Claims Canada August September 2014 by Annex Business Media

www.claimscanada.ca

August/September 2014

Official Journal of the Canadian Indeépendent Adjusters’ Association

RUNNING HOT Car insurance systems show signs of overheating in provinces across Canada

A BUSINESS INFORMATION GROUP PUBLICATION Publications Mail Sales Agreement #40069240

p1 CLAIMS COVER FINAL.indd 1

14-08-19 11:27 AM

GK_Ad_ClaimsCanada.pdf

11-11-03

2:51 PM

Exceptional expertise

• Forensic Engineering • Loss Mitigation / Remediation • Engineering Risk Management

416.368.1700 giffinkoerth.com

ad right size.indd 1

13-10-16 2:58 PM

Contents AUGUST / SEPTEMBER 2014 • VOLUME 8 • NUMBER

Cover Feature 12 RUNNING HOT Private sector-run auto insurance systems in provinces across Canada are experiencing troubling loss trends in key areas. While reforms, such as minor injury caps, treatment protocols and anti-fraud measures, have had stabilizing effects in recent years, there are signs of overheating in claims frequency and severity. Adjusters argue that a more thorough approach to claims handling and statement taking at first notice is a sound way to address cost pressures. BY CRAIG HARRIS

Spotlight 22 Western Perspective Burnaby, B.C.’s David Porter plans to bring some fresh ideas and focused solutions to the CIAA in his role as president for 2014-2015. BY CRAIG HARRIS

Education Forum

48 Product Recall Insurance

Adjusters who deal with manufacturing-related claims should understand how product recall insurance fits into the commercial landscape.

News Features 24 Property Loss Trends

42 Equitable Contribution

A review of recent legal cases shows some interesting developments in property insurance claims.

How this legal doctrine impacts the sharing of defence costs between primary and excess insurers.

BY GLENN GIBSON

BY CHAD LEDDY

32 Total-Loss Claims and Customer Satisfaction

44 Tornado Damage

When it comes to auto physical damage losses, the two are not mutually exclusive. BY JEREMY BOWLER

34 The Mortgage Clause Insurers and adjusters shouldn’t overlook the role of the standard mortgage clause in the property insurance policy. BY BRUNO DE VITA and HOLLIS BROMLEY

The Angus, Ontario tornado showed some deficiencies in construction methods – some of which can be fixed cheaply. BY GREGORY KOPP

Departments 4 First Notice 50 On The Scene

Columns

38 Dust to Dust

10 President’s Message

Is asbestos dust and asbestos containing settled dust the same difference?

48 Education Forum

BY MICHEL MILLMORE

44 p3 contents.indd 1

14-08-19 11:30 AM

• first notice FN Global and Canadian CATs down in first half of 2014 Global natural catastrophes for the first half of the year accounted for US$22 billion in insured losses, with more than half occurring in the United States, Impact Forecasting said in a report released July 23. Roughly 55% of the insured losses came from the U.S., with 23% in Europe, and 19% in Asia, according to Impact Forecasting, the catastrophe model development arm of Aon Benfield. Insured losses were, however, about 19% below the 10year average of US$27 billion. Economic losses for the first half of 2014 were also below the 10-year average, at US$54 billion, compared with US$106 billion average for the period of 2004 to 2013. In order of size, the five largest economic loss events were Japan winter weather in February (US$6.25 billion); Southern and Eastern European flooding in May (US$2.5 billion); Brazil drought from January to June (US$4.3 billion); U.S. drought from January to June (US$4.0 billion); and severe weather in Europe in June (US$3.5 billion). “Despite some well documented natural disaster events during the first half of 2014, our data show that losses from both an economic and insured perspective were below their recent averages,” Steve Bowen, associated director and meteorologist with Impact Forecasting said. “However, a relatively quiet first six months does not mean a similar trend will continue throughout the rest of the year.” Meanwhile, catastrophe losses in Canada during the first half of this year fell 98% over last year, with only two catas-

trophe events designated so far, Property Claims Services reported in mid-July. Both wind and thunderstorm events occurred in June, with the first event’s losses estimated at $34 million. An estimate for the second event is not yet available. Catastrophe losses during the first half of this year (excluding the second June loss event) are also below the five-year average of $641 million, PCS reported. “The steep year-over-year decline results from the fact that last year’s flooding - which led to the highest catastrophe loss levels since PCS Canada began operations in 2010 - was followed by the quietest first half in the service’s history,” the firm said in its report. “However, the results for 2013 may change based on future resurveys.” l

Total cost of risk edges higher for third year The average “total cost of risk” for companies trended higher for the third consecutive year in 2013, according to the newly-released RIMS Benchmark Survey. The TCOR increased 2% from $10.70 per $1,000 of revenue in 2012 to $10.90 per $1,000 of revenue in 2013, according to RIMS. The total cost of risk also increased 5% in 2012 and 1.7% in 2011, “reflecting the influence of hardening insurance market conditions,” according to the benchmark report, which includes industry data for more than 52,000 insurance programs from more than 1,400 companies. The contribution of property premiums to average TCOR also rose nearly 15%, from $3.09 per $1,000 of revenue to $3.54 per $1,000 of revenue, RIMS noted. “The value of risk management and its impact on an organization’s sustainability has emphasized the importance of developing comprehensive risk financing programs,” RIMS president Carolyn Snow commented in a statement. “However, the task of developing such programs has become more challenging as programs become more complex. Benchmarking the total cost of risk gives risk managers an undeniable advantage when structuring their risk financing programs, especially in today’s competitive insurance market.” l 4

Claims Canada

p4,6,8 FIRST NOTICE.indd 4

August/September 2014

www.claimscanada.ca

14-08-19 11:32 AM

ad right size.indd 1

14-08-15 3:44 PM

• first notice FN AIR releases updated earthquake model for Canada AIR Worldwide’s Earthquake Model for Canada – which the risk modelling firm calls a significant tool for compliance with Guideline B-9 – has been updated to provide insurers and other industry stakeholders with an enhanced means of assessing potential losses from ground shaking, fire following earthquake, tsunami, liquefaction and landslide. “The model reflects an up-to-date view of seismicity based on the latest hazard information from the Geological Survey of Canada (GSC) and collaboration with leading academics,” Dr. Jayanta Guin, executive vice president, research and modelling for AIR Worldwide, says in a statement from AIR, a member of the Verisk Insurance Solutions group at Verisk Analytics. “The release is the first in the industry to (also) include fully probabilistic landslide and tsunami models for Canada,” Guin says. “This physically based model is especially useful for estimating the recurrence rates for rare, very large magnitude earthquakes and source parameters for earthquakes capable of producing tsunamis,” AIR reports. The statement notes that Insurance Bureau of Canada previously selected AIR to conduct what is says is the most comprehensive study of seismic risk in Canada ever undertaken. The study cautioned that Canada was not prepared for a major earthquake and that both economic and insured costs would be significant.

ARCTIC WEST ADJUSTERS LTD. “Your Northern Resource!”

Arctic West Adjusters provides all claims adjusting services to the Northwest Territories, Nunavut Territory and, Yukon Territory. With over 30 years northern focus, Greg Merrithew and his team of experienced adjusters provide Insurers quality service in a timely fashion with Northern expertise. Based in Yellowknife, our Adjusters provide services to all the communities of the three northern territories.

For all your northern claims adjusting services,

Arctic West is Your “Go To” Team. www.arcticwestadjusters.com

N 401 5204 50 Ave. Yellowknife, NT (867) 920 2212 • 24/7 (855) 876-6722 claims@arcticwest.ca

Claims Canada

p4,6,8 FIRST NOTICE.indd 6

August/September 2014

AIR modelled scenarios involving a 9.0-magnitude earthquake off the west coast of Vancouver Island and a 7.1-magnitude quake about 100 km northeast of Quebec City and found that for the western scenario, economic losses would be about $74.7 billion and insured losses approximately $20.4 billion, while for the eastern scenario, those losses would be about $60.6 billion and approximately $12.2 billion, respectively. “AIR has deep knowledge in catastrophe risk management, including the impact of earthquake and tsunami on properties and infrastructure, and has been a great collaborator on this project,” Gregor Robinson, IBC’s senior vice president of policy and chief economist, says in the statement. “It is a direct result of this collaboration that our newly updated Canada earthquake model provides the most complete view of seismic risk to residential, commercial and industrial properties and infrastructure,” Guin adds. l

Tornado causes $30 million in damages in Angus, Ontario Insured damage from the tornado that hit Angus, Ont. in late June is at least $30 million, according to the Insurance Bureau of Canada based on preliminary figures from Property Claim Services (PCS). More than 100 homes were damaged from the storm, IBC noted. Immediately after the tornado hit, IBC deployed its Community Assistance Mobile Pavilion (CAMP) to Angus to help residents and businesses by offering on-site, insurancerelated information. “I was on the ground with IBC’s CAMP, and I can say firsthand that the tornado’s destruction is devastating for those who have been affected. But insurers are here to help with the recovery,” Pete Karageorgos, IBC’s director of consumer relations said. IBC worked with its members, local fire, provincial police, and emergency management officials, as well as the mayor and representatives from the town’s council to help prepare a plan that allowed residents to return to their homes to inspect the damage and to work with adjusters to begin the work of restoring their homes. Many insurance companies also brought in extra staff to start issuing cheques to residents to cover their daily needs and to begin processing claims immediately. l

www.claimscanada.ca

14-08-19 11:32 AM

LT D .

ERS I N I S T R E S T S U EN S ADJ

dge19.30 e l w o Knc Canada Since . l a c nti Lo g Atla Servin

wned u with o e e ploy nting yo m e 4/7.” 00% , represe 2 1 t e s c e i g ’s lar he ground sonal serv a d a pe r Can ce –on t d n r n e a t i “Eas ting serv mitment adjus nding com a outst E RT EXP

ad right size.indd 1

14-08-15 3:52 PM

• first notice FN Hurricane Arthur losses won’t exceed $250 million

Police recover $1.4 million in stolen cargo

Insured losses from Hurricane Arthur, which struck the United States and Canada in July, are not expected to be above $250 million from wind and coastal flooding, catastrophe modeling firm RMS reported in mid-July. Arthur made landfall July 3 along Shackleford Banks, between Cape Lookout and Beaufort at the southern end of North Carolina’s Outer Banks as a Category 2 hurricane, according to RMS. The storm then passed quickly over the Outer Banks of North Carolina and weakened to a Category 1 hurricane before tracking offshore of Massachusetts on the night of July 4, RMS said. It then made a second landfall as a post-tropical storm in Nova Scotia and New Brunswick July 5. The storm lashed the provinces, causing flooding, toppling trees and knocking out power for 250,000 people in both Nova Scotia and New Brunswick. Expected losses from Arthur will cover damage to residential, commercial and industrial properties; automobile and watercraft lines of business; and business interruption from power outages or damage to property. l

A recent police raid helped identify roughly $1.4 million in stolen property from 15 separate cargo load thefts over the past several months, the Insurance Bureau of Canada said July 15. “Multiple search warrants were executed on warehouses in the City of Vaughan and the City of Toronto,” York Regional Police reported in late June following the raid. “As a result of the warrants, 15 loads of cargo were recovered which contained merchandise including baby products, barbecues, household appliances, cleaning supplies, tools, musical instruments, forklifts, vehicle antifreeze and a baby grand piano.” IBC’s cargo theft reporting database helped insurance companies and law enforcement with the return of the property, according to a release from the organization in mid-July. “This is an excellent example of the effectiveness of our process,” Garry Robertson, IBC’s national director of investigative services commented. l

Paul Aquino Publisher (416) 510-6788 paul@canadianunderwriter.ca

Steve Wilson Senior Publisher (416) 510-6800 steve@canadianunderwriter.ca

Elliot Ford Account Manager eford@canadianunderwriter.ca (416) 510-5117

Craig Harris Editor (905) 873-7691 craig@editinsight.com

Gary White Production Manager • (416) 510-6760

Christine Giovis Account Manager (416) 510-5114 christine@canadianunderwriter.ca

Michael Chimienti Art Director mchimienti@bizinfogroup.ca

Subscription inquiries (416) 442-5600 • 1-800-668-2374 Fax: (416)Indeépendent 442-2191 Official Journal of the Canadian Adjusters’ Association

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

A bi-monthly magazine (6x per year), Claims Canada is published by BIG Magazines LP, a div. of Glacier BIG Holdings Company Ltd. Business Information Group is located at: 80 Valleybrook Drive, Toronto, ON, M3B 2S9. Claims Canada magazine is the Official Publication of the Canadian Independent Adjusters’ Association [CIAA] and through its editorial content and circulation brings together the ‘entire property & casualty insurance claims market nationally’ with information and insight into the profession, business and people of insurance claims and loss adjusting. All key claims process stakeholders are reached as part of our readership community – including: both CIAA member and non-member independent claims adjusting firms; insurance and reinsurance company executive, claims management

Claims Canada

p4,6,8 FIRST NOTICE.indd 8

August/September 2014

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

and claims adjusting personnel; corporate risk managers and loss control professionals; insurance brokers; insurance law firms; forensic engineers and accountants; appraisal, restoration, rehabilitation and collision repair professionals; Insurance Institute chapters; insurance associations, regulators and related claims market recipients. The contents of this publication may not be reproduced or transmitted in any form, either in part or in full, without the written consent of the copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without prior written consent.

www.claimscanada.ca

14-08-19 11:32 AM

Crawford Risk Management Services

Customized Claims Management Programs for Risk Managers Crawford Risk Management Services (RMS) is dedicated to creating claims programs that meet the specific needs of our commercial clients. Our team of dedicated and experienced account supervisors will effectively manage your program, providing a single point of contact and focusing on the details so you donâ&#x20AC;&#x2122;t have to. Contact us at info@crawco.ca for more information on RMS or any of our services.

www.crawfordandcompany.ca

CdnUnderwriterCrawford-RMS.indd 1 ad right size.indd 1

7/22/2014 11:27:16 AM 14-08-19 9:53 AM

Message from the President La Plume du Président MARIE GALLAGHER Four years ago, in her final ‘President’s Message’, CIAA Past President Patti Kernaghan posed the question: Who will advocate for the independent adjusting profession in Canada, if not independent adjusters themselves? Today as the 60th President of our association, once again I can not help but think back to that fateful day in December 1953 when a small group of independent adjusters, having asked themselves the same question, formed what would eventually become the Canadian Independent Adjusters’ Association – the only National body that promotes the interests of the independent adjuster in Canada. It has been a true honour and privilege to represent our Association and to serve as its President this past year. Admittedly, I find when ever I am sitting in the CIAA boardroom, and I look around the room at all those photos of Past Presidents, I cannot help but feel a sense of humility. Having been involved with CIAA in one capacity or another for over 20 years, I must admit it came as no surprise the amount of time and effort required to effectively carry out the duties of President. It never ceases to amaze me how a relatively small group of volunteers across the country can accomplish so much, keeping our torch alive for the betterment of the independent adjusting profession, our association and its members. I am proud of what we as a team have accomplished this year. With the help of our NIIAB members and IBC, we now have received approval from the majority of provincial regulators across the country for use of a simplified one page application we designed for temporary licensing in the event of an insurable event. With the help of our Education Committee, we have defined and finalized the course content for our new CLA designation. The courses, accredited for those who require CE credits, will not only serve as a means of continuing education and training for our members; the end result will be an industry recognized designation available only to CIAA members. With the help of our Regional Executives, our members continue to benefit from EMO work. And with the help of our Executive Director Patricia Battle we have met with and responded with CIAA’s formal position paper to a Department of Finance initiative regarding their examination of the GST/HST treatment of financial services in Canada. In my more than 30 years in the insurance industry, I have always felt extremely proud to be an independent insurance adjuster and proud of the company I have worked for, now half my life. I am grateful for the opportunities that have come my way and for the career this profession has 10 Claims Canada

p10,11 presidents message.indd 10

August/September 2014

Il y a quatre ans, dans son dernier « Message de la présidente », l’ancienne présidente de l’ACEI, Patti Kernaghan, posa la question : Qui défendra la profession d’experts en sinistres indépendants au Canada, si ces experts ne le font pas eux-mêmes? Aujourd’hui, en tant que 60e présidente de notre association, une fois encore, je ne peux m’empêcher de repenser à ce jour mémorable de décembre 1953, alors qu’un petit groupe d’experts en sinistres indépendants, s’étant eux-mêmes posé cette même question, ont formé ce qui allait éventuellement devenir l’Association canadienne des experts indépendants, le seul organisme national qui assure la promotion des intérêts des experts en sinistres indépendants au Canada. Ce fut véritablement un honneur et un privilège de représenter notre association et d’occuper le poste de présidente au cours de l’année qui vient de passer. Certes, je trouve que lorsque j’assiste à des réunions du conseil de l’ACEI et que je regarde toutes ces photos des anciens présidents dans la pièce, je ne puis m’empêcher de ressentir un sentiment d’humilité. Ayant été impliquée au sein de l’ACEI d’une façon ou d’une autre depuis plus de 20 ans, je dois admettre que je n’ai pas été surprise du temps ni des efforts nécessaires pour arriver à accomplir de manière efficace les devoirs en tant que présidente. Je ne cesse d’être émerveillée de la façon dont un groupe relativement petit de bénévoles d’un bout à l’autre du pays peut réussir à accomplir autant de choses, gardant notre flamme allumée, afin d’améliorer la profession d’experts en sinistres indépendants et aussi de bénéficier à notre association et ses membres. Je suis fière de ce que nous, en tant qu’équipe, avons accompli au cours de cette année. Avec l’aide de nos membres du CCNIA et du BAC, nous avons maintenant reçu l’approbation de la majorité des régulateurs provinciaux d’un bout à l’autre du pays en ce qui concerne l’utilisation d’un formulaire de demande simplifié d’une page que nous avons préparé pour un processus d’autorisation temporaire en cas d’une situation assurable. Avec l’aide de notre comité pour l’éducation, nous avons défini et mis la dernière main au programme d’études du cours pour notre nouvelle attestation d’expert en sinistres agréé (ESA). Les cours, accrédités pour ceux et celles qui ont besoin de crédits CE, serviront non seulement de moyen de formation continue pour nos membres, mais le résultat final sera l’obtention d’une attestation reconnue par l’industrie dont les membres de l’ACEI pourront bénéficier de façon exclusive. Avec l’aide de nos directeurs régionaux, nos membres continueront de bénéficier de notre travail EMO. Et avec l’aide de notre directrice générale, Patricia Battle, nous avons respecté et répondu à une initiative du ministère des Finances quant à leur étude du traitement des services financiers au Canada sous le régime de la TPS/TVH, en soumettant un document de position officielle de l’ACEI. Au cours de mes plus de 30 années de service au sein de l’industrie de l’assurance, je me suis toujours sentie extrêmement fière de travailler en tant qu’experte en sinistres indépendante et fière de l’entreprise pour laquelle je travaille, depuis maintenant la moitié de ma vie. Je suis reconnaissante pour les possibilités qui se sont présentées à moi et pour la carrière que cette profession m’a aiwww.claimscanada.ca

