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October/November 2010
Defining Minor Injury
Band-Aid solution or adequate replacement?
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Contents OCTOBER/NOVEMBER 2010 • VOLUME 4 • NUMBER 5
Cover Feature
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12 Defining Minor Injury Despite encompassing a wider range of injuries, there still exists some concern that the Minor Injury Guideline might not be the salvation the auto industry needs it to be. BY LAURA KUPCIS
Spotlight 20 Sun, Sea and Cliffs East Coast Claim Services Inc. uses all that encompasses the East coast in its logo to reflect its commitment to the area. BY LAURA KUPCIS
Education Forum
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52 The Proof is in the Pudding A loss adjuster must assess the elegibility of the injured party to make a claim based on either breach of contract or breach of legal duty.
News Features 22 Controlling Indemnity in Property and Casualty Claims
42 The Collision Repair Industry — a UK Perspective
Speakers at the CIAA’s AGM offered up tips to controlling indemnity in property and casualty claims.
What’s happening in the UK repair industry could be coming to Canada.
BY LAURA KUPCIS
28 Property Loss Update
BY DOUG KIRK
44 To Stack or Not Stack?
A few cases that offer guidance regarding the appraisal process.
A look at whether there are multiple deductibles for multiple accidents, or one deductible for multiple accidents.
BY GLENN GIBSON
BY JIM TOMLINSON and RUBY TATLA
36 Member Benefit
46 Lights, Camera, Damage
The CIAA is partnering with KLJ Computer Solutions to offer online claims management to members.
In the film and television business, third party property losses are the most difficult types of claims.
BY MARCEL ARSENAULT
BY NEIL GIBSON
38 Logical Flow
48 Solving the Meaning of Life
British Columbia implemented new Supreme Court civil rules which came into effect Jul. 1, 2010. BY BRIAN L. HOFFMANN
40 Adjusting Claims for Seniors With the number of people over 65 rising exponentially, knowing how to adjust claims for this age group is key. BY JON BREWER
How to calculate the loss of dependency claim for the present value. BY RANDAL S. CARLSON and DANIELLE BOURGEOIS
50 A Mistaken Understanding of Injury Sometimes a minor event can result in an unexpected injury. But understanding why the injury occured is critical. BY ROBERT PARKINSON
48 Departments 4 First Notice 54 On The Scene
Columns 52 Education Forum
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F first notice If injury is suspected to be deliberate, claimant does not have option to go to Appeal Commission to challenge denial of injury claim If an auto injury claim in Manitoba is denied on the basis that the damage was caused by a deliberate or willful act, a claimant does not have the option to have the Automobile Injury Compensation Appeal Commission (AICAC) review the decision, the Manitoba Appeal Court has found. Paule-Michelle Constantin reported to Manitoba Public Insurance (MPI) that she was transporting a propane stove on the back seat of her vehicle on Apr. 1, 2005. While seated in the driver’s seat and smoking a lit cigarette, she turned around to re-position the stove and was suddenly enveloped in fire and was thrown from the vehicle. She made a claim for her burn injuries. Initially MPI denied the claim on the basis that Constantin’s injuries were not caused by the automobile or use of the automobile. Constantin appealed to the AICAC, which found in her favour, and she received compensation for her burn injuries. But then MPI found fresh evidence suggesting the incident that gave rise to her injuries was not accidental, but rather willfully caused in an attempted suicide. Constantin sought to appeal MPI’s second denial of the claim to the AICAC, but MPI said the decision could only be appealed through the courts. The court determined the legislation that defines the claimant’s options for appealing MPI’s decision contains a specific “notwithstanding” exclusion. This would prevent appeals from going to the AICAC if the benefits were denied on the basis that they were not ‘accidents,’, but rather willfully caused. ●
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Canadian P&C industry researching the possibility of offering overland flood insurance Canada’s property and casualty insurance industry is conducting research into the possibility of offering overland flood insurance, which is not currently available, as part of a homeowner’s policy. Panelists at the National Insurance Conference of Canada (NICC) in Montreal noted there is an important distinction between what consumers and insurers define as “flood.” Whereas insurance policies cover basement flooding related to sewer backup, they do not cover damage caused to homes arising from overland flood. Paul Kovacs, CEO of the Institute for Catastrophic Loss Reduction (ICLR), moderated a panel on water damage, ‘Water and Brimstone,’ at the NICC in Montreal on Sept. 22. Kovacs said an ICLR study of 2,000 homeowners across the country a few years ago indicates consumers are clearly confused about whether flood is covered under their homeowers’ policies. “Seventy per cent believed they had [overland] flood insurance,” Kovacs said. “[Insurers] don’t sell any.” Now that water is about five times more likely than fire to cause damage to a home, it is important for insurers to be on the same page as their customers on the issue of flooding, the panelists said. “When we think about the challenges today, and you put yourselves in the shoes of the consumer . . . the most frustrating and least understood peril is water,” panelist Kathy Bardswick, president and CEO of The Co-Operators, said. “I want to suggest that we are very intently focused on flood, as we should be, but we need to keep in perspective that ‘flood’ is really our term. We understand what that means. But the consumer sees ‘flood’ as sewer backup and water damage, all in the pool of terms called ‘water’ and water risk, and what it does to their homes. That is an impor-
October/November 2010
tant issue that we need to start thinking about.” The big question for insurers has always been “adverse selection.” Essentially, how will insurers be able to cover the water risks of homeowners fairly, without shouldering a competitive disadvantage by agreeing to insure highrisk homeowners living in areas plagued by water damage incidents? One possibility is to consider an “opt-in, opt-out” method of coverage, in which consumers would choose whether or not they want flood coverage for their homes. But a joint study by Swiss Re and the ICLR, soon to be released, suggests the problem might be addressed instead by way of “bundling.” That is, water coverage would be bundled into the homeowner’s policy along with coverage for fire, theft and other perils. “The bundling effect is really the more appropriate way to go,” panelist Sharon Ludlow, president and CEO of Swiss Re Canada, said. “We came to the conclusion that in the United Kingdom, which is the jurisdiction that had the most ideal model, that is something we could use here in Canada. There clearly is a long way to go.” Other considerations would be to have a type of ‘facility association’ or risk-pool approach for extremely high water damage risks, along the lines of what is offered in auto insurance. Also, extensive and consistent flood mapping across the country would be a prerequisite for being able to offer coverage for overland flood. ● www.claimscanada.ca
we are adjusters. we are marine surveyors. we are industry leaders. we are 44 branches across Canada. we are 400 employees. we are here for you.
