homes and vehicles. For example, carriers may take the age of the roof and depreciation into account and pay a cash value to repair roof damage instead of full replacement coverage. It is also worth noting that granular loss to a roof is not usually covered, because that type of damage does not reduce the life expectancy of a roof. Moreover, policies usually have a two-year statute of limitations on hail damage claims, and landscaping is likely not covered.

Many vehicles are also written off as a result of hail storms because the repair costs, in some cases, can be greater than the value of the vehicle.

There is little time to respond after a severe weather warning, as hail storms happen suddenly. Underground parking is a necessity for many people during winter. Clients with access to either underground parking or to a garage

Encourage comprehensive coverage To make insurance more affordable, many Canadians slim down insurance on a motorcycle, boat or an all-terrain vehicle (quad) to just liability coverage. However, many mistakenly think that liability insurance covers them for incidents such as hail damage. A good broker will advise on keeping comprehensive coverage for all vehicles to cover for theft, fire, vandalism, damage caused by animals or natural disasters and falling objects when parked.

50 Canadian Underwriter September 2014

Umbrellas are frequently picked up by wind, and are often blown as far as five homes down a cul-de-sac. Clients who are home and know a storm is coming are advised to bring patio furniture indoors and take chairs down. Those without fences whose outdoor furniture blows away could be liable for damage caused to neighbouring properties. This step can also help mitigate risk to a policyholder’s own property.

Report damage immediately (before a backlog) After a major event, there will be a significant number of claims. The longer a property owner waits to report damage, the longer it may be to get a contractor to inspect it. Two years ago in Calgary, there were so many claims after a summer hail storm (which only lasted 10 minutes) that many people had to wait until winter to have damage repaired.

Types of materials affect claims Western Financial Group received several calls about mobile homes with aluminum siding that got dented during the Airdrie storm. Aluminum is weaker than other materials commonly used in siding and is easily damaged. It is often not covered in a hail claim because it would actually have to be punctured in order to be covered.

Many policyholders are unaware of the limitations on materials used and types of siding on mobile homes and outbuildings on farms. It is important that customers understand any distinctions in their policies and consider asking a reputable contractor to advise on the most suitable materials for the region.

Bring patio furniture indoors

Document it

Aluminum is weaker than other materials commonly used in siding and is easily damaged. It is often not covered in a hail claim because it would actually have to be punctured in order to be covered. Many policyholders are unaware of the limitations regarding materials used and types of siding on mobile homes and outbuildings on farms. year-round, should be advised to park indoors. This is especially true when going on vacation in the summer, since there is a good chance a storm may occur while the client is away.

Because there can be processing delays following a natural disaster due to the volume of claims, policyholders should document damage by taking pictures.

Keeping receipts and other documentation related to property for at least two years is another good tip. For example, a client who has had recent repair work done on a roof and keeps all receipts and documentation can help reduce the risk of a carrier or adjuster questioning the age or state of the roof before it was damaged.

Beware of opportunists Opportunists strike after a major event, often disguised as contractors offering to do repairs. Because people can be desperate to find repair vendors in these situations, they may forget to do their due diligence in vetting contractors. Brokers can be a great resource to help customers avoid fraud by reminding them to properly select a contractor after a major event.

The best advice is to encourage people to communicate with their agent or broker — before damage has been done — in order to understand their coverage.

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Liability

The Canadian government promises to impose additional liability on operators of pipelines, offshore oil and gas producers and nuclear power plants. Those writing pollution coverage for pipelines will have to be even more diligent than they already are in assessing risk, one insurer contends.

The federal government has vowed to impose absolute liability of up to $1 billion on major oil pipeline operators and this has some insurance professionals questioning whether there is enough capacity in the Canadian property and casualty insurance industry to cover the risk.

One lawyer says the impact of the pipeline proposal will depend on how the law is worded, while a senior civil servant predicts a similar proposal for nuclear power plants will “substantially change the premiums” for nuclear operators.

52 Canadian Underwriter September 2014

“It certainly opens up the opportunity for insurers to provide capacity, but the issue is, is there enough capacity in the Canadian market to give $1 billion to every major pipeline carrier?” asks Stephen Stewart, managing director and chief agent for Ironshore Insurance Ltd.’s Canada branch. Stewart refers to a May 14 announcement by federal natural resources minister Greg Rickford that the ruling Conservatives plan to introduce “absolute liability,” for all pipelines regulated by the National Energy Board. This means that companies are “liable for costs and damages regardless of fault.” For major oil pipelines, this will be up to $1 billion, Natural Resources Canada explains in a press release.

Rickford also said May 14 that the government plans to require that major oil pipeline operators have a “minimum level of financial resources” so they can respond quickly to incidents.

The measures are similar to proposals announced June 26, 2013 — by then-natural resources minister Joe Oliver — to require that pipeline companies hold “minimum financial

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“I don’t think the fact that they (plan to impose) absolutely liability changes things,” Stewart says of Rickford’s May 14 announcement. “The requirement to carry $1 billion does, because I think what’s going to happen is carriers will look for ways to mitigate the risk and part of that will be risk transfer, (which is) where insurance comes in.”

So pipeline operators will have to “assess their risk a little more closely,” Stewart advises.

“The proposed absolute liability requirement will mean that underwriters will have to be even more diligent

“Underwriters will have to be even more diligent than they already are in assessing the risk management practices,” writes a Zurich Canada spokesperson. than they already are in assessing the risk management practices, mitigation plans, processes and corporate culture around pipeline integrity, control and leak detection and overall operational excellence of pipeline operators,” writes Kevin Doyle, head of energy for Canada, Zurich Global Corporate in North America. Doyle reports that major pipelines operators already have a “culture of awareness that starts at the board level,” as well as spill prevention measures and emergency response plans.