14-08-19 11:38 AM

helped me to build. And as the old saying goes, I have found the harder I work and the more I give of myself, the “luckier” I become. I feel so fortunate to have had the opportunity to meet so many of our members as I travelled across the country this year. Our members are a dedicated and hard working bunch. We are the heart and soul of our profession. We are professionals. We care. We are committed. We give unselfishly of ourselves for the benefit of our association. As CIAA members, we will continue to build on the dialogue CIAA has established with our industry stakeholders and we will continue to be the voice of the independent adjuster in Canada. Because if it were not for the combined efforts of our members, who will advocate for the independent adjusting profession in Canada? I know our association is in good hands with the recent election of David Porter as President and Albert Poon and Gary Ellis respectively as First and Second Vice Presidents, not to mention the tireless and much appreciated efforts of our Executive Director Patricia Battle and Executive Assistant Mina Cerulli. This is a year I will never forget. Thank you to all who put their faith in me and gave me this wonderful opportunity to serve as CIAA’s National President. Thank you to all those who volunteered their time to our association this year. And to my employer, my family, my co-workers and my friends, a big thank you for your ongoing support and encouragement throughout the year – I couldn’t have done it without you! Salut! n

dée à bâtir. Et comme dit la vieille diction, j’ai remarqué que plus je travaille dur et plus je donne de mon temps, plus je connais de la « chance ». Je me sens si chanceuse d’avoir eu l’occasion de rencontrer un si grand nombre de nos membres lors de mes déplacements d’un bout à l’autre du pays au cours de cette année. Nos membres sont des gens dévoués et qui travaillent dur. Nous sommes le cœur et l’âme de notre profession. Nous sommes des professionnels. Nous faisons preuve d’empathie. Nous sommes engagés. Nous donnons généreusement de notre temps au bénéfice de notre association. En tant que membres de l’ACEI, nous continuerons de contribuer au dialogue que l’ACEI a établi avec nos intervenants de l’industrie et nous continuerons d’être la voix de l’expert en sinistres indépendant au Canada. Puisque, ne serait-ce que des efforts rassemblés de nos membres, qui défendra la profession d’experts en sinistres indépendants au Canada? Je sais que notre association est entre bonnes mains avec l’élection récente de David Porter comme président et d’Albert Poon et de Gary Ellis, respectivement à titre de premier et de second viceprésidents, sans oublier de mentionner les efforts inlassables et tant appréciés de notre directrice générale, Patricia Battle et de son assistante de direction, Mina Cerulli. C’est une année que je n’oublierai jamais. Merci à tous ceux et celles qui m’ont accordé leur confiance et qui m’ont donné cette merveilleuse occasion d’occuper le poste de présidente nationale de l’ACEI. Merci à tous ceux et celles qui ont travaillé comme bénévoles et donné de leur temps à notre association cette année. J’aimerais également dire un grand merci à mon employeur, à ma famille, à mes collègues de travail et à mes amis pour leur soutien continu et leur encouragement tout au long de l’année. Je n’aurais pas pu y arriver sans vous! Salut! n

NATIONAL EXECUTIVE 2013-2014 2011-2011 PRESIDENT Marie C. Gallagher, FCIP, CRM Granite Claims Solutions 71 King Street, Suite 204 St. Catharines, ON L2R 3H7 Phone: (905) 984-8282 • Fax: (905) 984-8290 E-mail: marie.gallagher@graniteclaims.com 1ST VICE-PRESIDENT David Porter, LL.B., FCIP, CRM Granite Claims Solutions 400 – 4370 Dominion Street Burnaby, BC V5G 4L7 Phone: (604) 659-6559 • Fax: (604) 659-6570 E-mail : david.porter@graniteclaims.com 2ND VICE-PRESIDENT Albert Poon, CIP Cunningham Lindsey Canada Claims Services Ltd. 1102 – 50 Burnhamthorpe Rd. W. Mississauga, ON L5B 3C2 Phone: (905) 896-8181 • Fax: (905) 896-3485 E-mail: apoon@cl-na.com SECRETARY Dara Banga, FCIP, CFEI DSB Claims Solutions Inc. 204 Main Street North, Brampton, ON L6V 1P1 Phone: (416) 400-8933 • Fax: (905) 915-4685 E-mail: dara.banga@dsbclaims.com

www.claimscanada.ca

p10,11 presidents message.indd 11

TREASURER Russell Fitzgerald, CIP Kernaghan Adjusters Limited 203 – 4246 97 Street N.W. Edmonton, AB T6E 5Z9 Phone: (780) 488-2371 Fax: (780) 488-0243 E-mail: rfitzgerald@kernaghan.com PAST-PRESIDENT John D. Seyler, CIP ProFormance Group Insurance Solutions Inc. 5080 Timberlea Blvd., Suite 214 Mississauga, ON L4W 4M2 Phone: (905) 238-4985 Fax: (905) 238-2735 E-mail: jseyler@prospecialty.ca EXECUTIVE DIRECTOR Patricia M. Battle Canadian Independent Adjusters’ Association/ L’Association Canadienne des Experts Indépendants Centennial Centre, 5401 Eglinton Avenue West, Suite 100 Etobicoke, ON M9C 5K6 Phone: (416) 621-6222 Toll Free: 1-877-255-5589 Fax: (416) 621-7776 E-mail: pbattle@ciaa-adjusters.ca

DIRECTOR James B. Eso, CIP, CIOP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Phone: (519) 578-5540 • Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca DIRECTOR Albert Poon, CIP Cunningham Lindsey Canada Claims Services Ltd. 1102 – 50 Burnhamthorpe Rd. W. Mississauga, ON L5B 3C2 Phone: (905) 896-8181 • Fax: (905) 896-3485 E-mail: apoon@cl-na.com DIRECTOR John Jones, BA Granite Claims Solutions Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 • Fax: (905) 671-1889 E-mail: john.jones@graniteclaims.com DIRECTOR Craig J. Walker, CIP, FCIAA, FIFAA Maltman Group International 3550 Victoria Park Ave., Suite 301 Toronto, ON M2H 2N5 Phone: (416) 492-4411 • Fax: (416) 492-5657 E-mail: cwalker@maltmans.com

August/September 2014

Claims Canada 11

14-08-19 11:38 AM

â&#x20AC;˘ cover story

12 Claims Canada

p12-20 COVER STORY.indd 12

August/September 2014

www.claimscanada.ca

14-08-19 11:46 AM

Private sector-run auto insurance systems in provinces across Canada are experiencing troubling loss trends in key areas. While reforms, such as minor injury caps, treatment protocols and anti-fraud measures, have had stabilizing effects in recent years, there are signs of overheating in claims frequency and severity. Adjusters argue that a more thorough approach to claims handling and statement taking at first notice is a sound way to address cost pressures.

BY CRAIG HARRIS

www.claimscanada.ca

p12-20 COVER STORY.indd 13

fter a lengthy period of reform that dates back more than ten years, auto insurance systems in Atlantic Canada, Ontario and Alberta are showing some wear and tear, particularly in bodily injury claims. Measures such as minor injury caps or guidelines are under constant pressure from creative litigators and regulators anxious to respond to accident victim disgruntlement. In some cases, provincial governments have tripled cap levels and indexed these amounts to inflation, creating higher per-claim costs. In others, lawyers have found ways â&#x20AC;&#x153;around the capâ&#x20AC;? by focusing on injuries like chronic pain and post-traumatic stress syndrome, while pursuing additional heads of damages. Other cost pressures include systemic fraud, lengthy dispute

resolution procedures, adherence to reasonable treatment guidelines and vehicle property damage claims. The question today is whether the reforms, designed to create sustainable car insurance programs that balance affordability with fairness, are still working. With legislation either introduced or pending in many provinces, there is a perceived need for measuring, tweaking and, in some cases, overhauling existing systems. It all adds up to a pivotal time for auto insurance, and a test of whether these changes can keep a healthy tension between reasonable claims payout and stable rates. Here is a cross-country check up on privately delivered auto insurance in key provinces, with commentary from independent adjusters.

August/September 2014

Claims Canada 13

14-08-19 11:46 AM

ATLANTIC CANADA Nova Scotia has had the longest experience of a raised minor injury cap in the Atlantic Canada provinces. Effective April 28, 2010, the province increased the limit on pain and suffering awards for minor injuries suffered in a car accident to $7,500 (from $2,500), indexed yearly for inflation. The Nova Scotia government also

narrowed the definition of what is actually considered a minor injury to include only sprains, strains and certain whiplash associated disorders. A second phase of the so-called “Fair Auto Insurance Reforms” came into effect April 1, 2013, bringing new diagnostic and treatment protocols for minor injuries. Borrowing heavily from Alberta’s model, the new treatment plans mean drivers injured in

BDO HELPS WHEN DISASTER STRIKES To business owners who have tirelessly committed themselves, disaster is the loss of their dreams and livelihood. To insurance professionals, it’s the challenge to fairly and accurately quantify what their loss is worth. When disaster strikes, trust the firm that provides expert, objective opinions and quality resources. BDO. More than you think. Business interruptions | Income replacement benefit calculations Personal injury claims | Forensic investigations | Inventory losses Fidelity and surety bonds Vancouver | Calgary | Edmonton | Winnipeg | Toronto | Montreal | Halifax Greg Hocking 416 775 7800 ghocking@bdo.ca

Andrew Bourne 416 775 7802 abourne@bdo.ca

www.bdo.ca/advisory

14 Claims Canada

p12-20 COVER STORY.indd 14

August/September 2014

accidents have direct access to physiotherapy and chiropractic services without waiting for approval from an insurer or a physicians. Other reforms included direct compensation for property damage (allowing drivers to be compensated by their own insurer for property damages) and limited liability and new priority of pay rules for car rental companies. However, it is the changes to the cap that have had the greatest effect on Nova Scotia’s auto insurance system. In May 2010, an actuarial report by Oliver Wyman done for the Nova Scotia Superintendent of Insurance estimated that the revised minor injury cap “will increase the bodily injury coverage claims costs by 17% … Approximately $69 million (estimate) in additional claim costs would be paid by insurers if all claims (open or closed) that had been subject to the current minor injury cap and definition were to be retroactively paid under the proposed minor injury cap and definition.” Carol Messervey, an adjuster with Plant Hope Adjusters Ltd., says plaintiff lawyers have accepted the reality of the cap, but are constantly looking at ways to circumvent it. “I think the lawyers said, ‘we are stuck with the cap, we have to live with it, let’s try to find other ways around it. Let’s take a look at other tactics,’” she notes. “It was just a matter of what that was going to be.” One tactic some litigators have tried is to pursue additional heads of damage, such as loss of future earnings capacity, loss of housekeeping capacity and future cost of care, according to Messervey. “A $60,000 claim is still the $60,000 claim it was way back when,” she notes. “The difference is that plaintiff counsel is making the foot fit the shoe with these heads of damages. So when the insurers are faced with some of these demands, they are starting to take a look at the grass roots adjusting, such as making sure you have a more detailed statement from the claimant to determine the exact nature of the injury and the impact on educational background, occupation.”

www.claimscanada.ca

14-08-19 11:46 AM

If you’re in Manitoba, this is considered an automobile. Surprised? ARC isn’t.

ARC Group Canada is a national network of independent law firms, each intimately connected to their local market. Insurance and risk management experts. Regional strength. National scope. That is the ARC Group.

Go to AskARC.com

The ARC Legal Reporter Winter Issue – Article #1 A National Network of Independent Law Firms

When is a medical examination considered a second examination under Rule 36 of the New Brunswick Rules of Court? ARC ad 2014_golf.indd 1

14-06-02 4:08 PM

ad right size.indd 1

14-06-24 2:58 PM

Another trend Messervey has observed is increased diagnosis of concussions. “This is diagnosed three, six or nine months after the accident, as opposed to right after,” she says. “I am not sure if the medical field has missed it or if there is some litigiously creative plaintiff counsel out there who realize that, not only does it take it outside the protocols of section B (accident benefits), but also outside the definition of soft tissue injury in the cap.” For Messervey, these trends necessitate a “back to basics” approach to loss adjusting. “I sensed at the beginning and still maintain that because of the interpretation of what qualifies and what doesn’t under the new cap, now insurers have realized that a good grass roots investigation can help at the onset of a claim,” she says. New Brunswick’s auto insurance system followed Nova Scotia’s lead in raising the cap for minor injuries to $7,500 (from $2,500) effective July 1, 2013 (indexing for inflation is set to start Jan. 1, 2015). The province also updated the definition of minor injury to a more restrictive set of six listed injuries – contusion, abrasion, minor

16 Claims Canada

p12-20 COVER STORY.indd 16

August/September 2014

laceration, sprain, strain and whiplash associated disorder. The regulations also note that minor personal injuries falling within these categories “do not result in serious impairment and permanent serious disfigurement.” A higher cap, coupled with a narrower definition of minor injury, will lead to higher claims costs – the question is, how much? In October 2013, the New Brunswick Insurance Board accepted estimates from two actuarial studies that showed “the range of probable magnitude for the impact (of the new Minor Injury Regulations) on bodily injury loss costs is between 20% and 31.3%.” An actuarial report prepared by Oliver Wyman in August 2013 at the request of the Office of the Attorney General for New Brunswick estimated that “the more restrictive minor injury definition and higher $7,500 minor injury cap will increase the bodily injury coverage average cost per claim by approximately 30%, and the accident benefits-medical/rehabilitation average cost per claim by 25%.” “As insurers know, uncertainty tends to breed litigation and increase costs,” according to a 2013 legal update by McInnes Cooper. “New Brunswick is entering a new era of insurance regulation and there are questions to be answered and arguments to be made. This will likely result in more claims moving to litigation, an increased reliance on expert medical evidence, and of course, increases in awards of non-pecuniary general damages actually paid to claimants.”  These trends are already being observed by some independent adjusters. “It seems to me that bodily injury claimants are much more reluctant to settle their claims within the first 12 months post MVA,” notes Kelly Roberts, an adjuster with Plant Hope. “Since the introduction of the new legislation, claimants are pressing more for the $7,500 payment. It has made it necessary to obtain more medical documentation from the treating physician and other health care providers in order for insurers to accept resolving the matter.” Invariably, lawyers are showing greater interest in higher cap payouts for minor injuries. “It is my experience that lawyers are becoming more involved in bodily injury files,” Roberts observes. “As a result, this has shifted our handling of files towards a more litigation-type approach. Consequently, files are staying open longer and I expect that there will be more challenges to the definition of what is considered a ‘minor injury.’” “Whether or not our market will be able to sustain the increase in loss severity remains to be seen,” Roberts adds. “However, we have been down that road before and everybody paid the price.”

www.claimscanada.ca

14-08-19 11:47 AM

Prince Edward Island’s government passed legislation in the spring of 2014 that will see significant changes in auto insurance, similar to reforms enacted in Nova Scotia and New Brunswick. Effective October 1, 2014, the cap on minor injuries will rise to $7,500 (indexed to inflation as of January 2016), while no-fault accident benefits available under the standard auto policy are set to increase significantly, mirroring those in New Brunswick. The amended legislation also narrows the definition of “minor personal injury” to sprains a, strains and whiplash associated disorders that do not result in a serious impairment. Direct compensation for property damage is also expected to be introduced in PEI in 2015. Newfoundland and Labrador, without a minor injury cap, remains the dark horse of auto insurance jurisdictions in Atlantic Canada. In 2004, the province introduced a $2,500 deductible on pain and suffering awards for minor injuries. However, according

to Insurance Bureau of Canada, this “did not effectively reduce the cost of court awards, and will not provide the

New Brunswick also updated the definition of minor injury to a more restrictive set of six listed injuries – contusion, abrasion, minor laceration, sprain, strain and whiplash associated disorder.

long-term cost control that has been seen in the other Atlantic Provinces with a cap, instead of just a deductible.” IBC also notes that “problems

continue to exist in the province’s auto insurance system that allow large pain and suffering awards for relatively minor injuries. If the experience in other provinces is any guide, additional reforms will be necessary to maintain stability in insurance rates.”