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F first notice Current round of Ontario auto reforms not enough to bust out of the reform cycle: defence lawyer Ontario is entering into yet another optimistic phase of its seemingly perpetual auto insurance reform cycle, but many within the insurance industry appear to want to break out of this cycle and build an altogether new model for auto insurance in the province. “You get initial optimism,” said defence lawyer Lee Samis, principal of Samis & Company, speaking as part of a panel discussion about the Ontario auto reforms at the National Insurance Conference of Canada in Montreal on Sept. 21. “Then you start to get a little bit antsy about how the thing rolls out,” he said, describing the reform cycle. “And then you start to see the other stakeholders play their cards. There are nerves about that because they came up with things we hadn’t thought about. “And then we get hit hard with some court decisions and arbitration decisions that are the pathway to abuses. Then we get cost pressure. Then we go back to government and say, ‘Let’s do this again.’ Then we start all over again. “Expect to see the same thing again,” Samis warned, referring to Ontario’s new reforms implemented on Sept. 1, 2010. Samis further observed it would appear the industry is now starting to feel the need to get off the merry-goround. Samis said he personally conducted an informal online survey of people within the insurance industry about the current Statutory Accident Benefits System (SABS). He said more than 100 people in the claims industry responded to his poll. In his survey, no one thought the SABS system in Ontario “right” as of this moment. More strikingly, 30 per cent of the poll respondents said they thought the whole system should be “scrapped” and future reforms should start from scratch. Forty-five per cent of respondents thought the SABS system required “significant change” in order to work. There was a great deal of discussion 6
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at the NICC as to whether Ontario would benefit from a full-tort system, a full nofault system, or even a Quebec-style model in which auto insurers pay only for physical damages, while the government is responsible for payment of health care provision. Still others asked whether Ontario would benefit from models in Alberta, Nova Scotia, New Brunswick or Newfoundland. Neither of the panelists, including trial lawyer John McLeish, senior partner of McLeish Orlando LLP, expressed optimism that the models could be easily imported into Ontario, which offers the richest accident benefits system in the country. Samis said he thought the current round of reforms would help contain some insurers’ costs. But he remained “pessimistic” about the outcome of the latest round of reforms. His pessimism was based in part on the uncertainty surrounding whether psychological injuries would be covered under the definitions of minor and/or catastrophic injuries. Samis noted that while 58 per cent of his poll respondents in the claims industry thought psychological injuries would be included in the reform’s Minor Injury Regulation — which caps payments for minor injuries at $3,500 — psychologists recently issued guidelines saying they did not believe psychological injuries would be covered. This is a big “disconnect,” Samis said. He noted the issue of psychological injuries is important for insurers because the updated DSM-V, a medical guide used to determine these types of injuries, is going to be available in 2013. The new DSM-V is expected to include new psychological conditions such as “Complex Post-traumatic Stress Disorder,” “Sluggish Cognitive Tempo Disorder,” “Personal Relational Disorder” [i.e. problems in relationships with other people as a result of struggling with pain] and ‘Post-traumatic Embitterment Disorder.” ●
October/November 2010
Dismantling a truck flatbed for parts is not an ordinary use of a vehicle: arbitrator The family of a man who was crushed to death while dismantling a truck flatbed for parts is not entitled to benefits because he was not fatally injured in an “ordinary and well-known activity to which automobiles are put,” an Ontario arbitrator has ruled. The parents of the deceased, Floyd Clause, have an auto scrap yard on their property located on the Six Nations Reserve in Brantford, Ont. Clause was found at the back of the property in 2004 crushed under the weight of a truck flat bed. His body was found near a hydraulic lift and a pry bar, which he had apparently used to separate the hydraulic lift from the back of a truck flatbed. Since the vehicle he had been working on was not insured, the family made a claim on the insurance of Amy Angela Clause’s pickup truck. RBC General Insurance Company disputed the claim, saying Clause’s injuries did not happen as a result of an “accident,” as defined under the Statutory Accident Benefits Schedule (SABS). The arbitrator, Anne Sone, agreed with the insurer that the use or operation of the vehicle did not directly cause the fatal injury. “In my view, the dismantling of a piece of a truck (the flatbed) for parts is clearly not an ‘ordinary and well-known activity to which automobiles are put’,” she ruled. ●
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Job Desc.: Docket: Client: Supplier: Type Page: Trim: Bleed: Screen: Pub.: Colour: Date: Insert Date: Ad Number:
AIC Skittish Ad AIOC0028 AIC 7" x 10" 8.125" x 10.875" 8.375" x 11.125" Claims Canada CMYK Sept. 9, 2010 October 2010 AIOC0028-CC-FP4C-E-Damage DKT./PrOJ: AIOC0028
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imAgE iS SPEc'd To 4c mAg
Property damage assessment starts with knowing a property’s real value. When it comes to the competitive nature of today’s insurance marketplace, handling claims with speed and efficiency is essential to your success. Start by having the most accurate information on a property’s real value. AIC experts will make sure you have the information you need to respond when disaster strikes. Make a real property expert - an AACI or CRA - part of your team today. Visit www.aicanada.ca
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F first notice Verification of Lightning Strikes Help Control Claim Costs By Kim Cockell Insurance companies can now validate lightning strikes using the lightning strike data archive launched by The Weather Network. There are approximately 2.7 million lightning flashes responsible for more than $5 billion in total insurance industry losses annually. A single bolt of lighting can reach temperatures of up to 33,000 degrees Celsius, bringing with it the risk of fire and countless dollars in insurance claims. Finding more accurate ways of defining actual lightning events has become increasingly important within the insurance industry. Some of the older, more traditional lightning investigation methods are very subjective, relying heavily on human interpretation — the resulting conclusions are often questionable or unreliable. More dependable methods of validating lightning activity are required in today’s insurance marketplace. Archived lightning data generated by the Pelmorex Lightning Detection Network (PLDN) assists these organizations in validating lightning strikes to correlate power outages, property and/or equipment damage with actual lightning events. The ability to authenticate lightning strikes allows for
better control over escalating insurance claims costs. With their pinpoint accuracy, verification reports not only reduce onsite inspections, but also help streamline the claim verification process by confirming the presence or absence of lightning at a specific location, date and time. The PLDN utilizes the timing precision of GPS technology and super-refined triangulation techniques to accurately pinpoint the location of lightning strikes across Canada. This results in a lower false strike rate and increased confidence in strike location relative to important assets. The data provided for each individual lightning strike includes: • date and time; • latitude/longitude; • polarity (positive/negative); • amplitude (strike strength measured in ampere’s); and • type (cloud-to-cloud/cloud-to-ground). ●
Kim Cockell is the sales and administrative coordinator with the commercial services division at The Weather Network.
Paul Aquino Publisher (416) 510-6788 paul@canadianunderwriter.ca
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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: 12 Concorde Place Suite 800, Toronto, ON, M3C 4J2. Claims Canada magazine is the Official Publication of the Canadian Independent Adjusters’ Association [CIAA] and through its editorial content and circulation brings together the ‘entire property & casualty insurance claims market nationally’ with information and insight into the profession, business and people of insurance claims and loss adjusting. All key claims process stakeholders are reached as part of our readership community – including: both CIAA member and non-member independent claims adjusting firms; insurance and reinsurance company executive, claims management and
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claims adjusting personnel; corporate risk managers and loss control professionals; insurance brokers; insurance law firms; forensic engineers and accountants; appraisal, restoration, rehabilitation and collision repair professionals; Insurance Institute chapters; insurance associations, regulators and related claims market recipients. The contents of this publication may not be reproduced or transmitted in any form, either in part or in full, without the written consent of the copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without prior written consent.