“Many pipeline operators already have the insurance limits, financial strength and specific reserve funds dedicated to respond to a major incident that would adequately cover the $1 billion in financial capacity required by the legislation,” notes Doyle. “However, some operators, if subject to the legislation, may have to up their game from a risk management perspective for underwriters to feel comfortable putting up the significant third-party liability 54 Canadian Underwriter September 2014

limits that would be required to help meet the proposed legislative financial requirement.”

How this affects liability risk depends exactly on how the law is worded, suggests environmental lawyer Rosalind Cooper, a partner with Fasken Martineau DuMoulin LLP. “Everything revolves around the wording of the legislation,” Cooper says. “Until you actually see the actual wording and the way that it comes together, you cannot really assess what the ultimate impact is going to be.”

At press time, it was not clear whether operators will have to provide proof of actual insurance or whether some other form of capacity will suffice. Pipeline operators seeking insurance to cover up to $1 billion may have to look outside of Canada for underwriters, Ironshore and Zurich suggest.

“It is unlikely that there is sufficient capacity in Canada to cover additional liabilities, but there is in the global insurance market,” notes Doyle. “Of course, any insurer from outside Canada would need to ensure that it complies with Canadian insurance and tax laws around admitted placement.”

For his part, Stewart asks whether or not it is “incumbent upon (the federal government) to allow carriers the option to carry unlicensed insurance without incurring” a tax penalty.

Rickford’s May 14 announcement on pipeline operators’ liability was one of several recent efforts by the federal government to ensure the cost of pollution is borne by the polluters themselves — whether or not they are proven to be at fault.

For example, Bill C-3 — if passed into law — would “establish strict liability” for owners of ships with hazardous or noxious substances. The intent is to have Canada implement the provisions of the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (also known as the HNS Convention). That convention stipulates that ship owners are “liable for damage caused by any hazardous and noxious

substances in connection with their carriage by sea on board the ship.” There are exceptions, such as war, a “third party” acting with intent to cause damage, and when the client fails to give the ship owner data on the hazardous nature of the cargo.

With Bill C-3, the Conservative government also proposes to “introduce compulsory insurance for the liability for the pollution damage caused by a spill of hazardous and noxious substances from a ship.”

Currently, Cooper explains, if there is a spill at sea, “it really is up to the ship owner and the company whether they have the financial wherewithal to deal with the damage.” With Bill C-3, Cooper adds, “the idea would be to have a situation where it’s mandatory to have insurance available so that if there is an incident, that there is an ability to know that the company will be able to have access to funding to deal with the clean-up.”

“It has been a kind of monopoly by the small group of insuring companies,” says John Barrett, president and chief executive officer of the Canadian Nuclear Association.

Bill C-3 was returned to the Commons in March by the Standing Committee on Transport, Infrastructure and Communities, but at press time had yet to pass third reading. It proposes to allow Cabinet ministers “to enter into certain insurance arrangements and other arrangements, to create almost a compensation fund, that is available in the event of a spill or incidents, in case there is not anybody here to pay for it, for whatever reason,” Cooper says, adding that ship owners are currently allowed to be self-funding.

Another government bill — which at press time was ready for third reading in the Commons — is C-22. If passed

into law, C-22 would make $1 billion the limit of liability, “without proof of fault or negligence,” to which some offshore energy producers would be “subject in the event of a spill or damages caused by debris.” Currently oil and gas producers’ absolute liability limits are $30 million and nuclear operators’ liability — $75 million — has been the same since 1976.

Bill C-22 would also require nuclear operators to “have a commensurate amount of insurance or fiscal security that demonstrates they are able to handle the $1 billion worth of absolute liability,” Jeff Labonte, director general for energy safety and security at Natural Resources Canada, noted during hearings this past June before the House of Commons Standing Committee on Natural Resources.

During the committee hearing, Calgary Centre MP Joan Crockatt asked Labonte whether or not Bill C-22 would impose insurance premiums increases.

“We expect that the change of the liability amount to $1 billion will substantially change the premiums in the insurance market for the operators,” Labonte replied. “The number of operators is small and the community of insurers is small and has to be approved.

Under the bill the Minister of Natural Resources has to approve an insurance policy to make sure it’s consistent with the act.”

At press time, there were four nuclear power generating stations operating in Canada. A fifth — Hydro Quebec’s Gentilly station on the St. Lawrence River southeast of Trois Rivieres — was shut down in December 2012.

Ontario Power Generation operates two plants on Lake Ontario: Pickering, about five kilometres east of the Toronto city limits and Darlington about 35 kilometres east of Picking. Ontario’s third station — operated by Bruce Power — is on Lake Huron north of Kincardine.

In New Brunswick, NB Power operates the Point Lepreau plant, about 50 kilometres west of Saint John.

Once the $1 billion in absolute liability takes effect, nuclear operators will

want “greater competition” in insurance, says John Barrett, president and chief executive officer of the Canadian Nuclear Association, said during the Commons committee hearings.

“It is my understanding that under the previous act and the limits there, the pool of insurers — the Nuclear Insurance Association of Canada — was able to handle the requirements, and the premiums were paid on that basis,” Barrett

said in reply to a question from natural resources committee vice-chair Geoff Regan, the Liberal MP for Halifax West.