ONTARIO Following its landslide election victory on June 12, 2014, the Wynne Liberal government quickly reintroduced auto insurance legislation Bill 15 (formerly Bills 171 and 189) into the Ontario legislature on July 15. With a majority government, the legislation is expected to pass this fall. The auto insurance reform package deals with several measures involving anti-fraud, consumer protection and arbitration, including: • Changing Ontario’s auto insurance dispute resolution by moving injured drivers from the insurance regulator to an existing tribunal run by the Ministry of the Attorney General (License Appeal Tribunal);

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

• • • • • • •

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

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

p12-20 COVER STORY.indd 17

August/September 2014

Client: A.R.S

Claims Canada 17

14-08-19 11:47 AM

• Providing more oversight of the billing practices of health clinics and allowing only licensed service providers to be paid directly by insurers; • Requiring tow truck operators to register their vehicles, get permission from a driver before charging for towing and storing services, post their prices and provide itemized invoices. For adjusters like Tammie Norn, founder of ProFormance Group Insurance Solutions, fraud is one of the biggest challenges facing Ontario auto insurance. “I would have to say the most significant cost pressures in the personal lines auto insurance at this point would be the fraudulent claims,” 18 Claims Canada

p12-20 COVER STORY.indd 18

Norn notes. “In a Canada-wide study conducted by KPMG on behalf of the IBC they found that 33.6% of all AB claims and 25.6% of all BI claims involve premeditated or opportunistic fraud. The study also found that the total cost to private insurers of AB and BI fraud is estimated to be 15% - 22% of all paid losses or as high as $430 million. The numbers and dollar amounts are highest in Ontario.” Norn says that some progress has been made on AB claims in Ontario, mainly due to the introduction of the Minor Injury Guideline in 2010. “The MIG has held up quite well and we have a couple of solid decisions supporting the application of the guideline. FSCO reported a decrease in the average cost of AB claims from $56,000 in 2010 to $27,000 in 2012. I

August/September 2014

also believe the regulation of health care providers as will go a long way in further preventing fraud in AB cases.” On the bodily injury side, “the frequency of these claims is definitely up,” Norn observes. “The definition of threshold continues to be challenged and we continue to see some of the ‘softer’ cases meeting threshold. Plaintiffs continue to try and recover monetary losses that are no longer available under the Statutory Accident Benefits Schedule, such as housekeeping, caregiving and attendant care to a certain extent. I anticipate these frequencies will continue to rise.” One area that will experience medium to long-term pressure is the dispute resolution system, according to Norn. “Although the mediation backwww.claimscanada.ca

14-08-19 11:47 AM

log was eliminated the later part of last year, an arbitration backlog now exists,” she says. “According to FSCO, approximately 72% of failed mediations proceed to arbitration. We do not currently have the infrastructure to support this increase. The proposed changes… mandate an arbitration-like process, which is only going to further tax the system.” Norn is also not confident that the new dispute resolution process involving the Ministry of the Attorney General will improve things. “Removing the right to sue in Accident Benefit cases and having to proceed to the License Appeal Tribunal is a mistake,” she notes. “There will be added cost pressures not only for the insureds who have both AB and BI claims, but for the insurers who are on for both sides as well.” Property damage claims costs may benefit the most from Bill 15, according to Norn. However, this is not the main driver of loss trends in Ontario auto insurance.

“I would suggest the changes related to towing and storage would have the most significant affect on current cost pressures within the scope of this legislation,” Norn concludes. “That

“I would have to say the most significant cost pressures in the personal lines auto insurance at this point would be the fraudulent claims,” Tammie Norn notes. being said, this is just a small portion of what is driving the cost pressures. The bulk of the claim dollars are spent on accident benefit and bodily injury claims. I do not foresee any positive effects in either of those two streams.”

ALBERTA Alberta has not experienced significant changes on the claims side of its auto insurance regulations in recent years. The minor injury regulation (MIR), which came into effect in October 2004, has held steady at $4,000 ($4,777 indexed to inflation for 2014). Alberta’s definition of minor injuries and its diagnostic and treatment protocols have been used as models for other provinces. And like its counterparts in New Brunswick and Nova Scotia, Alberta’s MIR has survived legal challenges against its constitutionality. However, there are troubling signs of adverse loss development in bodily injury claims in the provincial auto insurance market. According to an actuarial analysis of industry experience done by Oliver Wyman for the Alberta Automobile Insurance Rate Board (AIRB) in December 2013: “We reviewed the loss development patterns for each of the top ten insurers operating in Alberta, and while the

Strong reputation, fresh approach.

Acclaimed British Columbia Insurance Defence Lawyers, since 1924. 604.688.1221 guildyule.com

www.claimscanada.ca

p12-20 COVER STORY.indd 19

August/September 2014

Claims Canada 19

14-08-19 11:47 AM

development patterns differ (rather significantly) among the companies, most of the insurers experienced adverse development in 2013 as well as other recent years.” In a submission to the AIRB in May 2013, Allstate Canada noted that: “loss costs for mandatory coverage increased 21.5% in the last 12 months, a marked increase from year over year variances seen in the past three years.

20 Claims Canada

p12-20 COVER STORY.indd 20

Bodily injury claim frequency has remained steady, while average severity climbs. The deterioration in BI experience alone drives total loss costs for mandatory coverage up 15% over the past 12 months.” The main culprit behind rising BI claims costs seems to be, at least in part, two-fold: • a higher proportion of claims involving chronic pain (particularly),

August/September 2014

Temporomandibular Joint Disorders or TMJ (as a result of the Sparrowhawk decision, which held that dental and jaw-related injuries are outside the MIR) and psychological injury; and • plaintiff counsels aggressively disputing the MIR and a higher percentage of claims being litigated. While the Oliver Wyman report called these trends “largely anecdotal,” it is clear that plaintiff lawyers have increasingly applied legal rulings to circumvent the MIR/cap in Alberta. According to a 2013 paper called Minor Injury? I Don’t Think So authored by J. Derek Allchurch and Geoffrey D.W. Brisbin of the Calgary law firm Litwiniuk & Company: “Since Sparrowhawk, we have focused on taking any aspect of an injury not specifically covered by the legislation and using it to take the injury outside the cap. In addition, we have been relying extensively on the ‘serious impairment’ exception, specifically as it applies to activities of daily living. Finally we are trying to maximize other heads of damage, notably housekeeping.” In their conclusion, the lawyers expand their approach to any auto insurance jurisdiction using the minor injury cap. “Given the growing similarities between the Alberta and Atlantic legislation, these Alberta approaches will be effective in maximizing recovery for Maritime claimants as well. We also look forward to applying the lessons and strategies emerging from Atlantic Canada in Alberta.” For independent adjusters, such as Kerry Reid of Alberta-based Canadian Claims Services, the impact on bodily injury claims is clear. “There are signs of pressure in the bodily injury area of insurance,” Reid observes. “What we are finding more is (claims) for Post Traumatic Stress Disorder. There will always be pressure and someone will always challenge the MIR.” 

www.claimscanada.ca

14-08-19 11:48 AM

Granite Claims Solutionsâ&#x20AC;&#x2122; Complex Loss Team

Complexity Made Simple.

www.graniteclaims.com/gcstech For more information, please contact. 1.800.668.6100 professionals@graniteclaims.com www.graniteclaims.com

ad right size.indd 1

14-08-15 4:17 PM

• spotlight S

Western Perspective

Burnaby, B.C.’s David Porter plans to bring some fresh ideas and focused solutions to the CIAA in his role as president for 2014-2015. BY CRAIG HARRIS

or David Porter, a key challenge facing any organiza- handling bug and began loss adjusting for Lofting & Assocition is asking people to take time from their work to ates in 1989. move the association forward. Independent adjustFrom there, Porter moved to Lindsey Morden (now Cuners are clearly committed to professional development, but ningham Lindsey) where he gained experience working for spending days away from running a business is a tall order, a large firm handling a wide range of files. After a stint at especially for leaders of smaller firms. Pritchard & Associates (now Pritchard Woodall & Associ“We have to make it so that we are not unnecessarily ates), he started his own adjusting firm, Advance Claims creating a burden on peoples’ lives and work,” says Porter, Service Ltd., in 2000. The company grew to seven offices who is incoming president of CIAA for 2014-2015. “I would in B.C., with an impressive client roster and a strong repulike us to centralize, to generate enough revenue that we can tation for client-focused claims management solutions. In hire the appropriate people to run the programs that mem- 2011, Porter sold the business to Granite Claims Solutions, bers need – and to make the membership as meaningful as where he continues to work today. possible.” His career trajectory mirrors a diWith plans for a smaller executive verse and eclectic experience, with speIf we as an committee focused on a short list of cialization in liability claims ranging association can priorities, he wants to turn that chalfrom construction, general, and profeslenge on its head. Porter says he is fodevelop a process of sional, to marine losses. “I grew up on cused on developing tangible rewards condo claims and then moved to take on designations or recognized by current members and a wide variety of losses, a bit all over the certificates in key acknowledged by prospective adjustmap,” he says. “ In my earlier days, I took ing firms who are outside the CIAA over the account for the maintenance areas, I think we fold. claims work for the road contractors. It can differentiate “I see the issues from far way away was great; it took me all over the place. here in B.C., but I know that our pro- ourselves and enhance And I still have that account today.” vincial chapter (of CIAA) runs a tight Porter’s hands-on adjusting experithe role of the ship,” notes Porter, who is also vice ence is complemented by his commitpresident, Western Region for Granment to continuing education. He readjuster in the ite Claims Solutions. “I think there is ceived his CIP relatively early, in 1994, minds of a need to restructure our organizafollowed by his FCIP in 1997. He also the client. tion at the national level. If we priorireceived his Certified Risk Manager tize objectives for the year and have (CRM) designation in 1998, and then a tighter executive committee, I think we could be much graduated with an LL.B. from UBC’s law school in 2010. more efficient.” Throughout his career, Porter has instructed many These focused goals include adjuster skill development, courses for the Insurance Institute of B.C. He has been an increased membership in CIAA and a raised profile of in- active member of the insurance industry, serving as past dependent adjusters in areas such as cross-border licensing. president of the Insurance Institute of B.C. and past direcIn all of these areas, Porter is able to walk the talk of claims tor of the B.C. Insurance Adjuster’s Association. professionalism. Porter says he is keen to bring his adjusting expertise, orPorter’s insurance career started in the mailroom with ganizational knowledge and professional development exCanadian Northern Shield in 1988, a fact he is not shy about perience to CIAA over the next year. Skill development and sharing. However, it wasn’t long before he caught the claims certification is a subject he is particularly eager to address.

“

22 Claims Canada

p22-23 SPOTLIGHT.indd 22

August/September 2014

www.claimscanada.ca

14-08-19 11:55 AM

”As a profession, we have given away a number of functions that we could be doing and that, in fact, we used to do,” Porter says. “For example, every commercial property adjuster should be able to deal with a standard business interruption loss. These are the things that may require a bit of elbow grease, but there is no reason to outsource a modest BI loss to an accountant.” Here, Porter believes there is a critical role for CIAA to create and promote certification programs. www.claimscanada.ca

p22-23 SPOTLIGHT.indd 23

“If we as an association can develop a process of designations or certificates in key areas, I think we can differentiate ourselves and enhance the role of the adjuster in the minds of the client,” he says. “We also have to ensure that adjusters who have those certifications do quality work – there needs to be some enforcement and continuing standards for skill levels, competence and performance.” Membership is another central issue that has posed a persistent challenge to CIAA. “To be a professional by legal definition, you have to belong to a professional association,” he says. “And there are hundreds of adjusters who are not members of our professional association. “Porter notes that hectoring non-member adjusting firms or lecturing them about professionalism is not the way to increase membership. “Instead, we need to push the message about what our professional association does for them,” Porter comments. “This is why it is valuable to be involved. I would like to have more firms join the association because of the perceived value we offer.” One way to increase the value and profile of independent members is through tangible accomplishments in areas such as cross-border licensing. “I think this issue is becoming more manageable now and the Canadian Insurance Services Regulatory Organizations (CISRO) is working on it,” Porter says. “A relatively easy solution is for us at CIAA is to say to CISRO – ‘here is a designation that only our members can hold. It requires that they have CIP (or more) and they must complete 16 hours of continuing education every year. Will you then recognize our member adjusters across the country, full stop?’ I think if you took that to CISRO, there would be a very good chance it would be adopted. You would also have something that members would value.” Porter maintains there is a big correlation between price/ cost and value – an equation that independent adjusters have not fully appreciated. “When you go to the store and you are holding two jars of mayonnaise with different prices, something in your brain says that one jar is going to cost you a dollar more, but it is better,” he observes. “It’s the same thing in adjusting. I think that as we enhance our skill levels and become true experts in the field, the client will happily pay a commensurate fee.” That differentiation and value in the minds of client can only be achieved through dedication and professionalism, according to Porter. “In the type of competitive business environment we are in, you have to have a solid skill set, a sharp focus on continuing education and a strong emphasis on customer service that has been lacking generally,” he concludes. “You have to take pride in your work, you have to maintain your commitments, timeliness, attention to detail. I know that is a tall order, but if we want to differentiate ourselves as professional adjusters, that is what we have to deliver.”  August/September 2014

Claims Canada 23

14-08-19 11:56 AM

Property Loss Trends

A review of recent legal cases shows some interesting developments involving property insurance claims. BY GLENN GIBSON

When annual surveys are done in Canada to determine our “Most Admired Professions,” it is usually doctors, nurses and firefighters that top the polls. And why wouldn’t they? They help us in emergency situations during the most traumatic times of our lives. All front-line property and casualty adjusters have been placed in many of these same emergency situations. They have stood side-by-side policyholders looking at the total, complete destruction of a home or business. During these moments, the emotional toll on the adjuster is similar. Finding the right words to comfort someone in these situations is not easy. 24 Claims Canada

p24-30 GIBSON.indd 24

Unlike our most admired professionals, the loss adjuster cannot step away from the emergency call to go onto a new one. They work in the “emergency aftermath,” a journey that is designed to fulfill the insurance promise – in return for the premiums paid by the policyholder, the insurer will honour its obligations under the insurance contract in good faith. The result of fulfilling this obligation is helping policyholders rebuild their lives. As expected, the journey on both sides may resemble a roller coaster ride – some ups and some downs. But once successfully concluded, there is no greater satisfaction than being a part of that journey. Being an insurance professional may not put you on the most admired list. However, there is no question in my mind that We Help People in different ways than

August/September 2014

those top three admired professions… but in a very significant way, indeed! Here are some legal cases for consideration.

V. Malhotra v State Farm Fire & Casualty, Supreme Court of Canada, March 27, 2014 Five different properties owned by the appellant were subject to losses that were discovered in a short period of time. The insurer elected the “Appraisal” process to determine the “amount of loss.” They requested one umpire be appointed to handle the multiple claims. The insured had several objections that were heard in two separate motions www.claimscanada.ca

14-08-19 11:58 AM

in Superior Court. The insured appealed these decisions to the Ontario Court of Appeal who determined: “The power to appoint an umpire, or umpires, under s. 128 is discretionary. Nothing in s. 128 prohibits the court from appointing a single umpire to deal with multiple properties.” “The appellants did not file affidavit evidence on either motion to challenge the umpires proposed by State Farm. On appeal, the appellant has not identified any form of error on the part of the motion judge that would justify interfering with their discretion.”

1. A proof of loss form was never filed on this claim. There was an independent adjuster on the loss who recommended denial of coverage within weeks of the event. A blank proof of loss was provided in that denial letter but there was language included suggesting in part, “…in this case coverage is not applicable and therefore completion of same would not be required.”

The trial judge concluded that the language used in the letter constituted a “waiver” by the insurer of the requirement to file a proof of loss. The Court of Appeal agreed. 2. The “mechanical breakdown or derangement exclusion” was utilized to deny coverage for the claim. The insurer’s position was that the furnace breakdown was one of the multiple causes for the loss. The Court of Ap-

The appellant sought leave to appeal to the Supreme Court of Canada. The application was dismissed with costs. This case evolved from a dispute about selecting an umpire to handle a number of claims. Motions were heard before a judge. It resulted in the appointment of an umpire. The decisions were appealed and as you can see the original decision was affirmed and the matter was referred back to begin the appraisal process.

O’Byrne v. Farmer’s Mutual Insurance Co. (Lyndsay) Ontario Court of Appeal, July 11, 2014 This is a very interesting decision from the Ontario Court of Appeal for a variety of different reasons. At trial, the cause of the loss was determined to be the fault of an apartment tenant in a small commercial building in a small town in Ontario. The tenant inserted a piece of cardboard between two sets of contacts on the building thermostat to keep their apartment “hot” while they were away a few days. The ignition on the furnace failed to ignite while the pump continued to deliver oil to the point of overf low and spread within the building causing over $60,000 damage. Coverage for the loss was denied within a few weeks of the occurrence. The insurer advanced a number of arguments at trial including the applicability of several exclusions. They were not successful and they appealed. Justice Katherine van Rensburg wrote the decision for the Court of Appeal with agreement from companion justices G. Epstein and S.E. Pepall. Several things stood out in Justice Rensburg’s analysis: www.claimscanada.ca

p24-30 GIBSON.indd 25

August/September 2014

Claims Canada 25

14-08-19 11:58 AM

peal’s position was that the furnace oil spill was the result of a “chain of events” as opposed to being of one of the cause only. The chain of events started with the cardboard being placed in the thermostat which ultimately caused the oil to be pumping out without burning.

down.” Since the appeal court had already ruled that the mechanical breakdown exclusion did not apply, then it stood to reason that this position must also fail.