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Message from the President La Plume du Président MARY CHARMAN I am extremely proud to represent the Canadian Independent Adjusters’ Association as the 27th president. I have offered my time to the Association for the last 15 years and feel that it is definitely time for me to step up and lead an association that I am extremely passionate about. The 26th Annual General Meeting and Conference was held in Victoria, B.C. What a breathtaking city. You don’t realize what a beautiful country we have until you visit areas like this. The conference was a huge success and went off like a charm. I must commend Allan Hart and his team including Pat Battle, executive director of CIAA for their hard work and commitment to making this such a tremendous event. Delegates were able to experience some of the local attractions including whale watching and Butchart Gardens. I never dreamed I would be in a position to have a whale swim right up beside me! The delegates left with many lasting and cherished memories. We enjoyed the camaraderie with our U.S. counterparts from the National Association of Independent Insurance Adjusters and our members from across the country. The interaction between peers is what I admire, respect and take the most pleasure in. An ordinary bystander would never imagine that many of us are aggressive business competitors. “Company hats” are checked at the door when CIAA members gather and the sharing of common issues, trends and mutual interests are the order of the day. I am honoured to follow in past president, Patti Kernaghan’s steps. Patti has been an exemplary role model for the CIAA. She took on an enormous challenge with the creative strategic planning held last year and has been instrumental in following through and implementing the action plans. Some very exciting goals have been developed and with the strong and dedicated executive members we have in place, we will accomplish a great deal. Differentiating CIAA members in the industry through a restructured accreditation program and providing more online education programs are just a couple of examples of what members can expect this 10
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Je suis extrêmement fière de représenter l’Association canadienne des experts indépendants à titre de 27e présidente. Au cours des 15 dernières années, j’ai beaucoup travaillé pour l’association et j’ai le sentiment qu’il est temps, pour moi, d’aller de l’avant et de diriger cette association qui me passionne! La 26e Assemblée et conférence générale annuelle a eu lieu à Victoria, B.C. Quelle ville magnifique! On ne se rend pas vraiment compte de la beauté de notre pays avant de visiter des régions comme celle-là. L’événement a connu un énorme succès et s’est déroulé comme un charme. Je dois en féliciter Allan Hart, son équipe, et bien sûr, Pat Battle, directrice exécutive de l’ACEI, qui se sont dépensés sans compter pour en assurer la réussite. Les délégués ont eu l’occasion de découvrir quelques attractions locales comme l’observation des baleines et les jardins Butchart. Je n’ai jamais rêvé qu’il m’arriverait un jour de voir une baleine surgir de la mer droit devant moi! Tous les participants garderont de nombreux souvenirs durables et enchanteurs! Nous avons aimé la franche camaraderie qui régnait entre nos partenaires américains de la National Association of Independent Insurance Adjusters et nos membres de partout au pays. J’admire et respecte l’interaction entre pairs. Cela ne cesse de me réjouir. À nous voir agir, un simple observateur ne soupçonnerait pas combien nous pouvons être d’agressifs concurrents! D’entrée de jeu, quand les membres de l’ACEI se réunissent, ils se détachent de l’entreprise qu’ils représentent pour ne s’intéresser qu’aux questions, tendances et intérêts qui les unissent. C’est pour moi un honneur de suivre les traces de la présidente sortante, Patti Kernaghan, qui a été un modèle inspirant pour l’ACEI. Elle a relevé un énorme défi en organisant les sessions de Planification stratégique créative l’année dernière et a été au cœur des activités de poursuite et de mise en application des plans d’action. D’autres objectifs passionnants nous attendent et avec la participation énergique et dévouée des membres de la direction en exercice, nous accomplirons de grandes choses. www.claimscanada.ca
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coming year. As well, a National Advisory Council made up of CIAA executive members and key industry stakeholders is being created. The opportunity for increased communication and cooperation will ensure CIAA members are providing the products insurers are looking for and demonstrate the benefit of choosing a CIAA member when engaging their claims’ service providers. I look forward to a busy year with the Canadian Independent Adjusters’ Association and am extremely excited to represent a wonderful group of professionals. I encourage you to review the 2010-2011 national executive listed below and when you have the opportunity, please thank them for their time and commitment to this great organization. ■
Fournir le moyen de distinguer les membres de l’ACEI dans l’industrie, grâce à un programme d’accréditation restructuré et davantage de programmes de formation en ligne ne sont que quelques exemples de ce à quoi nos membres peuvent s’attendre au cours de l’année prochaine. De plus, un Conseil consultatif national, composé des membres de la direction de l’ACEI et de personnes occupant des postes-clés dans l’industrie verra bientôt le jour. L’accroissement d’occasions de communiquer et de collaborer permettra aux membres de l’ACEI de fournir les produits que recherchent les assureurs et de démontrer les avantages d’engager un membre de l’ACEI comme fournisseur de services d’expert en sinistres. J’envisage avec plaisir que l’année avec l’Association canadienne des experts indépendants sera très chargée et me réjouis à l’idée de représenter un groupe aussi remarquable de professionnels. Je vous incite à prendre connaissance de la liste des membres de la direction nationale 2010-2011 cidessous. À l’occasion, veuillez les remercier pour le temps et l’énergie qu’ils consacrent à cette importante organisation. ■ Translation provided by Henry Arcache, Themis Translations
NATIONAL EXECUTIVE 2010 – 2011 PRESIDENT Mary Charman, CIP Crawford & Company (Canada) Inc. 1 – 120 Mulock Drive Newmarket, ON L3Y 7C5 Phone: (905) 898-0008 Fax: (905) 898-1705 E-mail: Mary.Charman@crawco.ca
SECRETARY Marie C. Gallagher, FCIP, CRM McLarens Canada 71 King Street, Suite 204 St. Catharines, ON L2R 3H7 Phone: (905) 984-8282 Fax: (905) 984-8290 E-mail: marie.gallagher@mclarens.ca
1ST VICE-PRESIDENT Greg G. Merrithew, CIP, FIFAA Arctic West Adjusters Ltd. 401 – 5204 – 50 Ave. Yellowknife, NT X1A 1E2 Phone: (867) 920-2212 Fax: (867) 873-2244 E-mail: gregm@arcticwest.ca
TREASURER Randy P. LaBrash, CIP, CFE, CFEI Crawford & Company (Canada) Inc. 300 – 191 Lombard Avenue Winnipeg, MB R3B 0X1 Phone: (204) 947-2340 Fax: (204) 943-9168 E-mail: Randy.Labrash@crawco.ca
2ND VICE-PRESIDENT Delores Thorbourne, BA, FCIP McLarens Canada Suite 103 Greystone VII 4208 - 97 Street Edmonton, AB T6E 5Z9 Phone: (780) 442-3077 Fax: (780) 466-0325 E-mail: delores.thorbourne@mclarens.ca
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PAST-PRESIDENT Patti M. Kernaghan, FCIP, CRM Kernaghan Adjusters Limited 300-1575 West Georgia Street Vancouver, BC V6G 2V3 Phone: 1-800-387-5677 Fax: 1-800-387-5644 E-mail: pkernaghan@kernaghan.com
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 David Porter, LL.B., FCIP, CRM Advance Claims Service Ltd. 206 - 2323 Boundary Road Vancouver, BC V5M 4V8 Phone: (604) 642-0660 Fax: 1-888-452-5246 E-mail: davidp@advanceclaims.com
DIRECTOR James B. Eso, BA, CIP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Phone: (519) 578-5540 Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca DIRECTOR John Jones, BA McLarens Canada Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 E-mail: john.jones@mclarens.ca
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hile the insurance industry is hopeful the new Minor Injury Guideline (MIG) will successfully curb claims costs, there is an underlying current of fear that perceived loopholes in the MIG might thwart its effectiveness. The MIG includes pre-approved funding for treatment and a tighter definition as to what constitutes a minor injury, leaving little wiggle room for skirting a minor injury diagnosis. But while the MIG might fix some concerns that were readily apparent in the Pre-Approved Framework (PAF), has it simply created problems elsewhere? The purpose of the MIG is to help reduce insurers’ claims costs. But whether or not this will be the reform’s final outcome is anyone’s guess. In order for the new Ontario auto regulations to be profitable for insurers (or at least allow them to avoid a loss), more than 55 per cent of all accident benefits claims will have to fall within the new MIG guidelines, the Financial Services Commission of Ontario (FSCO) has reportedly told insurance defence lawyers. Given that somewhere between one and 20 per cent of all AB claims fell under the previous PAF, which the MIG has replaced, will insurance companies see reduced claims costs? When it comes to minor auto injuries, studies show earlier treatment results in a better prognosis for recovery. Despite this, many claimants — sometimes at the request of their health care providers — were bounced out of the PAF, which meant a delay in starting treatment. If a claimant was
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taken out of the PAF, insurers’ claims costs increased because the claimant had access to more benefits, such as attendant care and housekeeping benefits, in addition to higher limits on medical-rehabilitation payments and assessment costs. The new MIG is more expansive than the PAF, in the sense that far more injuries are supposed to fall within its definition of “minor.” However, if the injured person has a preexisting medical condition — one that would prevent the achievement of maximal recovery from the minor injury if subject to the $3,500 med rehab limit — they can be bounced out of the MIG. This exemption aside, costs might still be reduced under the new regulations. For example, a person with a minor injury, bounced out of the MIG, is entitled to up to $50,000 in medicalrehabilitation benefits, but not to optional benefits such as attendant care and housekeeping. In contrast, a person whose injury is not considered to be minor — i.e. a torn tendon — falls outside of the MIG and is therefore entitled to optional benefits (if purchased) and up to $50,000 in medrehab benefits. Those who are bounced from the MIG will receive less money than those claimants to whom the MIG does not apply. Is the MIG a suitable replacement for the PAF? Is it even a “replacement”? FSCO is cautioning against making such a comparison. The regulator is telling insurance industry representatives the new MIG is not the same thing as the old PAF, since there are more significant restrictions under the MIG than there were under the PAF.