“As it goes up to $1 billion, the view of (nuclear) industry is that, as in any market, a little more competition might help. It has been a kind of monopoly by the small group of insuring companies, and this might be a good way of seeing if there’s enough competition to bring down the premium.”

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Nate Spurrier Director of Business Development, IDT911

Breach

A significant percentage of data breaches are caused by weak passwords, insecure computer network portals and lost smartphones.

Policyholders should be encouraged to draft incident response plans and to contact their brokers or carriers as soon as a breach is discovered, in order to access experts such as forensic experts, legal counsel and crisis management specialists.

Another data breach — this one affecting the National Research Council (NRC) — has made the news. It is a scenario that’s becoming far too commonplace, as evidenced by a recent study that estimated 36% of Canadian businesses know they have been hit by a cyber attack.

56 Canadian Underwriter September 2014

Considering the multitude of repercussions organizations face if they experience a breach — from steep financial outlays to potential regulatory mandates — the odds look even more grim.

With this mind, it is time to look at the current data breach landscape and evaluate what business policyholders are likely to encounter if an exposure occurs.

Roots of a data breach At the time of writing, very little information about the NRC exposure had been released. It appears as if commercial data, including intellectual property and possibly trade secrets, was among the information stolen. Initial reports point to the involvement of state-sponsored hackers from China, though the Chinese government has issued a denial. While early indications are that this particular breach was the result of hack, exposures can occur in a number of different ways.

Deliberate acts, such as the introduction of viruses into a system by a hacker or accessing a corporate network by cracking a password, account for a portion of breaches. Other exposures are caused by human error and oversights. Lost smartphones, weak passwords, unsecured net-

Illustration by Dave Whamond

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work portals and simple mis-mailings, where one customer receives another’s information, all account for a significant percentage of breaches. Policyholders must be vigilant on both fronts, to thwart attackers and to prevent internal errors.

The breach response Businesses that experience a data exposure must quickly work on several fronts. One priority is to implement an initial solution to the breach so data does not continue to be lost. In order to accomplish this objective, it is vital that a policyholder contact its broker or insurance carrier. Many privacy breach and cyber insurance policies provide financial assistance for investigating the situation and making a determination as to whether a breach actually occurred. Resolution of support-repairing problems that were found and returning systems to a functional state-may also be included in these policies.

The firm’s next priority must be to help those who have been impacted by the breach — the individuals or other businesses whose information was exposed — whether they are customers, patients, employees or business partners. In addition, organizations are strongly advised in some provinces, and even required in others, to notify the Office of the Privacy Commissioner of Canada if Canadian citizens’ informa58 Canadian Underwriter September 2014

tion is among the data exposed. Information about the breach — including the cause and the remediation steps the organization will undertake to ensure affected individuals are protected moving forward — must also be reported.

By notifying the insurance company early in the process, the business is able to leverage many of the services available under its policies. Crisis management specialists, legal counsel and qualified forensic experts will help ensure the policyholder meets its compliance obligations. They will also work to quickly determine the nature and scope of the breach. These knowledgeable resources are often instrumental in shutting down exposures and launching effective remediating actions.

The cyber threats to corporate infrastructure are very real, ranging from hackers to malware.

Expenses related to resolving cyber issues can be enormous but these technology services are often necessary to maintain business continuity.

To provide the best basis for recovery from a breach, policyholders should be encouraged to draft an incident response plan (IRP) that can be implemented once the initial discovery phase is complete. The IRP will pull together all the steps and resources necessary to fully respond to a breach and to review and revise privacy protection protocols to ensure the security gaps that led to the breach are eliminated.

What breach victims can do Businesses or individuals who suspect their information may have been exposed should first contact the organization that held the data they fear was stolen. The breached entity is likely to offer assistance with answering ques-

tions about what information was lost, how and when the exposure occurred, and what the organization is doing to ensure additional data is not also lost.

In many cases, the breached entity is also likely to offer some level of support to victims. This assistance may include a credit or fraud monitoring solution, which is typically free to victims, and also perhaps access to an identity fraud remediation service if a victim actually experiences some form of identity fraud as a result of the breach.

Identity theft victims do not always know how or where their information was lost, and not every breached organization offers post-breach assistance.

In those instances, individual victims will want to check their homeowners insurance policies as many policies offer reimbursement expense coverage for handling identity fraud. Some even provide an identity fraud remediation service as an added benefit to the baseline homeowners coverage.

Business insurance solutions that provide assistance Many firms rely on technology — their websites, internal systems and overall networks — to conduct business. The cyber threats to corporate infrastructure are very real, ranging from hackers to malware. Expenses related to resolving cyber issues can be enormous, but these technology services are often necessary to maintain business continuity.

Though cyber costs will be specific to each breach, many insurance policies

provide coverage for common expenses.

• Virus removal and system repair. If the policyholder’s website, network or critical-path system was brought down by a virus or malware, this coverage would pay for a forensic specialist to remove the threat. It would also provide for services related to getting affected systems back to working order.

• Data restoration. It is often necessary to contract with an expert to restore a clean or sanitized data set from a back up source if the original data was deleted, destroyed or corrupted during the breach event.

Privacy breach costs, which revolve around the data exposure facet of a breach rather than the technology side of things, can also be significant. The monetary implications even have the potential to threaten the financial viability of small businesses. Coverage is avail-

Lost smartphones, weak passwords, unsecured network portals and simple mis-mailings, where one customer receives another’s information, all account for a significant percentage of breaches. able to manage many of the typical costs involved in the exposure of information.