Case Summary

It is critical in these situations to determine the cause of the occurrence. In this case, the failure of the furnace was not the failure of any mechanical element of the furnace but rather something that the tenant had done that interfered with the proper operation of the furnace. There was no internal problem or defect in the furnace itself. Both courts relied heavily on the case of Caneast Foods Ltd. V. Lombard General Insurance Co., 2008, Ont. Ct. of Appeal, 368, 91 O.R. (3d) 438. The Pollution Exclusion was also at play in this case. The trial judge felt that since the oil remained within the building the spill “…did not amount to a traditional environmental exclusion.” The Court of Appeal followed a different path but came to the same conclusion. hey placed great weight on the

fact that this was an All Risk Policy. Their review of the wordings suggested that there must be an operative exclusion at play before the pollution exclusion applies. The only other exclusion was the one for “mechanical break-

This decision provides strong guidance in several areas. There was a lot of attention paid to the importance of a proof of loss form. The importance of that document being served on an insured in compliance with the requirements of the Insurance Act should never be overlooked or underestimated. By serving the proof of loss form on the insured, the onus is now on the insured to complete it and return it as designated in the Insurance Act. The choice of what they put on the form and when they file it is entirely up to them. This judgment provides a good analysis on how to interpret two exclusions that don’t pop up very often in the volume of claims that the industry handles. You can see how a relatively small loss in rural Ontario triggered a bona fide contract dispute, one with complex issues that required the reasoning of the Ontario Court of Appeal to resolve.

A catastrophic event

p24-30 GIBSON.indd 26

14-08-19 11:58 AM

Dumitrascu v. State Farm Ontario Superior Court, Healy J., April 9, 2014

EUO condition into their property policies as a separate Condition. This judgment confirms established principles that statutory conditions applicable to fire policies are NOT applicable to multi-peril policies (KP Pacific Holdings Ltd. V Guardian Insurance Co. of Canada -2003- Supreme Court of Canada and Boyce V Cooperators, 2012, ONSC 6381). The impact of these cases is that State Farm was not offside in adding a EUO condition to their policy wording. They were not attempting to add to existing Statutory Conditions that had a clause that prohibited any ”…variation or omission of or addition to any statutory condition.” The court ordered a sworn proof of loss be submitted in 9-days and an EUO within 60-days.

A motion heard in front of Justice Healey in the aftermath of a fire loss with a claim being advanced against the property insurer. This motion involved some novel arguments where the insurer was making demands to: 1. Compel the insured to file a proof of loss form. 2. Require the plaintiff and her spouse to attend an Examination Under Oath (EUO). 3. Stay any legal matter until after a proof of loss and the EUO are concluded. The first issue relating to the proof of loss was dealt with quickly on consent. Agreement was reached to deliver a sworn proof within 9-days of this motion decision. The second issue was more complicated. The State Farm homeowner’s policy had a policy condition that said the policyholders were obligated to attend an Examination Under Oath if requested by the insurer. The policyholders had refused this request.

In Canada, an EUO is not part of our provincial Insurance Act Statutory Conditions contained within property policies. Of interest, our auto policies do contain a EUO requirement. Many insurers in Canada however, have been writing a

A. Merei, B. El-Attar, N. Merei v. State Farm Ontario Superior Court, Carey T., May 15, 2014 A fire destroyed a house in Windsor on March 4, 2010. The insurer maintained that the fire took place 8-days after the policy of insurance had been cancelled.

demands a decisive response. FirstOnSite has the leadership, resources and capacity to manage any disaster restoration situation. Weather events are increasing in severity. We are seeing a “new breed of storm.” Whether it’s damage from catastrophic flooding, wind, mould, ice or fire, FirstOnSite is ready to provide rapid and superior disaster restoration services in times of emergency. From the disastrous flooding in Southern Alberta, to the Southern Ontario ice storms; from the historically severe Quebec and GTA flooding to east coast hurricanes, our expert CAT RESPONSE teams mobilized resources, manpower and equipment to lead large scale recovery responses across the nation, getting homes and businesses back to normal. For more information, visit us at firstonsite.ca or follow us on Twitter @firstonsite.

p24-30 GIBSON.indd 27

14-08-19 11:59 AM

Disaster Restoration’s Premier Event Dedicated to educating and pushing your restoration business into the future. With Keynote Speaker

Jim Carroll

One of the world’s leading global futurists, trends & innovation experts.

Off To The Races Woodbine Race Track For Full PLR Expo Attendees Join us for an evening of fun with live horse racing, buffet dinner and drinks, and a $10 chit to bet.

With Super Session Speaker

Donald Cooper

Respected throughout the world as a thought-leader and passionate visionary in the important areas of marketing, management and business innovation.

PLUS Pre and Post-Conference Sessions with Jim Thompson, Donald Cooper, Dan Murray, and Michael Pinto!

September 30 – October 2 at the International Plaza Hotel - Toronto Airport

14-08-15 4:23 PM

The plaintiffs first bought a policy in 2006. It went through several renewal cycles. There were also two claims in 2007 that resulted in an increased deductible. Within days of the policy renewing in February 2009 the plaintiffs had another claim. This triggered a policy review at a time when there were several late payments of premiums. The insurer made a decision in December 2009 that they were not going to renew the policy and on January 25, 2010 they sent a cancellation notice by registered mail to both the policyholders and the mortgagee. The plaintiffs had a large uninsured loss. They argued strongly that the policy language said that the language of the contract required the insurer to automatically renew their coverage. They focused on the language of the “automatic renewal” section of the policy. The judge felt this clause “….clearly operates for the convenience of both policyholders and the insurer. It is cost efficient and provides unbroken coverage for the insured when there are no circumstances that would change any conditions of the policy.” The bottom line was that the judge did not feel the policy wording was ambiguous. A plain reading of the policy had to conclude the insurer was correct in taking the position it did. The plaintiff’s claim was dismissed.

Case 4713

Perpetrator: Visibility Obstruction When there is a motor vehicle collision, there are countless contributing factors to be considered relating to the incident. Experienced professional engineers can conduct a full vehicle examination and incident site inspection, thoroughly documenting all of the possible factors, many of which may not have been considered by police in their initial investigation.

It was interesting to see that the trial judge only awarded $4,000 in costs against the plaintiff in losing this case. The judge felt that the plaintiff had chosen the most expeditious way to resolve the matter by going for a summary judgment motion. He thought the insurer could use the results of this case in the future if this argument ever arose again. This case is a victory for ensuring the contract language is clear and simple to understand.

L. Stilwell / M. Neale V World Kitchen et al Ontario Superior Court, Leich I.J., June 6, 2013 The Plaintiff, Larry Stilwell suffered severe lacerations to his wrist when he was alone in his kitchen attempting to clean a “Visions Dutch Oven” in the sink. It allegedly broke into 4 pieces during the incident. The plaintiff’s wife had cleaned up the kitchen immediately after the event. While her husband was being prepared for surgery, he instructed his wife to get rid of the broken pot out of their house or he wasn’t coming home. There was no thought at that time to a lawsuit. The evidence led at trial seemed to be www.claimscanada.ca

p24-30 GIBSON.indd 29

Getting the right Forensic Engineering firm to handle your case is critical to a successful claim management process. And hiring the right firm early and proactively will make the difference in the long term litigation process. Rochon’s expertise brings clarity. Our Professional staff sets the industry standard for excellence with our state-of-the-art laboratory, securely managed and protected evidence warehouse and on-site technical testing equipment. Our professionals get to the root cause of a claim. You can count on it.

1.888.Rochons (762.4667) rochons.ca Toronto - Barrie - Halifax

Analysis and Performance You Can Trust Environmental  Fire & Explosions  Materials Accident Reconstruction  Structural  Remediation Biomechanical  Electrical  Mechanical  Forensics August/September 2014

Claims Canada 29

14-08-19 11:59 AM

accepted that there was no attempt to dispose of the items to “…gain advantage in a lawsuit or claim.” It was 16 days after the incident that the plaintiff’s wife initiated an email to one of the defendants complaining about the product(s), while outlining the severity of the cuts. The plaintiffs did not retain legal counsel until 16-months after the incident. This eventually led to a 22-day jury trial. Before the jury began deliberations, the trial judge provided both counsel with “draft” copies of his intended charge to the jury. The defendants felt that the jury should be counseled on “spoliation issues” before they began their deliberations. “Spoliation” is a legal doctrine. If an act is determined to involve the intentional destruction of relevant evidence when litigation exists or is pending to the jeopardy of the opposing side, the court may instruct the trier of fact (in this case a jury) that it may draw an adverse inference against the party who performed the destruction. But just because something is destroyed doesn’t mean it is intentional.

The adjuster’s “spoliation” investigation will require evidence and a deep understanding of the offending parties intent. These investigations are usually assisted by the involvement of experts. In this case, there was no question the product was disposed of by the plaintiff

before the defendants could examine it. Was it, in fact, a Visions Dutch Oven? What was the cause of the failure? But what was the intent behind the act? The judge ruled that he would not charge the jury on the doctrine of spoliation, including the drawing of an adverse inference or presumption. He also

THE BEST CHOICE FOR PROPERTY CLAIM CONSTRUCTION CONSULTING

(SERVING THE PRAIRIE PROVINCES)

 Insurance Appraisal Services  Construction Cost Control Services  Hail/Wind Inspections  Dispute Resolution

instructed counsel not to make reference to it in their submissions to the jury. He did not take away defence counsel’s right to argue that the product involved was not a Visions Dutch Oven or the cause of its failure or the difficulties they had at trial because they did not have the evidence available to challenge the plaintiff’s claims. The jury heard 19 witnesses for the plaintiff and 7 for the defendants. The case was hard fought and ended with a conclusion that it was a Visions Dutch Oven and the defendants were liable for a “…failure to adequately warn.” The jury awarded damages exceeding $1.1 million and deducted 25% for the contributory negligence of Mr. Stilwell. The outcome was less than what the plaintiff’s offered to settle for before the trial. It was also more than what the defendants offered to settle before the trial. The judge felt the pre-trial offers had little impact on his decision relating to how he was going to award “costs.” There was nothing in the conduct of the defendants to award costs on a substantial indemnity basis. There is a long endorsement post-trial dealing with the matter of costs. Of interest was that the plaintiff law-firm was awarded about $387,000 in fees and another $157,500 in disbursements. I don’t often write about “casualty” cases but this was an interesting legal decision involving a jury trial and the issue of “spoliation.” If you have a fire loss and you believe the cause of the fire may be a result of a faulty product, you should secure the scene and allow the other parties the opportunity to make their own determination if their product caused the loss. We are seeing more cases in this area that follow a rich history of significant litigation on this topic in the United States over the past decade.

Conclusion Thorough, impartial, objective unbiased, & professional Providing a better inspections understanding of the property & effects on the property to the insured & insurer.

mpoissant@mlpinspections.com • (306) 201-5556 www.mlpinspections.com

30 Claims Canada

p24-30 GIBSON.indd 30

August/September 2014

It appears from looking across the land at the output from our courts that litigation involving property/casualty insurance cases have declined. That trend might suggest insurers are making greater use of the “Appraisal” process or other ADR mechanisms. You can see some of the trial costs involved from the Stilwell decision are substantial, so you certainly have to pick your spots.  Glenn Gibson is Chief Executive Officer of Crawford & Company Consulting and can be reached at glenn.gibson@crawco.ca www.claimscanada.ca

14-08-19 12:00 PM

Your Insurance Digital Newsstand is now Mobile: NO APP REQUIRED

1 of 68

iPad/iPhone/Android users - go to the links below and select Digital Edition of the magazine of choice:

Publications with Digital Editions:

Claims Canada: http://bit.ly/CCarchives [case sensitive, capitalize CC only] Canadian Underwriter: http://bit.ly/CUarchives [case sensitive, capitalize CU only] Within Digital Edition, to flip through the pages, simply swipe or tap at the right or left side of the screen. Scroll through multiple pages by ‘dragging the page number indicator’ at the bottom of the screen to the left or right.

.ca

Via Computer: As always, everyone can view the Digital Edition of each issue of Canadian Underwriter magazine (including the Annual Statistical Issue and the Insurance Marketer) and Claims Canada magazine – simply visit the above links!

CU Digital Edition PROMO.indd 1

13-10-16 10:45 AM

Total-Loss Claims and Customer Satisfaction When it comes to auto physical damage losses, the two are not mutually exclusive. BY JEREMY BOWLER

Each year, approximately 17 per cent of Canadian auto physical damage claims result in a vehicle being deemed a total loss. Total-loss claims can be a protracted and emotional experience for the consumer. These are often more disruptive to the lives of the vehicle owners, who not only have to file a claim but also start thinking about hastily finding a new vehicle. In some cases, a claimant may find their outstanding lien on the wrecked vehicle exceeds its fair market value. If they lack gap insurance, these “upside-down” customers not only have to go shopping for a new vehicle, they will have to either pay off their old loan balance, or roll it into the new vehicle deal. This further challenges any insurer seeking to settle fairly, and pay what they legitimately owe on a claim. Insurers are challenged on several fronts as they handle total-loss situations – they must provide a satisfactory level of service, maintain proper scrutiny over their loss adjustment and related expenses and manage claimant expectations that often include an inflated Slide 1 perception of the value of their vehicle. The processes and touch points in handling total-loss claims are fundamentally different than those in handling repairable claims. By focusing on the key drivers of satisfaction and service best practices, insurers can still strive to deliver an exceptional total-loss experience.

Pathways to Claims Handling One of the major differences J.D. Power observes in analyzing customer data from its 2014 Canadian Auto Claims Satisfaction StudySM regarding the claims process is how different the claimant experience is for total-loss claims compared with repairable claims. As one might expect, whereas the repair facility is often a key contributor to a repairable claim customers’ overall experience, once the decision is made not to repair a vehicle, the shop drops out of the picture, and the emphasis shifts to the appraiser and adjuster, or “claim professional.” Often then, the claims-handling model shifts the focus of claimant interactions more squarely onto the insurance company personnel. (See Slide 1) 32 Claims Canada

p32-33 JD POWER.indd 32

August/September 2014

Irrespective of whether the vehicle is deemed repairable or not, all claims start with the first notice of loss (FNOL) interaction. Study findings reveal that both repairable and total loss claims have a similar level of appraisers acting as the primary contact point following first notice. In a total-loss claim, 26 per cent of claimants say their primary point of contact is a claim professional other than their agent or the appraiser – for a majority of insurers this is the claim adjuster. Because of the higher prevalence of claim professionals acting as the primary handler in total-loss claims, these individuals tend to have more direct impact on the customer’s overall impression of their insurer. It is important to note that satisfaction is typically lower among claimants when a claim professional is involved in the process. Evaluating both repairable and total-loss claims, claim professionals engage the customer directly on 26 per cent of all automotive physical damage claims. Claimant satisfaction when no claim professional is involved is 817 (on a 1,000-point scale), compared with 751 when a claim professional interacts with the customer—a 66-point drop. The adjuster or claim professional is involved 44 per cent of the time in a total-loss claim compared with only 25 per cent of the time in repairable claims.