Nuts and bolts of reform “If a claimant sustains what is described as ‘predominantly a minor injury,’ there is a hard cap of $3,500 in funding for medical and rehabilitation benefits, including assessments,” says Kadey Schultz, an associate with Hughes Amys LLP. Schultz can’t help but note the potential ambiguity around the wording of the definition of “predominantly minor injury.” She says, “Those are fighting words . . . Don’t you love that. How are decisionmakers going to apply the definition?” A minor injury is defined both in the Statutory Accident Benefits Schedule (SABS) and the MIG as a sprain, strain, whiplash associated disorder, contusion, abrasion, laceration or subluxation and any clinically associated sequelae. A strain or a sprain is defined as an injury to one or more muscles, ligaments or tendons with a partial — but not complete — tear. Subluxation is a partial, but not a complete dislocation of a joint. Whiplash is an injury to a person’s neck following a sudden acceleration or deceleration that does not exhibit objective, demonstrable, definable and clinically relevant neurological signs and a fracture or dislocation of the spine. Under the new SABS, if an injury is minor, it is subject to a $3,500 medical or rehabilitation limit. This limit includes $2,150 of pre-approved funding for goods and services under the MIG. For a claimant to access the MIG’s pre-approved funding, a health practitioner — such as a chiropractor, dentist, nurse practitioner, occupational therapist, medical doctor or physiotherapist — must complete an
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OCF-23 (Treatment Confirmation Form). An insurer must confirm receipt of the form and advise if a policy is in place. No further approval is required to access the pre-approved funding within the MIG, Schultz says. Once an active policy has been confirmed, the claimant can access the pre-approved funding available under the MIG. The pre-approved goods and services are divided into three blocks. Block 1 includes $775 in goods and services for the first four weeks after the accident. Block 2 makes $500 available for treatment in weeks five through eight. Block 3 includes $225 of available funding for treatment in weeks nine through 12. The MIG also includes up to $400 for supplementary goods and services. These are for things such as treatment for additional minor injuries, goods for self-directed rehabilitation at home, assistive devices to help the return to daily activities and some supportive interventions. Such interventions could be advice or education, noting psychotherapy or psychological inter-
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ventions are not specifically noted, Schultz says. There is also a monitoring fee of $200. This is available only if the claimant does not move into Block 3 of treatment. If the claimant accesses Block 3 funding, the monitoring fee is no longer available. Finally, there is a $50 transfer fee, which is effectively an administration fee; it is accessed when the claimant switches service providers or facilities. Once the MIG’s pre-approved funding of $2,150 is exhausted, $1,350 worth of med-rehab remains available under the $3,500 cap. But to access these additional funds, claimants must submit an OCF-18. This is an application for treatment and assessment (the OCF-22 application for pre-approval of an assessment or examination has been discontinued). Many in the industry believe this form will be a request for a psychological assessment, not for further physical therapy. The purpose of such an assessment would be to show there are psychological injures. This, in turn, would buttress an
argument for being bounced out of the MIG; once the MIG no longer applies, the claimant’s limit for med-rehab costs would be increased to $50,000. If a claimant has predominantly minor injuries, but wants to be exempt from the $3,500 cap, evidence must be presented showing that remaining under the cap would hinder rehabilitation. The health practitioner must provide compelling evidence that the claimant has a pre-existing condition that would prevent him or her from achieving maximal recovery if subject to the $3,500 limit. If approved, the claimant would bounce out of the MIG and have access to $50,000 worth of med-rehab. However, as noted above, getting bounced out of the MIG means the claimant will have no access to attendant care, a caregiver, housekeeping or in-home assessment funding. Even if a claimant has purchased optional benefits, these optional benefits are not available to the claimant if he or she gets bounced out of the MIG.
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Tougher definition of ‘minor’ The minor injury definition in the MIG is significantly more stringent than in the PAF, several sources note. “I would call it a more robust definition in the sense that it brings more components of an injury to the MIG,” says James Cameron, president of Cameron & Associates Insurance Consultants Limited. A large portion of the failure of the PAF is because its minor injury definition applied to such a narrow band of injuries, says Karin Ots, senior vice president of injury and casualty claims at Aviva Canada. The PAF applied predominantly to whiplash-associated disorders (WAD). As a result, anybody could get bounced out of the PAF if they had non-WAD injuries, such as a hip contusion, for example, or multiple sites of injury, says Lisa Fazzari, claims technical advisor for accident benefits at The Economical Insurance Group. The MIG definition, in contrast, is “definitely much broader and more inclusive,”
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she says. “That’s probably the single biggest impact that the MIG has that we didn’t have in the PAF.” The broader concept of minor injuries in the MIG is contained in the language of both the bulletin from FSCO and the MIG itself, Fazzari points out. The MIG states: “The SABS and this Guideline are intended to encourage and promote the broadest use of this Guideline, recognizing that most persons injured in car accidents in Ontario sustain minor injuries for which the goods and services provided under this Guideline are appropriate. Usage of the Guideline by all stakeholders will be monitored on an ongoing basis, with a view to early identification and response to inappropriate application or interpretation of the SABS and the Guideline.” For Fazzari, this means FSCO will be monitoring how treatment providers are using the MIG. Since a majority of the funding available under the MIG is preapproved, insurers can get claimants into treatment faster. “It’s a little more
inclusive in providing immediate access to treatment without insurer approval,” says Irene Bianchi, vice president of claims and corporate services at RSA. “Time is always at a premium for people. The Guideline sets out specifically what goods and services will be paid for without prior approval. That should speed up any process, including this one.” Also, the MIG gives insurers and claimants more flexibility in terms of treatment, Ots says. Claimants are able to get into treatment quicker, because there is no wait time for approval. Additionally, there are no parameters around the type of treatment, but rather around treatment cost and available funding.
Does the MIG = PAF? Despite reasons for optimism, insurers remain concerned the same
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“There are some strategic considerations that have to happen on a case-by-case basis, where you see that keeping the insured in the minor injury definition is going to be more expensive to the insurer than bouncing them out and having them with full med-rehab funding available.”