• Crisis management. When a breach occurs, many critical decisions must be made very quickly. An experienced crisis management firm can help provide guidance on what kind of forensic expert to bring in, what to say in the notification letters that will be sent to affected parties and what services should be offered to victims.

• Remediation services. The cost to offer breach victims credit and fraudmonitoring solutions, along with identity remediation services, can quickly mount. This is especially true if it is discovered that the exposure has been going on for some time or if the data lost pertains to a large number of victims.

insBlogs

• Communication services. It may be prudent to establish a call center — perhaps contracted through an outside firm-to answer questions about the breach and to provide victims with contacts for any support services they have been offered. In some cases it is also necessary to partner with an outside agency to manage inquiries from the media or other groups.

Risk management resources are also

provided via web portal to businesses holding many privacy breach and cyber coverage policies. Incident response plan templates are often available for download through these sites, allowing businesses to draft IRPs that suit their particular needs. This piece of proactive planning enables policyholders to more quickly and effectively deal with potential breach events while also minimizing their financial liabilities.

insBlogs

Insurance Blogs hosted by Canadian Underwriter

Recent Blog Posts Featured on

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Insurance Blogs hosted by Canadian Underwriter Emerging Risks and Swiss Re’s Sigma Report

by Carol Kreiling – August 28 HCAI Data: Most Early Treatment Is Provided

By Chiropractors and Physiotherapists

by Willie Handler – August 27 Basement flooding and backwater valves: Are insurers giving bad advice?

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by Willie Handler – August 20 Get Results with Big Data

by Catherine Smola – August 13

September 2014 Canadian Underwriter 59

Perception vs Reality The results of a recent survey suggest that providers of usage-based auto insurance need to educate clients about how the data insurers collect on driving behaviour is used, how this information will affect their rates and how telematics can improve safety while reducing claims frequency.

Andrew Lo

Chief Marketing Officer, Kanetix.ca

Usage-based insurance (UBI) is finally gaining momentum in Canada. Increasing in popularity around the world, UBI programs use telematics-driven data to monitor driving habits and determine whether or not drivers are risk-averse enough to receive discounts on their auto insurance premiums. In theory, it is a win-win for providers and consumers alike, but the nature of the technology makes it expensive for insurers to install, and difficult for consumers to understand.

Client Awareness In a recent survey commissioned by Kanetix Inc., 79% of Canadians polled said they were either “not at all familiar” or “not very familiar” with UBI. The survey was based on a Leger online panel of 1,555 Canadians. A probability sample of the same size would yield a margin of error of +/- 2.4%, 19 times out of 20.

Aside from the relative infancy of UBI in Canada, part of this lack of familiarity may be due to the confusing nature in which “telematics,” “usage-based insurance” and customized program names are used interchangeably.

Six insurance companies to date — Industrial Alliance Home and Auto Insurance Inc., Intact Financial Corp. subsidiaries Intact and Belair,

60 Canadian Underwriter September 2014

CAA South Central Ontario, The Co-Operators Group Ltd. and Desjardins General Insurance Group Inc. — have introduced UBI programs in Ontario and/or Quebec, but each company has its own name for its program, not to mention its own approach to promoting how it works. Desjardins’ program, for example, goes by Ajusto, while Belair’s is called Automerit. There is little consistency in identifying these programs as UBI programs across the board.

Despite this, UBI is moving forward. At least half a dozen more providers are expected to introduce UBI programs over the next year. Soon it will not be a question of who offers UBI programs, but who does not?

In order for UBI to find success in Canada, a number of barriers need to be addressed, one of which is the issue of “the device” and its associated data collection. Once customers learn that a device is installed in a vehicle to monitor and record driver habits, they express concern over the privacy of their personal information and the way in which the collected data is used and shared.

In the survey commissioned by Kanetix, 75% of the Canadian respondents said they are concerned that their personal information could be stolen, while 73% fear the data could be used to

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Many Canadians remain apprehensive and would prefer proof of potential savings before signing up for UBI programs.

deny an accident claim or cancel their policy. The results indicate that seven out of 10 Canadians worry about who owns the information, and whether that information would be shared with other insurers.

Beyond this, two-thirds of respondents worry that a UBI device would not capture their driving habits accurately, and 60% are concerned it would capture too much by reporting accidents that the driver does not want to claim.

More work needs to be done to help potential UBI customers understand how their information is used and protected, who owns it and how it will impact their rates.

Accountability of drivers Despite these privacy concerns, the allure of insurance premium savings and the potential for greater driver accountability is enough for the majority of Canadians surveyed to express interest in UBI programs. Sixty-nine per cent of those surveyed believe that people will drive more safely if they know their driving is being monitored, and 61% said they would plug a device into their vehicle if it meant there was a chance to save money. In fact, these drivers expressed confidence that they would see savings.

This relationship between safety and savings may be UBI’s biggest selling point. Not only will accountability help drivers lower their insurance rates, but it has the potential to make roads safer, ultimately reducing the severity and frequency of claims.

“Telematics can help reduce claim frequency by making people conscious of their driving habits and reinforcing them with positive or negative feed62 Canadian Underwriter September 2014

back,” says Sean Graham, a principal broker at KTX Insurance Brokers. “It will help people — especially teenschange their driving behaviours to avoid things like hard braking, which can lead to fender benders.”

It is argued that drivers will be motivated to adjust their habits to maximize savings. If they see that they can save by reducing speeds, tweaking the time of day they are driving, or embracing other savings-related driving practices, then they will likely be driven to correct bad driving habits. This discipline will help them to become better and more attentive drivers overall, producing long-term results that benefit both the drivers and insurance companies.