Total Loss Claim Satisfaction Overall, there are six factors that comprise the auto claims experience – FNOL, service interaction, appraisal, repair process, rental experience and settlement. The importance of weight in each of these factors is impacted by the severity of the claim. The more prominent role claim professionals and appraisers play in the total-loss process is apparent when examining the drivers of satisfaction that contribute to overall satisfaction. The primary difference between the total loss and repairable models is that the 13 per cent importance weight of the repair process is redistributed in the total-loss process to appraisal (+8 points) and service interaction (+4). The importance of FNOL and settlement remain relatively similar across both types of claims. (see Slide 2) Regardless of whether a claim results in a vehicle being repaired or totaled, the settlement factor is vital to overall satiswww.claimscanada.ca

14-08-19 12:09 PM

faction with insurers, driving a majority of overall satisfaction. The variations in the index model reflect the differences in the way total-loss claims are typically handled and the individuals involved in the claims process, compared with repairable claims. Overall satisfaction tends to be lower among total-loss claimants than among repairable claimants (744 vs. 809, respectively). The most significant difference is in the settlement factor, which accounts for the highest percentage in the overall customer satisfaction index model, where satisfaction is 87 points lower among total-loss claimants than among repairable claimants (723 vs. 810, respectively). While the satisfaction gaps for the remaining factors between total loss and repairable claims are smaller, they are all statistically significant. The sole exception is rental experience, in which scores are relatively consistent across both claim types with only a three-point gap. Slide 2

Claims Process Timing Total claim cycle time is an important metric in total-loss satisfaction. Total-loss claims not only take longer to settle, but every aspect of the claim also takes longer. Vehicle appraisals take more than 1.5 days longer for total-loss claims than for repairable claims. On average, total-loss claimants are not informed of the terms of their settlement until 10 days after the total-loss claim is reported, while claimants with repairable damage are notified after five days. In addition, totalloss claims take nearly a week longer to pay than repairable claims. Because claimants with a totaled vehicle wait longer to receive payment, they also use a rental car longer than those who have a repairable vehicle (13.8 days for totaled vehicles vs. 8.7 days for repairable vehicles), likely leading to the increased importance of rental experience in overall satisfaction. The extended time for processing total-loss claims allows more opportunities for things to go wrong. For Slide 3 example, 27 per cent of repairable-loss claimants indicate having to repeat information they already provided, compared with 39 percent of total-loss claimants. Because of the nearly 20-day time frame before a claim is paid, providing an accurate estimate of the amount of time becomes even more important; however, this is achieved among only 49 percent of total loss claimants compared with 65 percent of repairable claimants. www.claimscanada.ca

p32-33 JD POWER.indd 33

Settlement Satisfaction Variation in cycle time is not the only issue impacting the gap in satisfaction between total-loss and repairable claims. There is also a large disparity in meeting key performance indicators (KPIs) between these two claim types. For example, 94 per cent of claimants with repairable damage indicate their insurer met their settlement expectations, while only 77 per cent of total-loss claimants indicate the same. This is not surprising considering that 48 per cent of all total-loss claimants indicate that the settlement was not enough to cover the cost of replacing the vehicle. Another critical area of focus in settlement satisfaction is limiting out-of-pocket expenses (other than the deductible). Claimants are more likely to incur some out-of-pocket expenses for a total-loss claim, and typically spend nearly $70 more than claimants with repairable damage. Settlement satisfaction is significantly lower among claimants when there is some sort of out-ofpocket expense, regardless of whether it is a repairable or total loss claim. (see slide 3)

Conclusion A more in-depth understanding of how claim severity impacts the overall claims experience can help insurers focus their efforts on improving those elements of the claims process unique to each claim type. Auto claims resulting in a total loss are far more complex and protracted, compared with vehicle-repair claims. Yet, this added complexity should not deter insurers from striving to deliver a satisfying experience for their customers. Focusing on key processes, especially those involving interaction with representatives or the settlement process, can have a tremendous impact on customer satisfaction. Insurers should seek to simplify the claims experience by limiting the number of representatives who play a role in the claims process and to alleviate periods of claimant uncertainty. Ongoing communication and management of expectations are key not only during the FNOL, but also throughout the entire claims process, as claimants should never be left with unanswered questions or uncertainty about the next steps in the claims process. î &#x2014; Jeremy Bowler is Senior Director of the Insurance Practice at J.D. Power. August/September 2014

Claims Canada 33

14-08-19 12:09 PM

The Mortgage

Clause

Insurers and adjusters shouldn’t overlook the role of the standard mortgage clause in the property insurance policy. BY BRUNO DE VITA AND HOLLIS BROMLEY

A version of the Standard Mortgage Clause (SMC) is found in virtually every property insurance policy where a mortgage underlies the property ownership. The standard wording of the SMC is: Breach of Conditions by Mortgagor, Owner or Occupant – this insurance and every documented renewal thereof – AS TO THE INTEREST OF THE MORTGAGEE ONLY THEREIN – is and shall be in force notwithstanding any act, neglect, omission or misrepresentation attributable to the mortgagor, owner or occupant of the property insured. The potential effect of the SMC is much greater than the brevity of this clause might indicate. The effect of the SMC was examined by the Supreme Court of Canada in National Bank of Greece (Canada) v. Katsikonouris, (1990) 2 S.C.R. 1029. The Court explained that the SMC allows lenders to “piggy-back” on the insurance purchased by the insured/mortgagor and is akin to an independent contract between the insurer and the mortgagee. Essentially, with no further payment of premium, the mortgagee derives the entire benefit of the insurance policy as if the policy had been issued separately to the mortgagee. Further, the court found that the insurance coverage of the mortgagee will not be invalidated by any omission or misrepresentation of the insured. Therefore, regardless of 34 Claims Canada

p34,36 ARC.indd 34

August/September 2014

egregious conduct by the insured, such as arson, the mortgagee’s insurance cannot be invalidated. However, the power of the SMC surpasses the insured’s conduct and appears to apply regardless of the mortgagee’s conduct as well. In Royal Bank of Canada v. State Farm Fire and Casualty Co., 2005 SCC 34 (2005), the insurer denied the claim of the insured and the mortgagee arising from a fire loss. The insurer claimed that the dwelling was vacant, which was a material change in risk as to the occupancy of the dwelling, thereby removing coverage. The insurer further claimed that the SMC did not apply because the mortgagee was specifically aware that the dwelling was vacant. In fact, the mortgagee had foreclosed on the home, thereby instigating the vacancy, and had assumed control of the dwelling at the time of the fire. The insurer argued that Statutory Condition 4, which permits the insurer to void coverage where there is a material change in risk, applied to limit the grant of coverage under the SMC. The Supreme Court of Canada did not agree, finding that to the extent the SMC was in conflict with Statutory Condition 4, the SMC prevailed. As the closing words of the SMC provide that the mortgagee’s coverage shall remain in force despite any act of the mortgagors, the SMC supersedes any conflicting policy provisions. The fact that the mortgagee’s actions had caused the vacancy had no effect on coverage for the mortgagee. Thus, given that SMC clauses do not generally include any limitations or impose any obligations on the mortgagee, the SMC extends virtually unfettered coverage to the mortgagee rewww.claimscanada.ca

14-08-19 12:17 PM

Knowledgeable Fast & Effective

Complex & Large Loss Consulting Services Appraisal Services Multi Claim Losses & Catastrophic Events High Performance Standards National Coverage

Ethics

ad right size.indd 1

Innovative Solutions

Excellence



Value

WWW.SPECS.CA

1-877-907-7327



Teamwork

14-08-15 4:34 PM

gardless of the actions of either the insured or the mort- insurers counterclaim for paying out the replacement cost gagee. under the SMC without any consideration of whether this An open question in interpreting the SMC is whether was the correct method of valuation. the mortgagee can demand payment for the equivalent of A different result arose in Sholidis v. Economical Mureplacement cost, or if payment should be made on an ACV tual Insurance Co., O.J. No. 2242, where prior to trial the basis. Arguably, allowing for replacement cost as opposed to insurer and mortgagee agreed that ACV was the correct ACV is a potential windfall to the mortgagee whose security method of valuation. Each retained an appraiser to give in the property is typically limited to the depreciated value an opinion as to the value of the building and the land of the dwelling (in addition to and arrived at an agreement the land). Further, allowing reas to the dwelling value. The placement cost recovery where insured was not part of this there has not actually been process. The Court noted replacement puts the mortits, “reluctance about allowgagee in a better position than ing the award under the apthe insured would have been praisal methodology used by in, as the typical replacement the insurer and the mortgage cost wording requires that the company.” However, it did not structure actually be replaced. elaborate whether its relucThe commonly used SMC tance was because the insured wording states that the SMC was not given the opportunity extends “as to the interest of the to obtain his own appraisal, or mortgagee only therein.” One because ACV was used as opinterpretation of this phrase posed to replacement value. is that the SMC extends the Given that the dwelling was policy only so far as the mortnever actually replaced, as regagee’s interest in the property quired by the policy in order at issue. As the mortgagee’s to invoke replacement value, security interest in the dwellit is difficult to imagine how ing is restricted to the deprecianything other than ACV ated value of the structure, only would have been appropriate. ACV is available. Thus, it is an open question On the other hand, it is poswhether a mortgagee is entitled sible that the phrase simply to replacement cost given that means that the SMC terms are its interest in the property, and An open question in interpreting restricted to the mortgagee and its security for the mortgage, is the SMC is whether the are not for the benefit of the limited to the depreciated valmortgagee can demand insured. This argument finds ue of the dwelling (in addition some support in the Royal Bank to the land). payment for the equivalent of of Canada v. State Farm Fire and Recently, a more detailed replacement cost, or if payment Casualty Co. case, as the Court SMC has been seen from some should be made on an ACV basis. found that a similar phrase, insurers to address issues such “but only to the interest of the as the mortgagee’s obligation mortgagee,” meant that terms to report a material change in of the policy that conflict with the SMC, including excep- the risk, and the insurer’s option to pay out the mortgage tions to the mortgagor’s coverage, do not affect the mort- in full and take an assignment of the mortgage where the gagee’s coverage. loss under the policy is greater than the mortgage balance. There is little helpful Canadian case law on this issue. In However, the correct method of valuation under the SMC Voloudakis v. Allstate Insurance Co. of Canada, (1998) O.J. has yet to be defined.  No. 354, the insurer made two payments under the SMC Bruno De Vita and Hollis Bromley are partners with the for replacement cost to the mortgagee, although it seems that replacement did not actually took place, and counter- Vancouver law firm of Alexander Holburn Beaudin + Lang claimed against the Plaintiff for the amount of those pay- LLP (www.ahbl.ca). Mr. De Vita is recognized in both the ments. Thus, it appears the insurer conceded prior to trial Lexpert and Best Lawyers in Canada as a leading practitiothat replacement cost, without actual replacement, was the ner in the area of insurance law. Alexander Holburn Beaucorrect method of valuation pursuant to the SMC and, din + Lang LLP is a member of The Arc Group of Canada, a therefore, the issue was not squarely before the Ontario network of independent insurance law firms across Canada Superior Court of Justice. However, the court allowed the (www.thearcgroup.ca). 36 Claims Canada

p34,36 ARC.indd 36

August/September 2014

www.claimscanada.ca

14-08-19 12:18 PM

Wish Upon a Star Charity Golf Tournament

Register early as this event sold out last year! Mark your calendars! Date: Wednesday, October 1, 2014 7:30 a.m. Registration 9:00 a.m. Shotgun Reception and Lunch to follow

Location: Deer Creek Golf and Country Club 2700 Audley Road, North Ajax, Ontario L1Z 1T7 www.golfdeercreek.com

Help us turn wishes into memories If you have any questions, please feel free to contact one of our committee members: Camille Alexander Mark Weir Gina Greco Eddie Apelowicz Georgiana Chen Michael Thompson

416-953-9153 416-341-1464, ext. 43101 647-524-6330 647-444-6357 1-877-539-3111 905-875-0556

camille509@hotmail.com Mark.Weir@intact.net gina.greco@directime.ca eapelowicz@reliablecarrentals.com gchen@proadjusting.ca mthompson@isbc.ca

On-line registration is available at www.golfwishuponastar.com

ad right size.indd 1

14-08-15 4:38 PM

Dust to Dust

Is asbestos dust and asbestos containing settled dust the same difference? BY MICHEL MILLMORE

Asbestos today, more than ever, raises concerns in the general population. Many public and residential buildings, especially those built before 1980, are often made out of construction materials containing asbestos. Over the years, these materials deteriorate or may be disturbed during ad hoc maintenance or renovation work. In these occasions, asbestos fibres become airborne and occupants can be exposed to asbestos dust. In Canada, a material or product is considered to contain asbestos when the level of asbestos it contains exceeds 0.1 fibres per cubic centimetre (0.1%). In such case, any work requiring that the asbestoscontaining material be disturbed or removed must be carried out in compliance with the Canada Centre for Occupational Health and Safety (CCOHS). Quebec has much the same threshold limit value for asbestos, which must be removed under

38 Claims Canada

p38,40 SETTLEMENT.indd 38

the Regulation Respecting Occupational Health and Safety (RROHS) and section 3.23 of the Safety Code for the construction industry (Code). These codes and parameters offer a good framework for asbestoscontaining material management. Procedures and guidelines are well known by specialized contractors and consultants. Standards were developed to assess air quality after asbestos removal work, and exposure values exist for workers likely to be exposed to asbestos dust during their work shift. However, there are still today no acceptable exposure values for asbestos in ambient air of public or residential buildings. This situation creates a grey area that generates differences of opinion among specialized consultants when assessing asbestos-related risk is required. Although it is generally accepted that corrective action must be carried out when asbestos fibre levels in ambient air exceed 0.01f/ml, asbestosrelated risk assessment

August/September 2014

should also include a verification of asbestos-containing material condition and accessibility, sensitivity of individuals, incidence on the risk of cancer and the presence of asbestos in settled dust.

Addressing Asbestos containing settled dust Asbestos is present in many construction materials used before 1980. Consequently, itâ&#x20AC;&#x2122;s not abnormal to find asbestos fibres in settled dust of buildings constructed prior to this time, especially if the building contains friable asbestos in bad condition. Other sources can explain the presence of asbestos in ambient air and settled dust of a building. For example, even today, imported break pads of certain vehicles may contain asbestos, and mining activities in some regions can also account for residual levels of asbestos in ambient air and settled dust.

www.claimscanada.ca

14-08-19 12:23 PM

Any spill, anywhere, anytime! • 24 / 7 – 365 days a year response. • Excavating services, haulage, disposal, demolition, restoration and clean up.

Spill Response

• Above and below ground fuel tank removal. • Licensed by the MOE and TSSA. Toll Free: 855-378-3015 Fax: 888.245.5220 Email: info@kgservices.ca

Site Remediation

General Contracting ad right size.indd 1

14-08-15 4:43 PM

Some fibres are very thin and can be carried on long distances while airborne. It is then not surprising to occasionally detect asbestos fibres in ambient air or settled dust, even in buildings considered exempt of asbestos-containing materials. When settled dust is disturbed, the asbestos fibres it contains will become airborne and represent a risk for the health of the building’s occupants. In Quebec and the rest of Canada, the majority of consultants use the same method of detection for asbestos in settled dust and asbestos in bulk materials. A sample of dust is collected the same way a sample of a given construction material would. The sample collected is then analyzed using Polarized Light Microscopy (PLM). If it contains more than 0.1% of asbestos, the consultant will likely recommend that settled dust be removed using procedures established by the Code. If level of asbestos in the settled dust is detectable but lower than 0.1%, the consultant may recommend minimal risk procedures as a precautionary measure. If no asbestos is found, no specific recommendation is needed. The Environmental Protection Agency (EPA) in the U.S. does not promote this approach for settled dust. The EPA believes that PLM does not have a sufficient resolution to detect very fine asbestos fibres likely to be present in settled dust. The American approach rather rests on Transmission Electron Microscopy (TEM). The TEM has a much greater resolution, which allows the detection of very fine fibres not visible using PLM. The new edition of the analytical method for detection of asbestos fibres in settled dust and bulk material from the Institut de recherche Robert-Sauvé en santé et en sécurité du travail au Québec (IRSST) recognizes the use of TEM microscopy for the detection of fine fibres. However, it is mainly used to detect fine fibres in floor tiles and not usually in settled dust. Analyzing settled dust samples from buildings in which there is asbestos-containing material, using TEM, will often reveal asbestos fibres. Over40 Claims Canada

p38,40 SETTLEMENT.indd 40

time, the building’s asbestoscontaining materials may have been the object of renovation or maintenance work, generating dust. Analysis will likely detect the asbestos content of the dust, even at very low levels. If we believe that even an infinitesimal quantity of asbestos poses health and safety risks, remediation procedures would be required in the majority of public and residential buildings in which there is asbestos-containing materials.

If it contains more than 0.1% of asbestos, the consultant will likely recommend that settled dust be removed using procedures established by the Code. This is why the TEM analysis results are usually coupled with a predicted excess cancer risk evaluation. This reduces uncertainties related to asbestos in settled dust and allows regulatory agencies to take informed decisions regarding the actual risk.

Appropriate triggers? If asbestos is detected in a material or a product in any given concentration, but the product or material is in

August/September 2014

good condition and not likely to emit airborne asbestos, it is not required to remove it. However, when one plans on disturbing or removing a material or a product containing at least 0.1% of asbestos, or that such product or material is in bad condition and likely to release airborne asbestos, it is mandatory to repair it or manage it in compliance with the RROSH and the Code. The ambiguity arises when asbestos is detected in a product or material in concentrations below 0.1% and that this product or material is likely to release airborne fibres as is often the case with settled dust. Is the risk acceptable when the asbestos level is lower than the 0.1% standard? We believe it is not up to the consultant to decide whether the risk is acceptable or not. Their role is to document the risk and set the context. However, given the absence of clear guidelines and specific standards, some consultants will not hesitate to consider that even the smallest quantity of asbestos in settled dust causes an unacceptable risk and will recommend the removal of all dust using extensive asbestos abatement procedures, no matter how small the quantities. This usually translates in significant costs for precautionary measures, when a more moderate approach could have mitigated the risk and reduced the cost of the intervention. At CEP Forensic Engineering, we believe that settled dust sampling is a good indicator of the building condition as to which regards asbestos related risk. However, we recommend that sampling method and interpretation of results be made with precaution and by appropriate professionals.  Michel Millmore, P.T. CEA, is a Professional Technologist in Quebec and has been practicing in Environmental Assessment and Remediation since 1993. He is listed on the List of Experts of the Ministry of Sustainable Development, Environment, Wildlife and Parks (MSDEWP) and is a member of CEP Forensic Engineering team since 2012. He can be reached at millmore@expcep.com. www.claimscanada.ca

14-08-19 12:24 PM

The Textile Experts

When disaster hits home, basic needs become a priority: food, shelter and clothing. The Textile Experts of CRDN bring a scientific approach to losses involving clothing and textiles, adept at handling thousands of types of items, hundreds of types of materials and dozens of types of contaminants. CRDN offers expertise backed by generations of experience, a full range of equipment and numerous customized treatments using leading-edge solvents and techniques designed to achieve the highest level of restoration success to reduce severity. Thatâ&#x20AC;&#x2122;s the value of an expert.