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problems they experienced with the PAF will resurface with the MIG. “I think the general consensus with the MIG is that we are going to experience what we’ve experienced within the PAF,” says Tammie Norn, president of ProFormance Adjusting Solutions Inc. “I don’t think anybody to whom I’ve talked — including people on the committee who developed the Guideline — feel there is going to be a huge change. But I guess it’s a start.” The MIG’s definition of a minor injury may be tighter, but the exemption for pre-existing conditions is a wild card. How far will this exemption be stretched? Will age or weight be considered a factor in recovery time? Also, psychological components will undoubtedly come in to play. When they do, will a claimant with psychological conditions remain within the MIG, will they move up to the $50,000 limit or will they be deemed to have suffered a catastrophic injury? “I think there is going to be a lot of things that are going to knock it out,
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which is the challenge that we faced with the PAF,” Norn says. “It will be just as the PAF,” agrees Laurie Walker, director of Ontario auto accident benefits at McLarens Canada. “There’s always going to be some reason why they can’t be in the MIG. It’s tighter [than the PAF] in the sense that there has to be compelling evidence, so they have made it a little bit more stringent. But I see the same scenarios: ‘Well this person had a sore neck before the accident and it’s chronic and they can’t be in the MIG.’” Also, a health care practitioner’s perspective must be taken into account. More often than not, a claimant goes to the doctor very soon after an accident. Filling out a form saying an injury will resolve in 12 to 16 weeks requires a certain “leap of faith” on the part of the health care practitioner, Cameron says. “If you are a doctor, or if you are a health care practitioner, and you are examining someone who is your patient and they are complaining of injuries, are you going to fill out a form that actually limits their insurance claim right off the bat? Are you going to make a judgment call seven days after the injury that this is going to get better within 12 weeks and that’s all that’s required?” As with any new definition or legislation, it remains to be seen how the courts of the arbitrators interpret some of the new terms. “That we have no control over,” Fazzari says. “We’ve had many arbitrators say it’s just a Guideline, it’s not the law, I don’t have to follow it.” Ots says she definitely sees some loopholes. For example, the Guideline does not specifically address psychological issues. Instead, it is left wide open for interpretation, a cause of concern for many within the industry. Also, the term ‘sequelae,’ which refers to additional conditions that emerge as a result of the original injury, is not always clear. “If it’s clinically associated sequelae of a minor injury, it falls within the minor injury $3,500 cap,” Ots says. “Whether or not something is defined as clinically associated sequelae remains to be seen.” She sites, as an www.claimscanada.ca
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Filling out a form saying an injury will resolve in 12 to 16 weeks requires a certain “leap of faith” on the part of the health care practitioner.
example, someone who has a soft tissue injury and subsequently develops anxiety about driving. There will be an argument about whether that is clinically associated sequelae or a separate psychological injury disorder, she says. 18
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Grey areas It is often presumed that keeping claimants’ injuries defined squarely within the four corners of the MIG will reduce insurers’ claims costs. But this is not always the case. Some observe there will be scenarios in which keeping an insured in the minor injury definition will be more expensive in the long run than bouncing them out and providing access to full funding. Take, for example, a 46year old claimant who has worked his entire life as a general labourer. He sustains a minor injury in an auto collision and, in order to return to work, he needs pain medication. But he has used up the $3,500 available under the minor injury med-rehab limit and has no collateral insurance available. If the claimant can’t return to work because of the pain he or she feels, the insurer will be obligated to pay income replacement benefits until the claimant is potentially 65 years of age. (These payments would be ramped down at the age of 65.) This income replacement scenario would be much
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more expensive for the insurer than the option of simply paying for the claimant’s pain medication above and beyond the minor injury limit. But the MIG does not appear to allow insurers to pursue an alternative in which the insurers pay more than what is allowed under the minor injury limit. “There are some strategic considerations that have to happen on a caseby-case basis, where you see that keeping the insured in the minor injury definition is going to be more expensive to the insurer than bouncing them out and having them with full medrehab funding available,” Schultz says. “That’s a real issue that needs to be considered. It’s complicated because the language in the SABS says that an insurer shall not pay beyond the $3,500 hard cap. That’s strong language.” The issue of chronic pain is similarly tricky. Someone who develops chronic pain syndrome as a result of predominantly a minor injury sustained during the accident is still considered to fall within the minor injury limit. But in arbitration and in tort, claimants with chronic pain syndrome have been deemed to be catastrophically impaired. “There is a gap between what we are being told in the minor injury definition and what we know to be true from the decisions that flow from the Financial Services Commission of Ontario,” Schultz says. “While those responsible for drafting the new SABS are sitting on one floor at FSCO, on another floor are the arbitrators. We must acknowledge that even with the new regime, we are arguing cases before the same arbitrators, with the same historical perspective, normative values and decision-making patterns as have emerged over the last several years.” How will psychological impairments fit within the MIG? Does a psychological diagnosis count as “clinically associated sequelae” and bounce a claimant out of the MIG if the other injuries were “predominantly minor”? Certainly case law supports that psychological injuries can render a person catastrophic. “If documentation supports the fact that significant psychowww.claimscanada.ca
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logical impairments are affecting this person’s life, you are running the risk, if you don’t bounce them out of the MIG, of them decompensating potentially into a cat,” Schultz says. A catastrophic impairment changes the limits available for med-rehab benefits up to $1 million. Yet another grey area emerges relating to partial or complete soft-tissue tears. The definition of a minor injury includes a partial, but not a complete tear. What happens if, months down the road, when the claimant has gone through public health care and received an MRI, the insured ultimately finds out he or she has a complete tear not a partial tear of a ligament or a muscle? A private MRI would have cost too much to be funded within the minor injury cap of $3,500, so it was not done early on in the claim. What happens then? Schultz asks. Now the injury has been exacerbated, causing the claimant more suffering because of the pain. What happens down the road if there are additional diagnoses? The considerations above related to chronic pain, psychological injuries and soft-tissue tears all point to the larger issue of reduced funding of treatment and medication. Schultz terms this the “decompensation” issue. To make a long story short, under-funding of treatment and medication may ultimately bring an insured closer to the definition of catastrophic impairment than to the minor injury definition. “The case law shows that applying for cat — being found cat — is easier today than it ever has been in the past,” Schultz says. “As a result, insurers need to be strategic, because there will be cases where if you don’t find a way to bounce the claimant out of the MIG, then you might end up with a catastrophic claimant and everything that goes along with that.”
Getting enough under the limit When all is said and done, industry sources are skeptical the new SABS will be able to clean up all of the problems related to the old SABS over the long haul. In order to make the new SABS economically viable, FSCO has told www.claimscanada.ca
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insurance defence counsel that 55 to 65 per cent of all claims need to fall within the MIG. “That’s impossible, right?” Schultz asks. “We are never going to see 55 to 65 per cent of cases fall under the MIG. “The other thing is, with the reduction in the med-rehab limits and the other benefits for non-cat, we’re going to see the cat claims go through the roof. The idea that new SABS is more economically viable for an insurer than the old SABS? My respectful
opinion is that we have missed the ball on that one completely.” Insurers are, of course, optimistic that enough claims will fall within the MIG to reduce their very high accident benefits claims costs. But it remains to be seen how many claimants can find ways to be exempt.
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Sun, Sea and Cliffs East Coast Claim Services Inc. uses all that encompasses the East Coast in its logo to reflect its commitment to the area. BY LAURA KUPCIS
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n a search for change and a desire for new challenges, Daniel Laforest took the ultimate leap — leaving his job of 15 years with an international adjusting firm — launching his own adjusting firm. And the leap paid off. East Coast Claim Services Inc. (ECCS) was founded on May 1, 2001 when Laforest stepped into the Service New Brunswick’s registry office in Moncton. Two weeks after inquiring about the process involved in started a new company, ECCS was formally incorporated. When it came to choosing a name, Laforest went to the source that knows him best — his wife. Together, the two of them came up with the company name. He didn’t look much further to find a couple of designers for his logo — his son and daughter were the inspiration. The yellow sun represents New Brunswick, the brown cliff adjacent the sea is reflective of Prince Edward Island, while the blue sea relates to Nova Scotia — the trio culminating to represent the East Coast. In the beginning, there were two — Laforest and his secretary. Within half a year, a second adjuster, Serge Goguen, had come on board and the company remained a three-person operation for almost eight years, until a third adjuster was brought on board in May of 2009. Susie Laforest joined the company in 2002, taking over all administrative requirements of East Coast Claim Ser20
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vices, while Goguen left in early 2003 for a new career in the agency field, opening the door for Roger Frenette to come on board. In early 2009, a third adjuster, Monique Chamberlain, joined the firm. As Roger Frenette, adjuster, moves into retirement, the office is back to being a two-adjuster firm. “Working with an experienced adjuster such as Roger provided me with the opportunity to learn more about adjusting and the insurance industry while also establishing a good friendship,” Laforest said. “The door at ECCS has always remained open for Roger and Serge should they ever contemplate a return to the claims field again.”