By targeting young and new drivers in particular, as many insurance companies are presently doing around the world, UBI programs can help establish smarter and safer driving practices at an early stage in one’s driving career.

Still, many polled Canadians remain apprehensive and would prefer proof of potential savings before signing up for UBI programs. Sixty-one per cent of those surveyed said they would download a smartphone app if it would help them gauge whether they could benefit from a usage-based insurance program.

Apps — such Kanetix’s DriveSmart app for Apple and Android mobile devices — work much like other accountability apps. They can encourage the development of positive habits through positive reinforcement.

DriveSmart is analogous to the social media tool Foursquare, in that DriveSmart rewards drivers with badges. This lets drivers share their driving performance with their friends. But more importantly, the app gives con-

sumers a better understanding of how an actual UBI program works by providing a sense of what driving behaviour is being tracked by their insurers.

This allows a driver to become comfortable with an offering before subscribing, and gives him or her an indication as to whether or not he or she could pay a lower auto insurance premium based on driving behaviour.

At the time of writing, DriveSmart is not connected to an insurance company.

It is currently being used as a tool to gain consumer awareness and acceptance of UBI; however, several insurance companies have expressed early interest in leveraging the technology to encourage their own customer-base to embrace telematics.

Installing usage-based insurance devices is a cost presently absorbed by insurance companies, but if insurance companies were to offer app-based technology, a format most drivers are already familiar with, then adoption could be increased and implementation costs could be reduced.

Changing public perceptions of UBI Apps such as DriveSmart may be a crucial step in creating awareness about UBI programs and how they work, but it is not the only method. To truly change public perception, the industry needs to really understand consumer sentiment, and be more transparent and direct when it comes to the messaging surrounding UBI. Telematics is not going anywhere. The sooner UBI programs become clearer to consumers, the sooner the technology can expand across the Canadian insurance landscape.

Recent Insurance Press Releases featured on insPRESS.ca AssessMed is proud to present the 1st Annual Brain Injury Conference in support of OBIA

by AssessMed Inc. – Sep 9

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by Insurance Brokers Association of Canada – Aug 19

Halifax Collision Reporting Centre to open on September 10th

by Accident Support Services – Sep 8

AssessMed welcomes Dr. Max Kleinman as Medical Director – a key move to further enhance quality reporting standards

by AssessMed Inc. – Aug 18

CEP Forensic Engineering Continues to Strengthen its Team with the Appointment of Jean-François Goulet, M.A.Sc., P. Eng.

by CEP Forensic Engineering Inc. – Sep 4 Crawford & Company (Canada) Inc. Looking to Expand Talent Networks

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by STRONE-Itech – Aug 27 SCM Insurance Services Acquires Granite Divisions to Become a Leading Force in the Canadian Insurance Services Industry

by SCM Insurance Services – Aug 25 ClaimsPro Welcomes Michael Unger, BA, CPCU to Special Risk Division

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SCM Risk Management Services Announces rmsQuantify™, A Property Damage Appraisal and Audit Service

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by The Property Loss & Restoration Expo (PLR) – Aug 18 ClaimsPro- Special Risk Division (SRD) Continues to Strengthen its Team with Appointment of Jean-François Turcotte, PMI, B. Eng

by SCM Insurance Services – Aug 14 MENTAL ILLNESS – CAN IT BE OVERCOME? With an early and accurate diagnosis, proper treatment, and support plan, mental illness can be managed effectively

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by CRU - Catastrophe Response Unit – Aug 14 AssessMed Inc. announces Ms. Julie Langlois as Senior Director of Business Development, Quebec - by AssessMed Inc. Aug 13 ClaimsPro Boosts Capacity of Special Risk Division with Appointment of Myron Zaharia, LL.B., CRM

by SCM Insurance Services – Aug 12 Benefits of Partnering with a Payment Solutions Provider for You and Your Clients

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“Rolling Strones” Paddling for Charity in Barrie on August 23rd

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Zurich Canada helps transportation customers get the most out of telematics

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To Read the Full Story for Each Press Release visit insPRESS.ca

MOVES & VIEWS upcoming events: for a complete list visit

www.canadianunderwriter.ca

and click ‘my events calendar’ on the home page

1

Commercial insurance brokerage Nacora Canada announced in August the appointment of Dianna Fioravanti [1] as its new chief executive officer and managing director. Fioravanti was previously senior vice president of national sales and business development, for SCM Risk Management Services (RMS) and held various positions at Economical Insurance.

Nacora, which has offices in 30 countries, is a subsidiary of Kuehne + Nagle Inc., a Switzerland-based transportation and shipping firm.

2

Two brokerages with a combined total of six branches in Ontario — Neziol Insurance Group and Ottawa Valley Insurance — are joining Intact Financial Corporation’s BrokerLink subsidiary, the firm announced in September.

Neziol president Paul Neziol [2a] will join BrokerLink as its branch manager in Oakville while Neziol vice president Bernard Neziol will become BrokerLink’s branch manager in Brantford. Neziol’s other office is in the Hamilton neighbourhood of Ancaster.

Robin Postma [2b], president of Ottawa Valley Insurance, will become a BrokerLink account executive in Renfrew, about 100 kilometres west of Ottawa.

Ottawa Valley’s other offices are in Arnprior and Rideau Ferry. The terms of the Neziol

1

2a

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8a

and Ottawa Valley transactions were not disclosed.