24-Hour Claim Assignment 1-866-897-CRDN (2736) | www.crdn.ca

17338 CRDN Ad-ClaimsCanada_July2012.indd 1 ad right size.indd 1

7/10/12 4:01 PM 13-10-16 3:30 PM

Equitable Contribution

How this legal doctrine impacts the sharing of defence costs between primary and excess insurers. BY CHAD LEDDY

In May 2014, the Supreme Court of Canada rejected an application for leave to appeal a decision of the Ontario Court of Appeal which clarified the limits of the doctrine of equitable contribution. This doctrine operates to require excess insurers to share defence costs with a primary insurer. The court found that there is no such obligation on an insurer whose policy contains only a conditional obligation to provide indemnity for defence costs. The decision is ACE INA Insurance v. Associated Electric Gas Insurance Limited, 2013 ONCA 685 (CanLII). As a result, primary insurers can now expect to pay the full costs of defending larger claims, even where their liability exposure may be just a small fraction of that of the excess carrier, in cases involving similar policies with conditional defence costs coverage. This decision has not yet been considered by any other province’s courts. However, the doctrine of equitable contribution is interpreted similarly across Canada and is of national interest so this case will likely receive some attention, especially in cases with similar excess policy wordings. The case arose from an explosion at a hydroelectric transformer vault. The hydro utility held a $1 million primary policy with ACE INA Insurance (“ACE”) and a $45 million excess umbrella policy with Associated Electric Gas Insurance Limited (“AEGIS”). Liability for the explosion was 42 Claims Canada

p42-43 CDL.indd 42

contested. It was agreed that the damages would far exceed $1 million and noted that the total damages claimed across five separate actions exceeded $50 million. ACE’s primary policy contained a clear duty to defend and covered defence costs without eroding the liability limit. The AEGIS excess policy contained no duty to defend, but provided that its coverage would “drop down” to cover defence costs, by way of an indemnity for such costs that would reduce the policy limits, but only where defence costs were not covered by another valid policy. In other words, the AEGIS policy contained an indemnity for defence costs paired with a conditional exclusion. An earlier decision of the same court, in Alie v. Bertrand & Frere Construction Co. Ltd., 2002 CanLII 31835, set out that defence costs among primary and excess insurers with overlapping duties to defend should be subject to equitable contribution, to be determined in a fair and reasonable way. Alie v. Bertrand also made it clear that where a policy did not contain any duty to defend, the courts would not write one in. Thus, had the AEGIS policy simply excluded defence costs, this case would not have broken new ground. What makes ACE INA Insurance v. Associated Electric Gas Insurance Limited interesting is that faced with the new form of conditional indemnity for defence costs in the AEGIS policy, the Court of Appeal ruled that a policy provision obligating an insurer to pro-

August/September 2014

vide indemnity for defence costs will not trigger a requirement for equitable contribution where that policy also contains an exclusion for coverage of such costs in the presence of another policy covering defence costs. In arriving at this conclusion the Court found that the two policies did not cover the same risk; rather, they were tailored in a “made-to-measure” way to fit together and provide full insurance, without overlapping so as to cover the same risks, by a sophisticated insured and its broker. Thus, while the obligation to contribute to defence costs does not arise from any contractual relationship between the primary and excess insurer, an excess insurer may rely on express exclusionary language in a policy to bar or limit any such equitable obligation, even where the result is that an insurer facing as little as 1/45th the liability exposure must pay the full defence costs and the party facing up to 44/45ths of the exposure must pay none. The Court took note of ACE’s argument that to give AEGIS a “free ride” on defence costs when AEGIS faced forty-five times the exposure of ACE, and effectively had control over the resolution of the claims (given that ACE’s liability limits left it powerless to settle the claims), would not be good policy and would hinder settlement. In rejecting this argument, the Court ruled that it would be unfair to re-write ACE’s bargain with Toronto Hydro and that as primary insurer it should be held to its obligation to pay www.claimscanada.ca

14-08-19 12:35 PM

defence costs, whatever the effect on the role of the excess insurer at the bargaining table. The result in this case turned on the fact that the ACE policy expressly assumed responsibility for costs, without regard to whether another policy was present, while the AEGIS policy stipulated that it did not provide indemnity for costs if another policy was present. If the primary policy had itself contained such conditionality – for instance, via language that it would provide indemnity for costs only if there was no excess insurer responding to the claim, where the amount claimed exceeded the primary policy – the result in this case may well have been different. Thus, one can anticipate that primary policies litigated in the years ahead (presumably, these are being furiously re-written as you read this) may contain toughened up, more conditional language, that attempts to shift liability for costs back to the excess insurer. Any such efforts to change the language of primary policies to address this decision will be complicated by the Ontario Court of Appeal’s earlier decision in McKenzie v. Dominion of Canada General Insurance Company, 2007 ONCA 480 (CanLII), which maintained a sharp distinction between the risk insured by primary and excess policies, and which could render futile any efforts to make such policies “mutually repugnant” enough so as to result in a sharing of costs. Ultimately, we will have to wait and see if faced with two such “mutually repugnant” policies with conditional exclusions the courts return to the doctrine of equitable contribution on a pro rata basis. In the interim, primary insurers defending claims exceeding policy limits in the shadow of exclusionary excess policies can expect to face significant additional costs exposure. Even more unfortunately for them, they will have little control over those increased costs, as in cases of a genuine excess claim, the power of settlement will for all practical purposes be exclusively in the hands of the excess insurer. www.claimscanada.ca

Meanwhile, excess insurers with the good fortune to be responding on well-crafted excess policies will have the luxury of perching behind “free” defences, giving them reduced incentives to settle. Where such a key party need not “pay to play”, the result is likely to be more drawn out litigation in complex matters involving multiple insurers. 

Chad Leddy is an associate at Dutton Brock LLP with a wide-ranging insurance defence practice. Canadian Defence Lawyers (CDL) is the only national organization representing the interests of civil defence lawyers. It offers broad opportunities to unite the defence bar over common issues, as well as providing accredited continuing legal education.

Claims Canada Magazine is the only national claims publication COVERING the Canadian market

Reaching Over 8,500 Insurance Claims Professionals from Coast-to-Coast!

For advertising space information, please contact Paul Aquino, Publisher: paul@canadianunderwriter.ca

www.claimscanada.ca August/September 2014

Claims Canada 43

Official Journal of the Canadian Indeépendent Adjusters’ Association

p42-43 CDL.indd 43

14-08-19 12:36 PM

Tornado Damage

The Angus, Ontario tornado showed some deficiencies in construction methods – some of which can be fixed cheaply. BY GREGORY A. KOPP

On June 17, 2014, an EF-2 tornado ripped through the small town of Angus, Ontario, about 100 km north of Toronto. It caused damage to more than 100 homes, tearing the roofs off of 11 of them, including seven in a row down one street. The worst of the damage was confined to two streets. In fact, the tornado appeared to travel down the backyards between the houses over a stretch where about 70% of the damage occurred. Events of this magnitude seem to happen every couple of years or so in Ontario. Most people would say there isn’t much that we can do about these events, particularly when they look at the photographs of chaotic damage in the aftermath of the storm. However, when one digs into the details, patterns of damage emerge that suggest measures can be taken to reduce the number of people who lose their homes and have to re-build their lives. The most important mitigation measure is inexpensive – in the range of $100 to $200 per house.

In Angus, much of the observed damage was to the cladding (vinyl siding – 30% of the damaged houses), roof cover (asphalt shingles – 50%), and fascia, soffits and eaves troughs (40%). This is fairly typical of such storms, and while the damage can add up, our analysis suggests that these costs are not the main drivers of overall losses in severe tornadoes. Of greater concern are structural failures, such as roof sheathing (10% of the houses) and complete roof failure (10% of the houses), which is both a life safety issue and a much more expensive type of failure. It has been shown that the loss of one sheet of plywood from the roof can lead to substantial contents loss due to rain entry. Complete roof failure obviously leads to substantial re-building costs along with a high proportion of contents loss. Roofs in wood-frame houses are fastened to the walls with toe-nails – a set of three nails connecting each roof truss to the top of the wall. In convective storms in particular, the wind creates pressure, which acts to lift roofs up. So, in a severe wind storm, we need to think about holding the roof down, rather than having

Toe-Nail Connection: Weaker

Metal Strap Connection: Stronger walls that just hold it up. The toe-nailed connections have this job. Engineers tend to dislike toe-nailed connections because it is difficult to control their quality and, even when properly installed, their capacity to withstand uplift is relatively small. Often, the lumber will crack when the nails are put in; and it is easy to miss nails. As a result, the toenailed connections are often the weak link in severe wind. In other words, how the roof is fastened to the walls tends to be the weakest structural component in a wood-frame houses, even when they are installed correctly.

Damage to houses in Angus, Ontario.

44 Claims Canada

p44,46 ICLR.indd 44

August/September 2014

www.claimscanada.ca

14-08-19 12:38 PM

DKI full pg.indd 1

14-08-15 4:01 PM

As a result, one usually finds complete roof trusses on the ground after the storm, with the toe-nails protruding out. In Angus, as part of the research we did after the storm, we found many such toe-nailed connections during our survey. However, most of these were clearly faulty, often with only a single nail, instead of the three required by the building codes in Canada. Nailing problems were prevalent in Angus – we didn’t find one failed toe-nail connection that was correct (although in the piles of lumber, we may have missed some). Once a roof fails, it will fly through the air and could potentially impact adjacent houses that may have been otherwise undamaged. We saw several circumstances where roofs had landed on adjacent houses, and we also saw roof trusses that had penetrated adjacent walls like spears protruding through windows. About 40% of the houses in Angus were damaged by debris impacts. While shingles flying through the air have enough momentum to break common window glass, much of the damage due to debris impacts was caused by structural roofing material. Thus, if one can keep the roof structure attached to the

walls, there will be significantly reduced damage to surrounding houses. So, how can we reduce the number of roof failures? We need two things. First, builders need ensure that the building code is followed and the correct nails installed. Missing nails can be disastrous. It appears that improved inspection practices are needed in this regard.

Severe tornadoes are relatively rare in Canada, at least compared to the numbers in the southern United States. Second, in order to significantly increase the strength of the weakest link, roof straps should be required instead of toe-nails. These are thin metal straps that replace the toe-nails. The simplest and cheapest of these are far stronger than toe-nailed connections, and they cost less than $1 a piece. In an average house, like those in Angus, they would cost $100 – $150 per house to install. Such straps

would make inspection easier since they can easily be seen from the floor. Severe tornadoes are relatively rare in Canada, at least compared to the numbers in the southern United States. Nevertheless, for EF-2 tornadoes like that in Angus this year, or in Vaughan five years ago, much of the severe damage can be mitigated with roof clips holding the roofs onto the walls, and a few more nails holding the roof sheathing in place. Our analysis, based on full-scale testing at the Insurance Research Lab for Better Homes, suggests that the use of roof straps would have eliminated the roof failures in Angus, substantially reducing the overall losses. Just because it is a tornado does not mean we have to accept the damage – we can actually reduce the worst of it!  Dr. Gregory A. Kopp is a Professor in the Department of Civil & Environmental Engineering at the University of Western Ontario. Dr. Kopp is currently also a Research Director and a member of the Board of Directors of the Boundary Layer Wind Tunnel Laboratory. He can be reached at gakopp@uwo.ca; @gregoryalankopp; or 519-661-3338.

Forensic Engineering is our Business

And we’ve been successful in this business for almost 50 years by giving our clients fact-based, un-biased interpretations of property loss and personal injury incidents.

The Arcon Advantage From mechanical failures to collision reconstructions, ﬁres and explosions to structural collapses, biomechanical analyses and electrical malfunctions, our experts provide benchmark quality investigative services. We provide a unique level of service with: - access to all major engineering disciplines under one roof - multiple staff in each engineering discipline - inter-provincially licensed engineers - online claims ﬁle submission - investigative continuity and stability - peer collaboration and review of engineering reports - turnkey service from initial investigation through expert testimony - on-site evidence storage

888-272-6671 arcon@arconforensics.com 46 Claims Canada

p44,46 ICLR.indd 46

August/September 2014

www.claimscanada.ca

14-08-19 12:38 PM

速

SERVICEMASTER.indd 1

08/05/12 3:49 PM

ad right size.indd 1

13-12-03 7:45 PM

• education forum

A SERIES OF ARTICLES PROVIDED BY THE INSURANCE INSTITUTE OF CANADA

Taking it Back–

Product Recall Insurance

ecalls, advisories, and safety alerts involving consumer products, vehicles, food, and health products have been on the rise in recent years. Recalls can be costly and even devastating to a business, but product recall insurance is increasingly available to help companies mitigate this risk. Adjusters who deal with manufacturing-related claims will need to understand how product recall insurance fits into the commercial landscape. Product recalls can be mandated by a government regulatory agency operating under a specific statute or regulation. Recalls can also be initiated voluntarily if a manufacturer discovers a problem with a product – a step that can save money and help limit the damage to a manufacturer’s reputation. As recall incidents have increased over the last few years, so have the number of insurers offering product recall coverage. Recall insurance can be relatively expensive, but it can make commercial sense for manufacturers that face exposure to recall but cannot afford to self-insure.

Recall vs. liability insurance Product liability insurance and product recall insurance are sometimes confused. Product liability insurance is coverage for third-party liability claims for physical damage or injury arising from defects or problems related to products. This coverage is typically part of an insured’s commercial general liability (CGL) policy. Extensions to cover product recall are sometimes available on product liability policies, but they cover only recall expenses. Comprehensive product recall insurance, on the other hand, is separate, first48 Claims Canada

p48-49 EDUCATION FORUM.indd 48

party coverage for the insured’s economic losses resulting from product recalls. Comprehensive recall policies also cover third-party liability related to financial loss resulting from recall of the product. Though each product recall insurance policy is unique and tailored to the specific insured’s business, there are three basic elements of comprehensive product recall insurance policies: 1. Indemnification for recall costs 2. Lost revenue 3. Crisis management services

Recall cost indemnification The costs related to a recall can vary depending on factors such as the type of product involved, how widely the products are distributed, the ease or difficulty of pinpointing the problem that led to the recall, what it takes to remedy the problem, the time it takes to manufacture and restock replacement product, and so on. An automotive product recall, for example, can cost several times more than the original distribution of the product. Direct recall costs that may be covered under comprehensive recall insurance policies include the following: costs of determining the scope of the recall and tracing the products transportation costs to remove recalled products and distribute replacement products • costs of investigating the problem that led to the recall • costs of fixing the problem – for example, cleaning contaminated production facilities • costs of repairing or replacing recalled products

August/September 2014

• temporary additional labour costs – for example, to staff consumer phone lines • costs of additional regulatory burdens – for example, if products have to be re-inspected • costs for legal and other professional advice • advertising and promotion costs to help restore reputation and brand value In addition to the obvious direct costs, recalls involve significant indirect costs. These are harder to quantify, and they can impact a business long after the recall is completed. For example, distributors may refuse to continue carrying the company’s products; the company may

The risks of recalls The recent and ongoing story of recalls by General Motors provides an example of the impact that recall events can have on a company. According to figures posted on the company’s website, GM issued 60 North American recall notices in the first seven months of 2014, covering more than 28 million vehicles. Recall-related costs were reported at $1.3 billion in the first quarter and another $1.2 billion in the second quarter, reducing GM’s net earnings by over 56% across the two quarters combined. In addition to these figures, the company was also anticipating claims for compensation from injured consumers. Longerterm impacts, such as indirect costs, remain to be seen.

www.claimscanada.ca

14-08-19 1:46 PM

face increased borrowing costs because of damage to its reputation; and the company may lose market share to competitors while a product is off the market.

Lost revenue As for a business interruption claim, determining the amount of revenue lost as a result of a recall is done mainly through forensic accounting. For example, loss calculations will require a projection of the sales that would have been possible if the recall had not occurred. For this part of the claim, gathering appropriate financial records is critical: recent operating statements, budget forecasts, sales and production records, and so on.

Crisis management One of the reasons recalls can be catastrophic is because of the negative impact on the company’s brand and reputation. To mitigate the risk, timely and effective crisis management is key. A company usually does not have internal crisis management expertise, so the coverage provided under recall insurance fills an important gap. Crisis managers can help organize the logistics, including determining the scale of the recall,

notifying others in the supply chain, overseeing public relations efforts, and so forth.

Company choice Product recall policies have a deductible, which can be high, and the coverage itself can be fairly expensive. Whether or not a given manufacturer or supplier chooses to use product recall insurance will depend on a number of factors. One is

For companies that are not large enough to selfinsure, the decision may come down to whether or not the company could cope with a recall event. whether or not it’s likely that the company will be subject to a recall. In general, the more components or ingredients there are in a product, the more chance there can be for exposure to recall risk – and the recall risk may extend to the suppliers of individual components or ingredients. Another consideration is whether the company can self-insure the risk. Very

large companies may prefer to spread the risk across different lines of business rather than purchasing product recall insurance. For companies that are not large enough to self-insure, the decision may come down to whether or not the company could cope with a recall event. If a recall could potentially wipe out the company, recall insurance should be considered. As in any claims situation, an adjuster dealing with a product liability event involving a recall will need a clear understanding of the coverage that’s in place. The adjuster will also need to understand both the nature of the loss and the specifics of the business before determining how to document the loss.  This article is based on excerpts from ADVANTAGE Monthly, a series of topical papers on emerging trends and issues provided to members of the CIP Society. The Chartered Insurance Professionals’ (CIP) Society is the professional organization representing more than 15,000 graduates of the Insurance Institute’s Fellow Chartered Insurance Professional (FCIP) and Chartered Insurance Professional (CIP) programs.

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

www.claimscanada.ca

p48-49 EDUCATION FORUM.indd 49

Sébastien A. Kamayah Associate Direct: 416.363.9050 sebastien@snowdenllp.com

August/September 2014

Claims Canada 49

14-08-19 1:47 PM

APPOINTMENT

• on the scene OTS IN MEMORIAM

Olivia Cheng Claude Blouin and Jamie Dunn, Partners at Blouin, Dunn LLP, are pleased to announce that former articling student Olivia Cheng has been hired back as an associate at the firm. Olivia (Sin Ying) Cheng received her Bachelor (Honours) degree in Finance from York University in 2010, graduating on the Dean’s Honour Roll. She obtained her Juris Doctor degree at the University of Windsor in 2013. Prior to law school, Olivia gained valuable experience working in the accident benefits department of a reputable law firm. She also has extensive knowledge of the residential and commercial real estate practice. Olivia received a Golden Key International Honour Society award for placing within the top 15% of her class in 2011. She was also heavily involved with Community Legal Aid and Pro Bono Students Canada. Olivia completed her articles and was called to the Ontario Bar in 2014. During her articling year, Olivia attended the Superior Court of Justice for routine and contested matters, and was responsible for many Small Claims Court files. Olivia is a member in good standing of the Law Society of Upper Canada. Outside of work, Olivia’s interests include fashion, travelling and ethnic cuisines. Olivia’s contact information is: ocheng@blouindunn.com (416) 365-7888 ext. 158 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.