Changing faces of the industry Not only have there been staffing changes, but Laforest has also seen and experienced the changes in the way clients needs have evolved — especially as it relates to their claims handling requirements. “In 2001, when East Coast Claim Services first started, the bulk of the files were assigned to the independent claims adjuster with the mandate to handle all aspects of the particular loss,” Laforest. “The process has since transitioned to the point where many assignments are now specific to a task.” But what contributed to this change? In part, according to Laforest, it was the changes in law, the creation of the Privacy Act, and the shortage of adjusters
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entering into the industry. Combine these with the preferred vendors programs both for property and automobile losses and you’ve got just a few of the factors that have changed the profession and altered the field of work, Laforest said. “Some independents have since elected to specialize in certain fields as opposed to maintaining the broad handling of all lines, which has prevailed here at East Coast Claim Services since we first opened shop,” he said. This means that ECCS has become recognized as a small boutique within the industry. Being a small firm with experience in virtually all lines, ECCS has become a go-to firm when dealing with large, difficult and complex losses, in addition to being capable of handling routine claim or task assignments. But this doesn’t mean that being a small, all lines firm in the ever-changing world of independent adjusting is not without its challenges. Not only is there a move to more in-house handling of claims, but there remains the harsh reality that if insurance companies continue to keep most claims inhouse, the opportunity to reach out to independents will be gone. “One of the most challenging areas of concern over the first years of operation was to maintain focus [in the face of] the ever-looming reality that the industry was leaning towards in-house handling of their claims,” Laforest said, www.claimscanada.ca
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adding that this led to a reduction of overall files that were handled externally. “Five or six years ago, I recall some industry people alluding to the potential extinction of the independent adjuster.” The loss of experienced adjusters to retirement — with many more to come — coupled with the lack of newcomers to the industry as a whole, has brought with it the realization and recognition regarding the value of independents. “This change of focus is a breath of fresh air, which I firmly believe is serving to regenerate our profession,” Laforest said.
Working towards the future Furthermore, there are strong signs pointing towards not only maintaining the profession of independent adjusting, but, in fact, supporting ways to replenish the lost manpower. “This www.claimscanada.ca
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cyclical change is very comforting at this stage as East Coast Claim Service is entering its tenth year,” Laforest said. “Our goals over the years ahead are to increase staff in our Moncton office, with the prospect of opening branch offices elsewhere.” There are benefits to being a small firm, despite the pressures facing the industry. For Laforest, the biggest benefit is the ability to be able to respond quickly when implementing positive ideas. The motto at ECCS? Work hard, play hard, and have fun in the process. To ensure optimal success in the current office, Laforest makes certain that ECCS keeps up with any technological advances that are available to them, including computers with continuously updated software, email and BlackBerry communication. Additionally, the company has improved both the speed and accuracy in audiorecorded interviews, which allows more
time for claimant and witness interviews. Furthermore, the company is fully bilingual — a feat it has maintained since its inception. ECCS prides itself on hard work and being team-oriented. All staff members are invited and welcomed to provide their input on all aspects of the day-today operations, Laforest said. “We are very family-oriented, both at work and at home,” Laforest said of his company and staff. Being a member of the Canadian Independent Adjusters’ Association (CIAA) provides increased support for the company with respect to improved access to people, the opportunity to assist in disaster claims, in addition to being a source of information with respect to claims handling, ongoing education and licensing requirements. For this reason, among a plethora of others, ECCS has been a member of the CIAA since its inception.
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Controlling Indemnity in Property and Casualty Claims BY LAURA KUPCIS
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number of ways to control indemnity were offered up by speakers during the Canadian Independent Adjusters’ Association’s Annual Conference.
Check with brokers about policy coverage
Independent adjusters should never make assumptions about coverage in a policy, John Farthing of Cunningham Lindsay International cautioned. “Know the policy,” Farthing said, adding this can be tricky in an environment where there are so many policies in existence now. Adjusters must be cautious when speaking to insureds and never assume coverage where it might not be available. “Don’t answer a question you don’t know the answer to,” he said. “It just comes back and bites you.” Making a quick call to the insured’s broker, Farthing said, can clear up any questions or doubts. As an example of the danger involved in assuming coverage, Farthing cited a commercial insurance case he worked on, in which he assumed the insured had purchased coverage under a business policy. Testing his assumption, he called the broker and found out the insured had denied the coverage when it was offered. Had Farthing not cleared up any doubts about coverage, the insurance company could have been on the hook for the claim, which might have amounted to millions of dollars, he noted.
Assessing damage is step one The damage assessment process, which can be applied to commercial, residential and industrial losses, must be done in the immediate visitation to the site, Barry Milliner, regional manager for MKA Canada, said. The first step for adjusters is to get an understanding of what is required at the scene. Milliner recommends that adjusters use survey forms, which cover some of the elements one can commonly expect to look at on a damage site. They are also useful for gathering information, but more importantly serve as a record going forward if the claim is in dispute. One of the first things that Milliner does when he arrives on scene is to do a preliminary overview of the facility to get an understanding of the type of construction, materials and process involved, and then subsequently obtain any drawings of the site. If a contractor is being brought in, obtain the form of contracts at the get-go; obtain their rates and fee structure at a very early stage in the process. This helps to control the loss going forward, throughout the repair or construction process, Milliner said.
Measuring sales loss Sales loss measurement is the key in any business interruption assessment, Tony Volpe, partner and vice president 22
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with Matson Driscoll & Damico, said. This is done by projecting what the revenue would have been had the incident not occurred. There are a number of ways to project this. The most typical approach is comparing the prior year’s sales for that period and adjusting for growth. When that type of information is not available — be it a new operation or when the operation has changes in nature or size — sales from comparable operations in the region are used. “The experience just before the loss is obviously the best indicator as to what’s going to happen immediately after the loss,” Volpe said. “There’s no use looking at what’s happened two to three years ago because it’s a different economic climate.” It is important to understand the business at hand, understand the seasonality of the business, the market, whether it is retail, wholesale or manufacturing and the climate the business is in, he said.
Arbitration and mediation Nobody expects you to do anything you don’t feel is proper, honest or fair, Larry Gilbertson, arbitrator and mediator with ADR Canada Limited, said. “As long as you did that, you were doing your job,” he said. When a file ends up in arbitration or mediation, the required steps to handle a file have already been completed — and hopefully well. “The fact that it gets into an arbitration or mediation or an appraisal doesn’t mean these things haven’t been done well,” he said. “It just means that there is a difference of opinion and we deal with difference of opinions all the time in the claims area.” Most straightforward answer not the cheapest In professional liability claims, sometimes the opportunity exists to repair a problem versus paying indemnity dollars, Craig Walker, director of Maltman Group International said. Walker cited a case he worked on where had the more straightforward option been followed, the payout would have been upwards of $600,000. Instead, because of a lot of communication and determination, the payout was only $85,000. A land surveyor discovered that a house built in a subdivision was encroaching on the neighbour’s lot by about 14 feet. At the time, there was only two homes built in the area out of the planned 10 — the end unit and a middle one. The first thought was that the house, because it was so far over the lot line, would have to be demolished. As luck would have it, the home was owned by the developer’s daughter and she did not want to go through the hassle of www.claimscanada.ca
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tearing down and rebuilding her home. Because there was some extra room to work with on the 10-lot property, the process to re-jig the lot lines was started. Both existing homeowners agreed to the lot line changes, with one requesting some financial compensation, and the municipality signed off on the changes. The developer was compensated slightly as a few of the lots would now be smaller than originally planned, which meant a reduction in value. In this situation, there were repair opportunities that held in the indemnity control, Walker said.