3

64 Canadian Underwriter September 2014

Marsh Canada announced in early September the acquisition of Montreal-based construction and surety provider Kocisko Insurance Brokers Inc. “Kocisko focuses on providing commercial insurance and risk management solutions to construction and surety operations throughout the province of Quebec,” Marsh notes in a press release.

“The Kocisko team will join Marsh Canada’s National Construction and Surety Practice, and will be based in Marsh’s Montreal location.” The acquisition by Marsh “is a terrific evolution for Kocisko,” Kocisko

chief executive officer Terry Kocisko [3] notes in a statement. “Our clients will benefit from the tremendous service and broader array of capabilities and resources that Marsh has to offer.”

Marsh did not disclose the terms of the acquisition.

4

Donald MacLeod, Halifax-based chairman of the marine liability insurance carrier Shipowners’ Club, has been replaced by Philip Orme.

Orme [4], based in Dubai, is chief executive officer of Ocean Power International Ltd. Orme was appointed to the club board in 2005. The Shipowners Club, which provides protection and indemnity insurance, insures more than 33,000 vessels from

2b

8b more than 6,200 members worldwide and is a member of the International Group of P&I Clubs. It has branches in London and Singapore.

5

Willis Re Inc. announced in August it has appointed Geoff Lubert as managing director and executive vice president of Willis Re Canada, replacing Robert Wildbore [5]. Willis Re, a reinsurance broker owned by Londonbased Willis Group Holdings plc, opened its Toronto office in 2010. At that time, Wildbore moved from London to Toronto. Before his appointment as executive vice president of Willis Re Canada, Wildbore had been responsible for Willis Group’s reinsurance business in the

MOVES&&VIEWS VIEWS MOVES

of Calgary; Gordon Adams; Robertgeneral Cartwright, Jr.; to its senior adjusters Al Gorski; Lamb; John special riskLeslie division.

Michael Phelps;[8a] Michael Phillipus; Unger has more than 13 Frederick Savage; and Lori years of experience handling Seidenberg. claims. Unger’s specialties

3 3

98c positions have included general adjuster, branch manager, English-speaking Caribbean. vice president of operations Wildbore is now “returning and Lloyd’s leader. to the U.K. Division to take up a new senior position at Willis,” Willis Re reports. “Subject Macdonald Chisholm to regulatory approval, Insurance LubertTrask will also take a (MCT) seat announced in early on the Board of Directors January it will joinWillis propof Willisthat Re Canada.” erty and casualty brokerage Re also announced it has BrokerLink.

The terms the appointed Scott Jellousofas transaction were not disToronto-based senior vice closed, notes a statement president.

Both Jellous and from BrokerLink.

BrokerLink Lubert started their careers companies, subsidiaries at reinsurance brokerageof Intact Financial Corp., Guy Carpenter. include 84 offices serving clients in Atlantic Canada, AlbertaAllianz and Ontario.

Global Dating back more than 60 years, Corporate & Specialty MCT has more announced than 110 in(AGCS) in surance professionals August the availabilityinof18 new offices.

Michaelcoverage Brien, who cyber security in the has led MCT over the last 12 wake of growing cyber crimiyears, joins BrokerLink as nality threatening Canadian head of its Atlantic companies.

Allianzoperations.

Cyber

6

6

5 5 Protect includes broad business interruption capabilities, as well as access to a panel of consultants and IT experts who will work with AGCS clients to manage a cyber incident to minimize financial loss and reputational damage.

10 It includes a comprehensive policy offering cover up to a limit of $75 million Carolyna Snow will and covering broad [7] range lead RIMS as president of cyber exposures. AGCS is for thethree 2014levels term,of also offering which took effect January business interruption cover,1.

Snow, can whobe hascustomized. been on the which RIMS Board of Directors for seven years, is currently director Totten of risk Insurance management for Group Humana Inc. She previously Inc. announced in servedAugust as RIMS’s treasurer, the appointsecretary and director ment of Muriel Schmidtof[7] external affairs.ofThe RIMS to the position senior unboard for 2014 also includes derwriting specialist, casualty. vice president Richard Totten, a subsidiary of Hub Roberts, Jr.; treasurer International Ltd., is a Julie manPemberton; corporate secreaging general agent with six tary Nowell Seaman, director offices in Canada.

Schmidt of global risk management previously worked at ACE for Potash Northbridge Corporation Insurance of Group, Saskatchewan Inc.; Gloria and Travelers Canada, notes Brosius; Steve Pottle, director her LinkedIn Profile. of risk management services at York University; Jennifer Santiago; Janet Stein, direcIndependent adjusting tor of risk management and firm ClaimsPro has insurance at the University appointed three new

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include fire, flood, marine, cargo, aviation, earthquake As ofand January 8, and boiler machinery.

Toronto Turcotte insurance[8b] broJean-François kerthan Joneseight DesLauriers has more years of Insurance Management Inc. claims experience.

Turcotte (JDIMI) had acquired Whitley has a mechanical engineerInsurance Sering degree and and Financial has worked as vices.

Whitley Insurance has a facility hazard consultant offices in The Belleville, Ontario engineer. third new and the nearby adjuster, Myron communities Zaharia of Trenton, Deseronto and [8c], has more than seven Stirling.