It is with heavy hearts the Canadian Independent Adjusters’ Association (CIAA) announces the passing of four true giants in the P&C industry. All gave generously of their time and expertise serving the association unconditionally in a wide variety of roles and responsibilities at all levels of the organization. All four gentlemen were granted the prestigious Honourary Life Member award in recognition of their tireless efforts in furthering the objectives of the association on behalf of the Independent Adjusting fraternity and the industry at large. John A. Ingram, AIIC, CLA, FCIAA began his eminent career with A.E. Williams & Co. Ltd in 1963 later becoming Angell, Townson and Williams. His great leadership and commitment to the industry served as a shining example to all who had the privilege of working with him. John was elected CIAA National President in 1980 and received his CLA designation in 1994. He also served as President of the Insurance Institute of Ontario in 1985/86. John passed away June 6, 2014. Roderick G. Palmer, CIP, FCIAA joined L.S. Croth & Co. Ltd., now Crawford Adjusters Canada, in 1970 in the Hanover, Ontario office. He was promoted to manager of the Barrie, Ontario office, eventually becoming Central Ontario district manager. Rod joined CIAA in 1972, and was elected CIAA Ontario Region President in 1997-1998. Rod passed away June 18, 2014. Paul A. Bracken, CLA, FCIAA joined Adamsons Ltd. in 1959, later purchasing the firm together with Gary LeClair in the early 1980’s. He remained with Adamsons, which became Sobel, Adamsons & Clements in 1995, until his retirement. He concentrated on specialty lines and was respected for his scrupulousness in defending claims that shouldn’t be paid and was just as forthcoming when he thought they should be. Paul served as CIAA National President in 1976 and received his CLA designation in 1979. Paul passed away July 10, 2014. Ernest F. Bell, CLA began his illustrious career in claims adjustment with General Accident in 1936. He opened Bell-Saunders Limited in 1951, becoming Adjusters Canada in 1982. One of the original and founding members of CIAC (prior to becoming CIAA in 1985), Mr. Bell was elected to Secretary/Treasurer at its first meeting held in 1953. He received the CLA designation in 1971. Ernie passed away on August 5, 2014. These highly respected gentlemen will be sadly missed; however, comfort can be found in the fact their memory lives on through their mentoring and historied and valued contributions and accomplishments on behalf of the Independent Loss Adjusting profession. Please join us in a moment of reflection to honour the memories and influence of these fine gentlemen to our Industry and to the many people they touched personally and professionally along their journey. l

www.blouindunn.com 50 Claims Canada

p50-53 OTS.indd 50

August/September 2014

www.claimscanada.ca

14-08-19 1:49 PM

APPOINTMENT

The annual CIAA/CICMA Atlantic Joint Conference, with the theme “Mastering Disaster,” was held at the Atlantica Oak Island, Nova Scotia resort June 11-12. Jason Rabin Claude Blouin and Jamie Dunn, Partners at Blouin, Dunn LLP, are extremely pleased to announce that Jason Rabin has joined the firm as an associate lawyer. Jason received his Honours Bachelor of Arts degree in History and English from the University of Toronto in 2002. He graduated from Osgoode Hall Law School in 2005

The conference education program featured excellent presentations from defence counsel firms on Maintaining Evidence, Avoiding Estoppel (Joey Palov/Cox & Palmer), Avoidance of Bad Faith Claims (Chris Madill/Stewart McKelvey ), as well as an overview on Municipal Liability ( David Graves/ McInnes Cooper). The conference opened with an informative presentation by Jim Abraham of Environment Canada/ CBC on “Climate Change and Weather –Is Weird Weather The Norm?” The final presenter was Kyle Urech of the Restoration Contractors Organization Of Canada on “Lessons Learned.“ At the annual dinner & silent auction, CIAA/ CICMA was able to donate $10,800 to the Canadian Red Cross thanks to the generosity of our event sponsors and auction sponsors. Photo attached shows CIAA, NS president Grant King and CICMA, NS president Adelle Mitchel, with Red Cross representatives Alicia Billard and James Sedgewick. A special donation of $5,000 was made to the Bob Smye memorial fund. A heartfelt presentation was made by Jim Higgins of CICMA, NS in recognition of Bob’s long time support of this event over the years. The conference committee also announced a 2nd special donation of $2,500 to the RCMP Family fund in recognition of the tragic loss of life of three RCMP members in the line of duty in Moncton, NB. CIAA president Marie Gallagher attended and addressed CIAA Atlantic attendees. The photo attached shows (from left), Everett Porter CICMA NB, Grant King CIAA NS, Kristel Doucet, CICMA NS, CIAA President Marie Gallagher and Luc Aucoin, CIAA NB/PEI. The joint conference committee would like to extend thanks to all the sponsors and attendees for their support of this conference. l

Since being called to the bar in 2006, Jason has spent his entire legal career in insurance litigation acting on behalf of insurers, municipalities and corporate clients. Jason has handled a diverse range of claims, from complex construction and products liability disputes, to serious personal injury and insurance coverage claims. Jason has appeared before the Ontario Superior Court of Justice, the Workplace Safety and Insurance Appeals Tribunal and at Coroner’s inquests. He has argued (and opposed) complex motions including for summary judgment, and enjoys looking for innovative legal theories to defend his clients’ interests. Jason has presented before the Ontario Bar Association, for trade organizations and coauthored an article on product recall legislation in Canada. Most recently, he has devoted considerable time studying and writing about the uninsured automobile insurance regime in Ontario and recent developments of the law in that area. Jason is a member in good standing of the Law Society of Upper Canada and is a member of the Advocates’ Society. When he is not practicing law, Jason enjoys baking and preparing homemade pizzas and bagels in his wood fired ovens. Jason’s contact information is: jrabin@blouindunn.com (416) 365-7888 ext. 171 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 www.claimscanada.ca

p50-53 OTS.indd 51

August/September 2014

Claims Canada 51

14-08-19 1:49 PM

• on the scene OTS Crawford & Company recently released a white paper meant to help insurance companies and adjusters better understand the current cyber risk environment and how insurers are addressing a risk that continues to be a global threat to millions of commercial enterprises and consumers. Cyber crime is a still-evolving area that insurance companies and adjusters are studying and analyzing carefully to try to stay current or possibly even ahead of its development, notes a statement issued this week by Crawford & Company, announcing the release of The Future of Cyber Insurance. l

CIAA New Members — May 2014 INTERNATIONAL ASSOCIATE MEMBERSHIP Alpha Loss Adjusters Ltd. JAAG Inc.

Nigeria Barbados

ASSOCIATE MEMBERSHIP Ross Claim Adjustment Service CORPORATE MEMBERSHIP Discovery Claims Services Ltd.

Michael Holden, President and CEO of Granite Claims Solutions, announced that Maeve Davis has joined the GCS team as Executive Vice President, National Customer Solutions. Maeve has been in the insurance industry for 24 years and brings a wealth of experience to the role, having held senior positions with a brokerage, independent adjusting Maeve Davis firm, and national insurer. Maeve is also a member of the Ontario Risk & Insurance Society and holds her CRM, FCIP and CAIB. l

Shinder Kurrha

AssessMed Inc. announced the recent hiring of Mr. Shinder Kurrha as Business Relations Advisor, Western Division. Shinder will be working in AssessMed’s Vancouver office. In other company news, AssessMed has acquired the IME Division of Plexo from its past ownership group Persistence Capital Partners (PCP). l

Daytona Beach, FL

Surrey, BC

INDIVIDUAL MEMBERSHIP Capital Claims Adjusters Colby Vermette Emily Woods Omar Parris

Regina, SK Regina, SK Toronto, ON

Level 1 Level 1 Level 3

Crawford & Company (Canada) Inc. Lisa Fowler Shaun Greenly Jordan Stronquist Carole Barclay Apurav Gupta Alistair Stewart Carol Thurlow Damien McQuaid Steven Johnson Ashley Evora

Calgary, AB Nanaimo, BC Victoria, BC Mississauga, ON Mississauga, ON Mississauga, ON Mississauga, ON Newmarket, ON Ottawa, ON Toronto, ON

Level 1 Level 1 Level 1 Level 2 Level 2 Level 2 Level 1 Level 1 Level 1 Level 1

Cunningham Lindsay Canada Claims Services Ltd. Patricia Nadine Furnell Kelly Smith Joseph R.A. Marc Lavoie Richard Paramonczyk

Langley, BC Langley, BC Hamilton, ON Mississauga, ON

Level 1 Level 1 Level 1 Level 2

Discovery Claims Services Ltd.

The Edmonton Police Service (EPS) announced in mid-July that it recovered more than $863,000 worth of travel trailers and other allegedly stolen property after an investigation into false vehicle identification numbers, in which the Insurance Bureau of Canada provided help. “Police were able to identify the original owners and return the property to them, however many innocent buyers are now out significant amounts of money,” EPS stated. l

Pat Lodewijkx Jane Lodewijkx Samuel Cho

SPECS – Specialized Property Evaluation Control Services – announced that Melissa Marshall has joined the National Sales and Marketing Team as Marketing Coordinator. Melissa has a Masters in Communications and brings with her over 10 years of progressive marketing experience. l

A Toronto-area rehabilitation clinic was recently convicted of several auto insurance fraud-related offences and has been fined $200,000. Ontario Rehab Centre was charged following co-operative investigations involving the Financial Services Commission of Ontario (FSCO), the Insurance Bureau of Canada, multiple insurers, and the Toronto Police Service. The conviction resulted from an investigation into a staged accident ring called “Project Whiplash.” According to IBC, insurers paid out an estimated $4 million in fraudulent claims as a result of the scam. l

Wellpoint Health Services Corp. (“Wellpoint”) announced the acquisition of WRI Group Inc. (“WRI”). WRI, via its WorkReturn and WorkLab entities, is a leading provider of independent medical examinations (“IME”) and a provider of disability rehabilitation services in Canada since 1992. l 52 Claims Canada

p50-53 OTS.indd 52

August/September 2014

Surrey, BC Surrey, BC Surrey, BC

Level 3 Level 1 Level 1

Kernaghan Adjusters Limited Mahsa Marandi Alamdari Rosario Ray

Vancouver, BC Calgary, AB

Level 1 Level 1

www.claimscanada.ca

14-08-19 3:37 PM

The International Federation of Adjusting Associations, of which CIAA is an active member association, recently held its Annual General Meeting in London where the Executive Board of Directors for 2014-15 was elected. In this photo: L to R – Paul May, IFAA Director at Large; Felipe Hoetz, IFAA President, representing the Chilean Association of Independent Loss Adjusters (ALOSI); Nihal Bogahalande, IFAA Past President, of the Sri Lanka Association of Loss Adjusters (SLALA) and Fred Plant, Incoming IFAA President on behalf of the Canadian Independent Adjusters' Association.

DKI Canada announced the appointment of Paul Burns to the position of Director, Global Business Development. In his new role with DKI Canada, Mr. Burns will be responsible for partnering with key stakeholders to develop and execute strategies to create deep and lasting customer partnerships. In other company news, DKI announced that Paul Burns R.D. Steele has joined the organization. Mike Berthiaume, owner of R.D. Steele DKI has provided a high level property restoration services in the Brockville, Prescott, Morrisburg, Gananoque and surrounding areas for over 35 years. l Itech Environmental Services announced that Chris Andrews has accepted the role of Business Development Manager. As Business Development Manager, Chris will focus on increasing awareness of Itech’s emergency spill response and remediation services. Itech maintains a diverse fleet including excavation equipment, dump trucks, bin trucks, Chris Andrews vacuum trucks, and fully equipped spill response trailers to meet the needs of environmental engineering consultants and insurers. l

Relectronic-Remech Inc. recently launched its new website at www.relectronic-remech.ca. The company has been servicing the insurance industry (insurers, contractors, independent adjusters) since 1992. Its consultants specialize in major electronic losses, major mechanical failures, restaurant losses and data recovery. l

Forensic Engineering Consultants

Read Jones Christoffersen (RJC) Ltd. has been involved in the evaluation and restoration of building structures and enclosures for over 35 years. Our expertise has expanded to include Forensic Engineering: > Property Damage Assessment and Loss Remediation > Structural Collapse > Failed Building Component Issues > Building Code Compliance Issues > Construction Claim Disputes Analysis > Litigation Technical Support

Claims Canada Wants You! Claims Canada magazine wants you to send us your company news, appointments and event photos for possible inclusion within our ‘On the Scene’ department. Please help us share your items with the claims industry across the country. For more information, please email: craig@editinsight.com

www.claimscanada.ca

p50-53 OTS.indd 53

For more information, please contact: Derek Gibson, P.Eng. Jeremy Horst, C.E.T.

e: dgibson@rjc.ca e: jhorst@rjc.ca

t: 416.977.5335 x329 t: 416.977.5335 x241

Vancouver Victoria Nanaimo Calgary Edmonton Lethbridge Kitchener Toronto Kingston

August/September 2014

Claims Canada 53

14-08-19 1:52 PM

CIAA REGIONAL PRESIDENTS 2013 – 2014 NEWFOUNDLAND & LABRADOR Marcel Pitcher, CIP, CRM Crawford & Company (Canada) Inc. 96 Clyde Avenue, Suite 310 Mount Pearl, NL AlN 4S2 Phone: (709) 753-6351 Fax: (709) 753-6129 E-mail: Marcel.Pitcher@crawco.ca NOVA SCOTIA E. Grant King, BA, B.Ed., CIP Crawford & Company (Canada) Inc. 120 – 237 Brownlow Avenue Dartmouth, NS B3B 2C7 Phone: (902) 468-7787 Fax: (902) 468-5822 E-mail: Grant.King@crawco.ca NEW BRUNSWICK & PRINCE EDWARD ISLAND Luc Aucoin, BBA, FCIP Plant Hope Adjusters Ltd. 85 Englehart Street Dieppe, NB E1A 8K2 Phone: (506) 853-8500 Fax: (506) 853-8501 E-mail: laucoin@planthope.com QUEBEC/AESIQ Claude Nadeau Cunningham Lindsey Canada Claims Services Ltd. 1250 Guy Street, #1000 Montreal, QC H3H 2T4 Phone: (514) 939-1570 Fax: (514) 938-5445 E-mail: cnadeau@cl-na.com ONTARIO Dorothy Lowry, FCIP Crawford & Company (Canada) Inc. 15 - 431 Bayview Drive Barrie, ON L4N 8Y2 Phone: (705) 728-5597 Fax: (705) 728-2167 E-mail: Dorothy.Lowry@crawco.ca MANITOBA Timothy W. Bromley J.P. Hamilton Adjusters Ltd. 125 Enfield Crescent Winnipeg, MB R2H 1A8 Phone: (204) 944-1057 Fax: (204) 944-1606 E-mail: tbromley@mts.net

WESTERN M. Doreen Lennon, CIP Townsend & Leedham Adjusters Ltd. 200, 4245 - 97 Street Edmonton, AB T6E 5Y7 Phone: (780) 463-7776 Fax: (780) 462-1280 E-mail: dlennon@tladjusters.com PACIFIC Blair McGregor, CIP Granite Claims Solutions 400 - 4370 Dominion Street Burnaby, BC V5G 4L7 Phone: (604) 659-6558 Fax: (604) 659-6570 E-mail: blair.mcgregor@graniteclaims.com

p54 CIAA NSC.indd 54

ADVISORY David Porter, LL.B., FCIP, CRM Granite Claims Solutions 400 – 4370 Dominion Street Burnaby, BC V5G 4L7 Phone: (604) 659-6559 Fax: (604) 659-6570 E-mail: david.porter@graniteclaims.com Albert Poon, CIP Cunningham Lindsey Canada Claims Services Ltd. 1102 – 50 Burnhamthorpe Rd. W. Mississauga, ON L5B 3C2 Phone: (905) 896-8181 Fax: (905) 896-3485 E-mail: apoon@cl-na.com John D. Seyler, CIP ProFormance Group Insurance Solutions Inc. 5080 Timberlea Blvd., Suite 214 Mississauga, ON L4W 4M2 Phone: (905) 238-4985 Fax: (905) 238-2735 E-mail: jseyler@prospecialty.ca James B. Eso, CIP, CIOP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Phone: (519) 578-5540 Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca John Jones, BA Granite Claims Solutions Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 E-mail: john.jones@graniteclaims.com Craig J. Walker, CIP, FCIAA, FIFAA Maltman Group International 3550 Victoria Park Ave., Suite 301 Toronto, ON M2H 2N5 Phone: (416) 492-4411 Fax: (416) 492-5657 E-mail: cwalker@maltmans.com CIAA NATIONAL INSURANCE INDUSTRY ADVISORY BOARD Patti M. Kernaghan, FCIP, CRM Kernaghan Adjusters Limited 300 - 1575 West Georgia Street Vancouver, BC V6G 2V3 Phone: 1-800-387-5677 Fax: 1-800-387-5644 E-mail: pkernaghan@kernaghan.com Marie C. Gallagher, FCIP, CRM Granite Claims Solutions 71 King Street, Suite 204 St. Catharines, ON L2R 3H7 Phone: (905) 984-8282 Fax: (905) 984-8290 E-mail: marie.gallagher@graniteclaims.com