Gathering evidence and information If you don’t have a good introduction into the claim or the claimant, then you are going to hit a few dead ends or rocky roads, Miles Barber, principal of Network Adjusters Ltd., said. In a liability claim, information needs to be gathered and preserved straightaway in the event of a future court date. This includes straightforward facts such as the date and time of the incident; the location, name and contact information of the claimant; and any witnesses. From there, the adjuster will discuss and review any details of the loss with the policyholder. Information recorded in the incident report should be objective information which comes from the claimant, witness or any observation of the loss scene. “Comments should not include any subjective remarks, and should not include any conclusions that may have been reached regarding a certain matter,” Barber said. When analyzing the scene, observations should be made regarding the condition inside, outside and surrounding the scene. This includes whether there is any debris, spills or snow, etc. Lighting conditions should be
Teri Mitchell and Mary Charman
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Teri Mitchell of Crawford & Company (Canada) Inc. was awarded a Fellow of the Canadian Independent Adjusters' Association (FCIAA) designation during the Conference. The FCIAA designation is awarded to members of the Canadian Independent Adjusters' Association (CIAA) who possess outstanding qualifications and at least 15 years of practical experience in the adjustment of loss. ●
commented on — is it sunny outside, what sort of lighting is inside the building, etc. When taking pictures, take them from the four compass points when viewing the scene of a loss. Certain angles can provide a differenst perspective, perhaps showing inconsistencies in the flooring, or a glare which could affect how the ground appears.
The trial is the end goal When doing the investigative work, keep in mind that the end point is the trial, Aron Bookman, partner at Carfra Lawton, said. “Imagine yourself in that situation. How are those pieces going to do on the stand?” Documents that are gathered during the investigation are vitally important in the event of a case. These documents fill in the gaps and timelines, in addition to helping with respect to cross-examining witnesses and establishing fact. The last thing a defense lawyer wants during a case is a document that comes out of nowhere and changes the entire complexion of the case. When obtaining statements, Bookman recommends using a tape recorder, as they are more effective and truer than having someone sign a written statement. His preference, he said, is to gather information first without taking a statement and then going back at a later date to obtain the statement. He adds that frequently he has trouble locating a witness down the line when the case actually makes it to trial. He suggests that adjusters obtain cell phone numbers and email address for witness, which are less likely to change than a work phone number. When investigating a claim, try and answer four questions: duty, breach, causation and damages, Bookman says.
Mary Charman was inaugurated as the CIAA president for the 2010 – 2011 year. She is enthusiastic to continue the work started by her predecessors. In the coming year, CIAA’s focus will be the key strategic priorities identified during last year’s strategic planning exercise. ●
Mary Charman and Patti Kernaghan
Reno Daigle was awarded Honourary Life Member during the Conference. This membership is the association’s highest honour bestowed upon only those members that have gone over and above in serving and furthering the objectives of the association. ●
Miles Barber was honoured for his loyal commitment and dedication to achieving the goals of the association. ●
Reno Daigle and Jim Eso
Miles Barber and Patti Kernaghan
October/November 2010
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National Standing Committees 2010 – 2011 ADVISORY Greg G. Merrithew, CIP, FIFAA Arctic West Adjusters Ltd. 401 – 5204 – 50 Ave. Yellowknife, NT X1A 1E2 Phone: (867) 920-2212 Fax: (867) 873-2244 E-mail: gregm@arcticwest.ca
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: rchard.vanhorne@ns.sympatico.ca
CAREER RECRUITMENT PLANNING Richard Swierczynski, BA, CIP AZ Claims Services Inc. 1500 Upper Middle Rd., Unite #3 P.O. Box 76041 Oakville, ON L6M 3G3 Phone: (905) 825-0027 Fax: (905) 825-5543 E-mail: Richard@azclaims.ca
FINANCE Randy P. LaBrash, CIP, CFE, CFEI Crawford & Company (Canada) Inc. 300 – 191 Lombard Avenue Winnipeg, MB R3B 0X1 Phone: (204) 947-2340 Fax: (204) 943-9168 E-mail: Randy.Labrash@crawco.ca
COMMUNICATIONS Craig J. Walker, CIP, FIFAA, FCIAA Maltman Group International 3550 Victoria Park Avenue, Suite 301 Toronto, ON M2H 2N5 Phone: (416) 492-4411 Fax: (416) 492-5657 E-mail: cwalker@maltmans.com
IBC: LIAISON & FORMS David McKeon, CIP McKeon & Associates Adjusting Company 2120 Rathburn Road East, Suite 91 Mississauga, ON L4W 2S8 Phone: (905) 602-0321 Fax: (905) 602-4025 E-mail: david@maaac.ca
CONSTITUTION & RULES John Jones, BA McLarens Canada Suite 300, 5915 Airport Road Mississauga, ON L4V 1T1 Phone: (905) 671-3164 Fax: (905) 671-1889 E-mail: john.jones@mclarens.ca CONVENTION Marie Gallagher, FCIP, CRM McLarens Canada 71 King Street Suite 201 St Catherines, ON L2R 3H3 Phone (905) 984-8282 Fax (905) 984-8290 E-mail: marie.gallagher@mclarens.ca
LEGISLATIVE David McKeon, CIP McKeon & Associates Adjusting Company 2120 Rathburn Road East, Suite 91 Mississauga, ON L4W 2S8 Phone: (905) 602-0321 Fax: (905) 602-4025 E-mail: david@maaac.ca LICENSING J. Miles O. Barber, B.Comm. (Hons.), FCIP, CRM Network Adjusters Ltd. 67 Folkestone Blvd. Winnipeg, MB R3P 0B4 Phone: (204) 897-5793 Fax: (204) 897-5797 E-mail: mbarber@mts.net
DESIGNATION 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
MEMBERSHIP & QUALIFICATIONS Santo Carbone Crawford & Company (Canada) Inc. 300-123 Front Street West Toronto, ON M5J 2M2 Phone: (416) 867-1188 Fax: (416) 867-1925 E-Mail: santo.carbone@crawco.ca
DISCIPLINE Patti M. Kernaghan, FCIP, CRM Kernaghan Adjusters Limited 300 – 1575 West Georgia St. Vancouver, BC V6G 2V3 Phone: 1-800-387-5677 Fax: 1-800-387-5644 E-mail: pkernaghan@kernaghan.com
NOMINATING Patti M. Kernaghan, FCIP, CRM Kernaghan Adjusters Limited 300 – 1575 West Georgia St. Vancouver, BC V6G 2V3 Phone: 1-800-387-5677 Fax: 1-800-387-5644 E-mail: pkernaghan@kernaghan.com
EDITORIAL Fred Silvestri, BA, CIP, NCRS 121 King Street W., Suite 1810 Toronto, ON M5H 3T9 Phone: (416) 733-9265 Fax: (416) 733-0510 E-mail: fred.silvestri@srsconnect.com
PRIVACY James B. Eso, BA, CIP Crawford & Company (Canada) Inc. 539 Riverbend Drive Kitchener, ON N2K 3S3 Phone: (519) 578-5540 Fax: (519) 578-2868 E-mail: Jim.Eso@crawco.ca
EDUCATION Gary A. Ellis, BBA, FCIP, RF, FCIAA, CLA, FIFAA Crawford & Company (Canada) Inc. 18 Great George Street Charlottetown, PE C1A 4J6 Phone: (902) 566-1011 Fax: (902) 894-3044 E-mail: Gary.Ellis@crawco.ca
www.claimscanada.ca
CIAA REGIONAL PRESIDENTS 2010 – 2011 NEWFOUNDLAND & LABRADOR Marcel Pitcher, CIP, CRM Crawford & Company (Canada) Inc. 22 Torbay Road St. John’s, NL AlA 2G4 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 Charles A. Berthiaume Réclamations C. Berthiaume 44, Chemin d’Oka Saint-Eustache, PQ J7R 1K5 Phone: (450) 491-6165 Fax: (450) 491-6230 E-mail: rcb@reclamationscberthiaume.ca ONTARIO Richard Swierczynski, BA, CIP AZ Claims Services Inc. 1500 Upper Middle Rd., Unit #3, P.O. Box 76041 Oakville, ON L6M 3G3 Phone: (905) 825-0027 Fax: (905) 825-5543 E-mail: richard@azclaims.ca MANITOBA Timothy W. Bromley J.P. Hamilton Adjusters Ltd. 125 Enfield Crescent Winnipeg, MB R2H 1A8 Phone: (204) 944-1057 Fax: (204) 944-1606 E-mail: tbromley@mts.net SASKATCHEWAN Lee Dixon Crawford & Company (Canada) Inc. 210 – 227 Primrose Drive Saskatoon, SK S7K 5E4 Phone: (306) 931-1999 Fax: (306) 931-2212 E-mail: Lee.Dixon@crawco.ca WESTERN Bea Boutcher, CIP Horizon Adjusters Ltd. #207, 9814 – 97 Street Grande Prairie, AB T8V 8H5 Phone: (780) 402-8383 Fax: (780) 402-7888 E-mail: bea.boutcher@horizonadjusters.com PACIFIC TBA
