The snow removal industry insurance dilemma

By Ted Butler

Recently, I was asked to attend a municipal snow removal sub-contractors meeting which was held by a local Canadian city. Contractor meetings like this are held in almost every city in Canada to help prepare the city’s snow removal contractors for the upcoming winter season.

Representatives from all the local municipal snow removal contractors were in attendance, and as expected, the standard issues were discussed. Issues such as route assignments, “on-call” procedures, and invoice payments, etc. The usual mundane stuff, but then suddenly, halfway through the meeting, one particular contractor stood up and asked a question of the city which immediately became the focus of the entire meeting.

The question simply was ”Why do us sub-contractors have to carry such incredibly high and expensive insurance coverage, especially considering the fact that when a resident sues for a slip and fall incident, they actually sue the city, not the contractor?”

The room went silent. Everyone in the room was thinking the same thing. What a great question. The answer, unfortunately, was rather anti-climactic. “Just standard city policy,” retorted the city manager. But the question itself had highlighted a major issue that has become a nationwide dilemma within the snow removal industry.

Canadian insurance companies are choosing to either refuse coverage to contractors or they are implementing massive premium rate hikes to cover the cost of the everincreasing lawsuits which are plaguing the industry. These massive premium rate increases have forced many contractors right out of the business.

There are three main areas of snow removal affected: high-density residential properties (high-rise condos and apartments), high-traffic commercial properties (shopping malls and big box retailers), and public highways and municipal roads.

Snow removal contractors operate on a seasonal basis, typically turning to landscaping and lawn maintenance or general hauling during the summer months. These industries are also a major problem for insurance companies – from the use of pesticides on lawns to constant

litigation for slip and fall claims from residents. As a result, many insurers have significantly cut back on insuring this type of business.

The insurance industry in Canada has introduced several measures to try to help alleviate this problem, such as standardized contracts, loss prevention, and risk management programs to address the challenges facing snow removal companies. Unfortunately, the frequency and the severity of claims from lawsuits continues to increase drastically every year, which has created a major concern within the industry.

In Ontario for example, the province’s statutory duty to maintain roads and highways in a safe condition has generated million-dollar lawsuits against the province. In some cases, residents have successfully sued the province by alleging that improper road sanding on portions of provincial highways had caused their traffic accident to occur. In one particular legal decision, an Ontario court found that the province was 70 per cent responsible for damages in excess of $5 million. Another similar case resulted in a $3.8 million award of damages against the province.

These two lawsuits represent a few of the larger awards, but they’re just the tip of the iceberg (no pun intended). There are also many other minor lawsuits involving smaller snow removal companies adding up to millions of dollars. Accurate numbers are not available from the contractors or the insurance companies about the total cost of these smaller slip and fall claims, but they are increasing substantially every year.

Provincial ministries set the standards for contractors and monitor their operations before, during, and after winter storms. Contractors are closely scrutinized for their compliance to these standards and the penalties for failure to comply are quite severe, including loss of contract. Yet this does not remove liability from the province. Government contracts require that all sub-contractors must secure adequate insurance, regardless of the increased premiums.

Another disturbing part of this issue is the many loopholes found in snow removal contracts. Loopholes that usually place the liability for slips and falls onto the contractor. Poorly written or loosely worded contracts will often mean the liability issue will be contested in a court of law. Many contractors have signed contracts which have unwittingly accepted liability far above and beyond what their insurers were prepared to accept. It is for this reason that many insurance companies are no longer interested in writing

Snow removal sub-contractors have to carry such incredibly high and expensive insurance coverage to cover the cost of the everincreasing lawsuits which are plaguing the industry.

new business for snow removal contractors.

The problem for the insurance companies is generating enough revenue from premiums to cover the amount of the lawsuits. Meanwhile, the problem for the contractors is the premiums are getting so high, they’re unable to make any profit from the operations.

The real underlying problem

Let’s talk about the elephant in the room here; the real underlying problem is not the snow removal contractors. Nor is it the insurance companies. The real problem here is the fact that Canadians nowadays seem to have an increased willingness to legally sue others. Particularly for minor incidents like slip and falls. It is this factor, more than any other, that has created this nation-wide insurance dilemma in the snow removal industry today.

Canada is simply becoming a more litigious society. In the past, when a person slipped and fell on ice, they would simply pick themselves up, brushed themselves off and carry on with their day. Maybe the worst-case scenario might be a visit to the doctor and be processed though our national health care system. Today, they tend to seek additional compensation through litigation.

Any homeowner who has a public sidewalk crossing their front lawn is aware of the perils of not clearing the snow to allow neighbours to walk past. A slip and fall on your front step by a visitor could cost you dearly.

The solution is simple, but government action is required. Lawsuit controls must be put into place. Maximum dollar values for which a person is able to sue others must be established. Millions of dollars of litigation for a slip and fall is unsustainable.