SASKATCHEWAN Cheryl Hanson Crawford & Company (Canada) Inc. 210 – 227 Primrose Drive Saskatoon, SK S7K 5E4 Phone: (306) 931-1999 Fax: (306) 931-2212 E-mail: Cheryl.Hanson@crawco.ca

54 Claims Canada

National Standing Committees 2013-2014

David Porter, LL.B., FCIP, CRM Granite Claims Solutions 400 – 4370 Dominion Street Burnaby, BC V5G 4L7 Phone: (604) 659-6559 Fax: (604) 659-6570 E-mail: david.porter@graniteclaims.com John D. Seyler, CIP ProFormance Group Insurance Solutions Inc. 5080 Timberlea Blvd., Suite 214 Mississauga, ON L4W 4M2 Phone: (905) 238-4985 Fax: (905) 238-2735 E-mail: jseyler@prospecialty.ca Patricia M. Battle Canadian Independent Adjusters’ Association/L’Association Canadienne des Experts Indépendants Centennial Centre, 5401 Eglinton Ave. West, Suite 100 Etobicoke, ON M9C 5K6 Phone: (416) 621-6222 Toll Free: 1-877-255-5589 Fax: (416) 621-7776 E-mail: pbattle@ciaa-adjusters.ca James B. Eso, CIP, CIOP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Phone: (519) 578-5540 Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca

August/September 2014

Laurie Walker, CIP Granite Claims Solutions 5915 Airport Road, Suite 300 Mississauga, ON L4V 1T1 Phone: (905) 740-1784 Fax: (905) 671-1889 E-mail: laurie.walker@graniteclaims.com

John Jones, BA Granite Claims Solutions Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 E-mail: john.jones@graniteclaims.com

Albert Poon, CIP Cunningham Lindsey Canada Claims Services Ltd. 1102 - 50 Burnhamthorpe Rd. W. Mississauga, ON L5B 3C2 Phone: (905) 896-8181 Fax: (905) 896-3485 E-mail: apoon@cl-na.com

Fred R. Plant, AIIC Plant Hope Adjusters Ltd. 85 Englehart Street Dieppe, NB E1A 8K2 Phone: (506) 853-8500 Fax: (506) 853-8501 E-mail: fplant@planthope.com

Craig J. Walker, CIP, FCIAA, FIFAA Maltman Group International 3550 Victoria Park Ave., Suite 301 Toronto, ON M2H 2N5 Phone: (416) 492-4411 Fax: (416) 492-5657 E-mail: cwalker@maltmans.com

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

Jo-Ann Eccleston, CIP Aviva Canada Inc. 2206 Eglinton Ave. East Toronto, ON M1L 4S8 Phone: (416) 689-3328 Fax: 1-866-805-8585 E-mail: jo-ann_eccleston@avivacanada.com Bob Grouchy, BA, FCIP, CRM Allianz Global 1600 – 130 Adelaide Street West Toronto, ON M5H 3P5 Phone: (416) 915-4247 Fax: (416) 849-4555 E-mail: bob.grouchy@agr.allianz.ca Paul Hicks, FCIP, CRM TD Insurance 2161 Yonge Street, 4th Floor Toronto, ON M4S 3A6 Phone: (416) 486-2507 Fax: (416) 545-6022 E-mail: Paul.Hicks@tdinsurance.com Justin MacGregor Past President Insurance Brokers Association of Canada Phone : (416) 859-4567 Mark Stewardson, FCIP Royal & Sun Alliance 2225 Erin Mills Parkway, Suite 1000 Mississauga, ON L5K 2S9 Phone: (905) 403-2333 Fax: (905) 403-2326 E-mail: Mark.Stewardson@rsagroup.ca Mark Weir Intact Financial Corporation 700 University Avenue, 13th Floor Toronto, ON M5G 0A1 Phone: (416) 341-1464 Fax: (416) 217-0562 E-mail: mark.weir@intact.net

CONSTITUTION & RULES John Jones, BA Granite Claims Solutions Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 E-mail: john.jones@graniteclaims.com CONVENTION Matt Allan, CIP, CRM Granite Claims Solutions Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 E-mail: matt.allan@graniteclaims.com DESIGNATION Paul W. Greening, CLA, FCIAA Greening Aviation Claims Inc. 26C Palliser Park, Box 190 Riverhurst, SK S0H 3P0 Phone: (306) 353-2000 Fax: (306) 353-2200 E-mail: pgreening@sasktel.net E. Brian Gough, FCIP, CLA, FCIAA Marsh Adjustment Limited 1550 Bedford Highway, Suite 711 Bedford, NS B4A 1E6 Phone: (902) 469-3537 Fax: (902) 469-2396 E-mail: ebgough@marshadj.com Robert V. Pearson, CLA, FCIAA Hansen Labelle Adjusters Ltd. 1328 17th Avenue N.W. Calgary, AB T2M 0R1 Phone: (403) 284-2211 Fax: (403) 284-2299 E-mail: bob@hansenlabelle.ca

Beth Bull ACE INA Insurance 1400 – 25 York Street Toronto, ON M5J 2V5 Phone: (416) 594-3067 Fax: (416) 368-0641 E-mail: beth.bull@acegroup.com

EDITORIAL Mary Charman, CIP Crawford & Company (Canada) Inc. 1 – 120 Mulock Dr. Newmarket, ON L3Y 7C5 Phone: (905) 898-0008 Fax: (905) 898-1705 E-mail: Mary.Charman@crawco.ca

Alex Walker, CIP Royal & Sun Alliance 2225 Erin Mills Parkway, Suite 1000 Mississauga, ON L5K 2S9 Phone: (905) 412-1397 Fax: (905) 403-2328 E-mail: Alex.Walker@rsagroup.ca

John M. Sharoun, FCIP, FCIAA, CRM Crawford & Company (Canada) Inc. 300 – 123 Front Street West Toronto, ON M5J 2M2 Phone: (416) 867-1188 Fax: (416) 867-1925 E-mail: John.Sharoun@crawco.ca

CAREER RECRUITMENT PLANNING Richard Swierczynski, BA, CIP AZ Claims Services Inc. 1500 Upper Middle Rd., Unit #3, P.O. Box 76041 Oakville, ON L6M 3G3 Phone: (905) 825-0027 Fax: (905) 825-5543 E-mail: Richard@azclaims.ca

EDUCATION Gary Ellis, BBA, FCIP, RF, FCLA, FCIAA AMG Claims Inc. 535 North River Road, Unit 3 Charlottetown, PE C1E 1J6 Phone: (902) 628-9091 Fax: (902) 628-9093 E-mail: gary.ellis@amgclaims.ca

COMMUNICATIONS Richard Swierczynski, BA, CIP AZ Claims Services Inc. 1500 Upper Middle Rd., Unit #3, P.O. Box 76041 Oakville, ON L6M 3G3 Phone: (905) 825-0027 Fax: (905) 825-5543 E-mail: Richard@azclaims.ca

EMERGENCY MEASURES Richard Van Horne Action Investigations Inc. 2 Catelina Court Dartmouth, NS B2X 3G9 Phone: (902) 462- 1222 Fax: (902) 462-3688 E-mail: richardvanhorne@actioninvestigations.ca

FINANCE Russell Fitzgerald, CIP Kernaghan Adjusters Limited 203 – 4246 97 Street N.W. Edmonton, AB T6E 5Z9 Ph: (780) 488-2371 Fax: (780) 488-0243 E-mail: rfitzgerald@kernaghan.com Marie C. Gallagher, FCIP, CRM Granite Claims Solutions 71 King Street, Suite 204 St. Catharines, ON L2R 3H7 Ph: (905) 984-8282 Fax: (905) 984-8290 E-mail: marie.gallagher@graniteclaims.com John D. Seyler, CIP ProFormance Group Insurance Solutions Inc. 5080 Timberlea Blvd., Suite 214 Mississauga, ON L4W 4M2 Ph: (905) 238-4985 Fax: (905) 238-2735 E-mail: jseyler@prospecialty.ca IBC: LIAISON, LEGISLATIVE & FORMS Paul Hancock, B.Sc., CIP Crawford & Company (Canada) Inc. 300 – 123 Front Street West Toronto, ON M5J 2M2 Phone: (416) 867-1188 Fax: (416) 867-1925 E-mail: Paul.Hancock@crawco.ca LICENSING J. Miles O. Barber, B.Comm. (Hons.), FCIP, CRM Network Adjusters Ltd. 67 Folkestone Blvd. Winnipeg, MB R3P 0B4 Ph: (204) 897-5793 Fax: (204) 897-5797 E-mail: mbarber@mts.net MEMBERSHIP & QUALIFICATIONS Georgiana Chen, CIP ProFormance Group Insurance Solutions Inc. 1101 Kingston Rd., Suite 280 Pickering, ON L1V 1B5 Ph: (877) 539-3111 Fax: (905) 554-3776 E-mail: gchen@proadjusting.ca NOMINATING John D. Seyler, CIP ProFormance Group Insurance Solutions Inc. 5080 Timberlea Blvd., Suite 214 Mississauga, ON L4W 4M2 Ph: (905) 238-4985 Fax: (905) 238-2735 E-mail: jseyler@prospecialty.ca Marie C. Gallagher, FCIP, CRM Granite Claims Solutions 71 King Street, Suite 204 St. Catharines, ON L2R 3H7 Phone: (905) 984-8282 Fax: (905) 984-8290 E-mail: marie.gallagher@graniteclaims.com James B. Eso, CIP, CIOP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Ph: (519) 578-5540 Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca Craig J. Walker, CIP, FCIAA, FIFAA Maltman Group International 3550 Victoria Park Ave., Suite 301 Toronto, ON M2H 2N5 Ph: (416) 492-4411 Fax: (416) 492-5657 E-mail: cwalker@maltmans.com PRIVACY James B. Eso, CIP, CIOP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Ph: (519) 578-5540 Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca Keith P. Edwards, FCILA, CLA, FUEDI-ELAE CIAA Honorary Life Member c/o CIAA National Office 5401 Eglinton Ave. W., Suite 100 Etobicoke, ON M9C 5K6 Ph: (416) 621-6222 Fax: (416) 621-7776 E-mail: info@ciaa-adjusters.ca PROFESSIONAL PRACTICES John D. Seyler, CIP ProFormance Group Insurance Solutions Inc. 5080 Timberlea Blvd., Suite 214 Mississauga, ON L4W 4M2 Phone: (905) 238-4985 Fax: (905) 238-2735 E-mail: jseyler@prospecialty.ca

www.claimscanada.ca

14-08-19 1:53 PM

Your Insurance News Source .ca

Sign-Up at http://bit.ly/cuenews to receive Canadian Underwriterâ&#x20AC;&#x2122;s free DAILY e-Newsletter each morning â&#x20AC;&#x201C; containing all of the latest industry news, press releases, blogs, events, careers and more.

cu.ca ad June2014.indd 1

14-08-19 10:56 AM

â&#x20AC;˘ on the scene OTS A record turnout of 200+ industry representatives attended the 55th Annual Reception of the Quarter Century Club on May 21 at the Albany Club in Toronto. The event was a roast for claims industry veteran Beth Bull, VicePresident Claims at ACE Canada. l

56 Claims Canada

p56-57 OTS.indd 56

August/September 2014

www.claimscanada.ca

14-08-19 1:56 PM

Kelly Albert

Appointed National Account Executive, Global Client and Business Development for the Western Canada Region

Crawford & Company (Canada) Inc. is pleased to announce the appointment of Mr. Kelly Albert to the position of National Account Executive, Global Client and Business Development, for the Western Canada region. In his new role, Mr. Albert will assist Crawford’s Global Client and Business Development team with its national growth strategy and execution. His immediate focus will be on working with the Company’s Western Region offices to help increase business with existing and new clients in the west. During his 21 years in the insurance industry, Mr. Albert has gained extensive industry and management experience working on both the insurer and brokerages sides of the business. In addition to a wide array of industry academic credentials, he also holds the Chartered Insurance Professional and Canadian Risk Management designations. “Mr. Albert’s ability, enthusiasm and experience make him ideal for this position,” said Walter Waugh, vice president, Operations, Western Canada Region. “He will be a great addition to the Crawford team, and his expertise in both development and management has earned him a strong reputation within the industry.”

Crawford & Company (Canada) Inc. is a wholly owned subsidiary of Crawford & Company. Based in Atlanta, Ga., Crawford & Company is the world’s largest independent provider of claims management solutions to the risk management and insurance industry as well as self-insured entities, with an expansive global network serving clients in more than 70 countries. The Company’s shares are traded on the NYSE under the symbols CRDA and CRDB.

www.claimscanada.ca

p56-57 OTS.indd 57

August/September 2014

Claims Canada 57

14-08-19 1:57 PM

• on the scene OTS Giffin Koerth held its 3rd annual golf tournament, the “Giffin Koerth BIG DIVOT” on July 18 at Wyndance Golf Club, 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. l

58 Claims Canada

p58-59 OTS.indd 58

August/September 2014

www.claimscanada.ca

14-08-19 2:00 PM

APPOINTMENT

Paul Burns Ken Tucker, CEO of DKI Canada is very pleased to announce the appointment of Paul Burns to the position of Director, Global Business Development. In his new role with DKI Canada, Mr. Burns will be responsible for partnering with key stakeholders to develop and execute strategies to create deep and lasting customer partnerships. Paul will be responsible for the development of the DKI national brand strategy as well as the execution of DKIâ&#x20AC;&#x2122;s continued growth in the Property & Casualty market, Broker community, Property Management and Corporate Canada. Paul brings over 20 years of senior leadership experience in the insurance industry with a strong focus on strategic business development and partnerships. Before Joining DKI, Paul was the VP, Ontario Operations and National Sales for a TPA company and also spent a number of years prior to that as the Vice President, London Market Services for a National IA firm. DKI is the largest disaster restoration contracting organization in North America. The restoration services that DKI provides to insurance, commercial and residential clients include: emergency response, water damage mitigation, fire and contents cleaning, mold remediation, complete reconstruction and much more, 24 hours a day, 365 days a year. DKI returns damaged property to its pre-loss condition quickly and efficiently, delivering complete satisfaction to our consumer, insurance, and corporate customers. Paul can be reached at: E: paul.burns@dki.ca Cell: 416-566-2131 â&#x20AC;˘ Ph: 905.820.0188

www.claimscanada.ca

p58-59 OTS.indd 59

August/September 2014

Claims Canada 59

14-08-19 2:00 PM

â&#x20AC;˘ on the scene OTS This year, 180 golfers attended the 15th Annual WICC Ontario Golf Tournament on July 7 at Angus Glen Golf Club in Markham, Ontario. The weather cooperated with the dayâ&#x20AC;&#x2122;s schedule and attendees enjoyed a BBQ lunch, silent auction, raffle and delicious dinner. A WICC cheque in the amount of $75,000 was presented by Golf Committee Chair, Jean Faulkner to the Canadian Cancer Society. l

60 Claims Canada

p60 OTS.indd 60

August/September 2014

www.claimscanada.ca

14-08-19 2:09 PM

THE SOLUTION PROVIDER FOR ALL YOUR CONSULTING AND RESTORATION NEEDS

NEWTRON ENGINEERING SERVICES

NEWTRON RESTORATION SERVICES

HIGH-TECH, INDUSTRIAL, MEDICAL AND ELECTRONIC EQUIPMENT RESTORATION. CAUSE & ORIGIN, LOSS MITIGATION, AND DAMAGE ASSESSMENT. TECHNICAL CONSULTING, AUDITING AND PROJECT MANAGEMENT.

24HR EMERGENCY SERVICES AND RESPONSE ANYWHERE IN NORTH AMERICA

1.800.238.3734

Technica l Au diti ng

Ori

gin

3 en

t ra

g uildin Reb & n

Project Consulting

&M a na ge m

Miti oss

gation

Reco ver y , Re sto

www.newtrongroup.com

Emergency Respons e

& se

14 Automatic Road, Unit 37 Brampton, Ontario, Canada L6S 5N5 Tel: 905.458.1400 Fax: 905.458.4840 email: claims@newtrongroup.com

NEWTRON GROUP CAN HELP EVERY STEP OF THE WAY 27153_Newtron_ad.indd 1

ad right size.indd 1 ad right size.indd 1

16/07/09 12:04 PM

14-08-19 11:07 AM 12-08-01 9:37 AM

â&#x20AC;˘ on the scene OTS On June 24, the Ontario Risk and Insurance Management Society (ORIMS) held its annual golf tournament at Deer Creek Golf Club in Ajax, Ontario. It was a well-attended and successful day, with 279 golfers taking part. ORIMS members and their guests enjoyed a fantastic day of socializing and fun. ORIMS was pleased to announce that the tournament raised $3,190 in support of the Juvenile Diabetes Research Foundation. Prior to the tournament, ORIMS held its 54th Annual General Meeting at the golf club. At the AGM, outgoing president David Beal handed the reins to incoming 2014-2015 term president, Julian Valeri, and the new ORIMS Board of Directors was introduced. l

62 Claims Canada

p62 OTS.indd 62

August/September 2014

www.claimscanada.ca

14-08-19 2:10 PM

Here we grow again. We’re now here to help in: St. John’s, NL Tel: 709-738-2229 stjohns@firstgeneral.ca

Miramichi, NB Tel: 506-622-2224

miramichi@firstgeneral.ca

Fredricton, NB Tel: 506-450-5035

fredericton@firstgeneral.ca

With over 80 offices across North America