“The acquisition is years of experience handling expectedclaims. to build a solidhas liability Zaharia in Eastern apresence BachelorforofJDIMI Laws from the Ontario and position the firm University of Liverpool and to better service their clients, has worked as a research with strengthened commerofficer for Alberta Criminal cial and personal insurance Justice. offerings in the region and a new financial services division,” AssessMed notes a statement from Inc. has JDIMI.appointed President Dr. andMax CEO ShawnKleinman DeSantis as willits lead the teams from both companies. medical director for Ontario LorisMaritime Clarke [8] has been and Provinces. named successor to Paul in Dr. Kleinman specializes Whitley, president Whitley physical medicine of and rehaInsurance,notes who will remain on bilitation, his profile during a transition period.and the College of Physicians

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Surgeons of Ontario website.

“Dr. Kleinman has Ken thousands Rayner [9] of has completed joined Anderson medical assessments to McTague & Associates date over his tenured career Ltd.both as its of busifor tortdirector and first-party ness development, Central accident benefit claims and Region.

“Ken does brings a wealth also regularly assessof experience to our comments for life and health pany, having held various insurers as well as Corporate senior management Canada,” AssessMedpositions with insurers andrelease. other MGAs,” notes in a press

9

says Chuck McTague, president ofprovides Anderson McAssessMed mediTague & evaluations Associates, and a familycolegal file owned MGA based in New reviews to auto insurers and Brunswick.

In January, Another clients. derson McTague & Associates announced it was expanding, adding an office in Toronto to Canadian National service the Insurance brokers of Ontario and Manitoba.

Rayner’s Crime Services appointmentannounced confirms the (CANATICS) company’s “commitment in August that Wawanesa to the Ontario/Manitoba marketMutual Insurance Company place, and to the building of is a new member of the nona local support team to assist profit organization. CANATICS brokers their surplus now haswith 10 insurers, “replines and 75% difficult to place resenting of the direct business,” McTague adds. written premium market for

10

auto insurance in Ontario,” notes a statement from The Guarantee CANATICS. CANATICS, which Company of expects to begin operations America in 2015, willNorth use computer has announced that Tara tools to identify potentially Wishart [10] became vice suspicious claims.

Barbara president ofWawanesa’s claims for the MacIntyre, vice insurer’s Toronto branch on president of claims, will be December 2, 2013.

Having on the CANATICS board.

21 years of experience in The Guarantee’s claims department,Managing Wishart will be general responsibleagent for the operations ENCON has of the Toronto Branch Claims. announced the She first joined The Guaranappointment of Vesna Fable teeainbusiness 1995 asdevelopment, an adjuster as and has held roles of increassenior casualty underwriter. ing seniority with on theprovidcomFable will “focus pany, including, most ing Stand-alone Commercial recently,Liability claims manager for General (CGL) and specialty lines.

Wishart is a Umbrella & Excess insurance memberENCON’s of both the Surety through Alternative AssociationMarket,” of Canada and Insurance ENCON the Canadian Association of notes in a release.

Women in Construction.

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September 2014 Canadian Underwriter February 2014 Canadian Underwriter

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CU Seminar ad September 2014 14-08-21 1:39 PM Page 1

Putting the pieces together.

Events and Seminars Calendar You work hard to protect your clients’ property. Now, it’s time to ensure that you apply the same kind of energy and commitment to your own success. CIP Society Events and Seminars give you the opportunity to learn, to network, to catch up on industry developments and to think about your career.

CIP Society Seminars & Events:

Professional Development Courses:

Toronto – Indoor Beach Volleyball Tournament . . . . . . . . . . . . . . . . . . . October 1

Vancouver – Think on Your Feet® . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 7-8

Edmonton – Battle of the Bands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 7

Edmonton – Think on Your Feet® . . . . . . . . . . . . . . . . . . . . . . . . . . October 21-22

Conestoga – PROedge: Equipment Breakdown Insurance . . . . . . . . . . October 9

Edmonton – Building Better Relationships at Work . . . . . . . . . . . . . . October 23

Victoria – PROedge: Advanced Business Interruption . . . . . . . . . . . . . October 15

Calgary – Think on Your Feet® . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 28-29

Vancouver – PROedge: Wildfire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 22

Winnipeg – Essential Management Skills . . . . . . . . . . . . . . . . . . . November 4-6

North Bay – Curling Bonspiel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 30

Ottawa – Essential Management Skills . . . . . . . . . . . . . . . . . . . November 11-13

Keeping you at the forefront of the P&C industry.

The CIP Society. MEMBERS BENEFIT. www.insuranceinstitute.ca/cipsociety

APPOINTMENT

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

Giffin Koerth held its 3rd annual golf tournament, the Giffin Koerth BIG Divot” on July 18 at Wyndance Gold Club in Uxbridge, Ontario. This unique course is the first Greg Norman design in Canada. On the links, players were treated to dramatic holes and beautiful fairways. Guests also enjoyed a fabulous lunch, a wonderful assortment of prizes and the ceremonial presentation of the “BIG DIVOT” trophy.

Lindsay Traves Claude Blouin and Jamie Dunn, Partners at Blouin, Dunn LLP, are extremely pleased to announce that former articling student Lindsay Traves has been hired back as an associate at the firm.

Lindsay received her Bachelor of Arts in Philosophy with a minor in Political Science from the University of Western Ontario in 2009, after which she obtained her Juris Doctor from the University of Windsor, spending one semester at Monash University in Malaysia, in 2013.

While attending Law School, Lindsay participated in the Hicks Moorley moot, the Lerners Cup, and the Zuber moots. She also wrote for the Law Enforcement Accountability Project’s blog for which she won two writing awards, was Editor in Chief of the student magazine, and the proud General Manager of the UWindsor Outlaws hockey team.

Prior to articling at Blouin, Dunn LLP, Lindsay worked for a prominent insurance company gaining valuable insight as a member of the legal and compliance departments.

Lindsay completed her articles at Blouin, Dunn LLP and was called to the Ontario Bar in 2014.

While articling, Lindsay attended the Superior Court of Justice for a variety of matters as well as handled her own Small Claims Court files.

Lindsay is a member in good standing with the Law Society of Upper Canada.

Lindsay’s contact information is: ltraves@blouindunn.com (416) 365-7888 ext. 142 Blouin Dunn is one of Ontario’s leading insurance defence firms whose members have been providing quality legal support to the insurance community for over 30 years. We offer services in Ontario to property and casualty insurers throughout North America, at all levels of experience, at appropriate and competitive rates.

www.blouindunn.com September 2014 Canadian Underwriter 67

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 Dedicated to fellowship and charity. 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

Crawford & Company (Canada) Inc. Enhancing the customer experience, every day. www.crawfordandcompany.com Cunningham Lindsey International independent claims services. www.cunninghamlindsey.com

Granite Claims Solutions Global Adjusters and Marine Surveyors www.graniteclaims.com PCA Adjusters Limited Adjusting to Meet your needs™ www.pca-adj.com Quelmec Loss Adjusters Identifying, Investigating, Resolving... for over a quarter century! www.quelmec.ca

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

ENGINEERING SERVICES

DSB Claims Solutions High Performance Speciality Adjusting Satisfaction Guaranteed! www.dsbclaims.com

Giffin Koerth Forensic Engineering and Science Investigate Understand Communicate www.giffinkoerth.com

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

INSURANCE COMPANIES

Aviva Canada Inc. Home Auto and Business Assurance. www.avivacanada.com Catlin Canada Underwriting Ambition. www.catlincanada.com

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

INSURANCE LAW

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

REINSURANCE

FM Global The leader in property loss prevention. www.fmglobal.com National Bank Insurance Auto | Home Home and Auto Insurance in Quebec. www.nbc-insurance.ca 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

Guy Carpenter & Company The world’s leading reinsurance intermediary. www.guycarp.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

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

Your Insurance News Source .ca Sign-Up at http://bit.ly/cuenews to receive Canadian Underwriter’s free DAILY e-Newsletter each morning – containing all of the latest industry The Insurance news, press releases, blogs, events, careers and more.

Brokers Insurance Broker

BROKERS FIRST

™

Operated by the CG&B Group Inc. We are the Professional Liability Program Administrators for IBAO and IBAN

www.cgbgroup.com • 800.267.6670 68 82 Canadian Canadian Underwriter Underwriter September August 2014 2014 72 Canadian Underwriter March 2014

GALLERY

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

The OIAA Georgian Bay Chapter held its annual golf tournament at Bear Creek Golf Club in Utopia, Ontario on August 8. Guests enjoyed a delicious BBQ lunch before heading out onto this beautiful central Ontario layout for an 18-hole scramble. Several on course prizes were up for grabs throughout the day and golfers were treated with perfect weather.

The round was followed by cocktails and dinner in the clubhouse where tournament awards and raffle prizes were distributed to the various winners.

PROPERTY CLAIMS ADJUSTER

Get the job.

Done.

TM

September 2014 Canadian Underwriter 69

GALLERY

The Canadian Independent Adjusters’ Association (CIAA) held its 30th Annual General Meeting and Conference in beautiful Quebec City at the Fairmont Le Chateau Frontenac from Aug. 21-24. More than 100 attendees joined together for a bustling trade show, informative education sessions, social events and the member meeting.

70 Canadian Underwriter September 2014

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

September 2014 Canadian Underwriter 71

GALLERY

The Canadian Independent Adjusters’ Association (CIAA) held its 30th Annual General Meeting and Conference in beautiful Quebec City at the Fairmont Le Chateau Frontenac from Aug. 21-24.

The President’s Banquet & Ball saw David Porter of Granite Claims Solutions take over the reins as president of CIAA for the 2014-15 year. He succeeds outgoing president Marie Gallagher.

72 Canadian Underwriter September 2014

GALLERY

Accelerate Your Content on insPRESS

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

September 2014 Canadian Underwriter 73

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

Totten Group held its 19th Annual Charity Golf Tournament at Deer Creek Golf & Banquet Facility on August 25th. Industry partners and colleagues were treated to a beautiful day on the course with hole-inone prizes in play on all par 3’s in addition to several other on course contests.

The round was followed by cocktails on the patio and a fabulous dinner with awards and prizes. The tournament has been in support of the Lions Foundation of Canada Dog Guides for the past 19 years; a short presentation was made by representatives of Canada Dog Guides to help demonstrate the crucial role Dog Guides play in the lives of Canadians with disabilities.

74 Canadian Underwriter September 2014

Productivity matters Offer your commercial clients an innovative product that fulfills the specific needs of their business. Prime Manufacturing offers a convenient, all-in-one insurance solution that eliminates the need for multiple policies and reduces the risk of coverage gaps.

Whether consumer, retail, wood, metal or industrial clients, you can feel confident recommending a wide range of customized protection to all sectors of the manufacturing industry. And with Aviva’s leading risk management solutions and exceptional claims service, you can help your commercial clients stay productive if the unexpected happens.

Be certain with Aviva. Recommend Prime Manufacturing.

AvivaPartner.ca Home | Auto | Leisure & Lifestyle | Business | Group | Surety Aviva and the Aviva logo are trademarks used under license by the licensor.

M-2707 September trade pub CU - Prime Manufacturing.indd 1

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