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CIAA 26th Annual General Meeting and Conference; Victoria, British Columbia
Delegates and guests attended the 26th annual Canadian Independent Adjusters’ Association (CIAA) Annual Conference in Victoria, B.C., Aug. 26-29, 2010. Attendees started the conference with a day of golf and whale watching. The day was rounded out with a Welcome Reception, where delegates and guests were given the opportunity to visit with the exhibitors in the trade show hall. Day two was filled with educational sessions for the adjusters. Sessions focused on indemnity control for both property and casualty claims, water restoration and subrogating success. The day was rounded out with a tour and dinner at Butchart Gardens. The conference came to a close with the president’s banquet and ball, when Mary Charman, branch manager at Crawford & Company (Canada) Inc., took the helm as the association’s newest president. ●
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Property
Loss Update BY GLENN GIBSON
Some very important cases have come out of the appeal courts in Nova Scotia and Alberta. While the Ontario courts drive significant litigation action, we have terrific legal minds across the country and it’s important to view their arguments before the courts. There are a few cases that help provide further guidance for conducting an appraisal session pursuant to the policy conditions. This mechanism has been in place for decades, but in recent years more policyholders, public adjusters, law firms and insurers are beginning to utilize this process to arrive at fair outcomes in a timely fashion. Part of the process may involve the need to appoint an umpire. Going to appraisal to resolve a dispute on the amount of loss is very effective.
Matty v. Wawanesa Mutual Insurance Company, Queen’s Bench, Alberta, Justice W.P. Sullivan, May 14, 2009 On Nov. 15, 2007, a homeowner had a sewer backup and reported the claim to the insurer. Eventually they reached 28
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a point of disagreement on the scope of damage: What should be cleaned versus replaced? Pursuant to the Insurance Act, both the policyholder and insurer appointed an appraiser to act for their respective interests. The two appraisers reached a point where they could not agree on damages. This, then, required that both appraisers appoint an umpire to deal with this matter. Both sides proposed an umpire: The insurer’s appraiser brought forward the name of a person who had an extensive background in the insurance industry; the policyholder’s appraiser proposed a lawyer who had extensive experience in alternate dispute resolutions (ADR). Arguments were raised that the ADR specialist had too close a connection to the insurer involved and the lawyer proposed lacked the expertise to determine what property the sewer backup had damaged. Because both appraisers could not agree on the choice of an umpire, the matter was brought before Justice Sullivan. On the day of the hearing, both appraisers took one further step in nominating a new umpire. Both had similar backgrounds to the original umpires being offered and resulted in no decision being reached.
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In his written decision, Sullivan highlights several key points: 1. The decision of an umpire in this process is in the nature of a binding arbitration award. It cannot be set aside unless there is evidence of “. . . fraud, collusion or bias.” 2. The intention of the process is to encourage a quick settlement. 3. The process should facilitate the use of an appraiser or umpire to determine the value of a loss. 4. Appointing an umpire was much like qualifying an expert at trial. He relied on the Canadian Oxford Dictionary definition of an expert as someone who has “specialized knowledge or skill in a subject.” In appointing an umpire, both appraisers should determine the issue at hand and then select someone with sufficient expertise in that field to act as an umpire. In looking at the case at hand, Sullivan chose not to name an umpire from the four names that were before him, providing guidance that the umpire should “have sufficient experience in home rehabilitation or home reclamation.” Further, the umpire should be “capable of acting impartially.” He sent the two sides away and indicated he www.claimscanada.ca
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would see them again if they couldn’t agree on someone. They reached an agreement outside the courtroom.
Case summary This is an interesting decision. The trial judge seemed to feel there was really one issue to deal with: should something be cleaned or replaced in a sewer backup? So, he felt the chosen umpire should be someone with specific experience in this area. In many situations like this, the judge usually picks the umpire from a list that both sides bring forward, but in this situation he chose to send both appraisers away to choose a new umpire.
265 Commercial Street Ltd. v. ING Insurance Co. et al, Nova Scotia Supreme Court, Justice F. Edwards, Dec. 14, 2009 On Oct. 21, 2001, a major fire damaged a commercial property in North Sydney, N.S. The initial damage claim was slightly more than $132,000, but during the litigation process this was lowered to about $76,000. The policyholder and insurer could not come to an agreement on damages, so an election was made for appraisal. Each side appointed an appraiser, but they could not come to an agreement on the choice of an umpire. The insurer proposed an umpire who had extensive construction and appraisal experience. He personally had done no work for ING, but his employer had done some limited work for the insurer in the past. The policyholder initially proposed a candidate who had no construction experience and was not familiar with the appraisal process. Eventually, they proposed a second choice as umpire who had extensive construction experience but was also unfamiliar with the appraisal process. The trial judge referenced several cases in making his decision, including: • Shinkaruk Enterprises Ltd. v. Commonwealth, Saskatchewan Court of Appeal, 1990. SlJ. No. 317, 71 D.L.R. (4th) 681. • Matti v. Wawanesa, Alberta S.C., 2009. www.claimscanada.ca
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• McPeak v. Herald Insurance Co., Alberta Q.B., 1991. A.J. No. 222. Justice Edwards identified the issue was the “value of the physical damage to the property . . . ” It made sense the umpire should be someone who has both experience in the appraisal process and knowledge of construction standards. When examining the appointment of an umpire, the judge felt a court had to consider the test of whether a “reasonable apprehension of bias” might exist or not. He did not agree with the insurer that the test was whether or not there was an “actual bias or partiality.”
When both appraisers cannot agree on an umpire, they can go before a judge to seek a decision. In this case, the judge looked at the two proposed umpires and picked one.
Appraisal Appraisal has been part of our statutory conditions for decades. It has taken a long time for it to be effectively utilized to settle matters in dispute. In the early 1990s, public adjusters in Ontario were triggering this mechanism to settle claims. There were a number of umpires who quickly emerged and did a very good job in bringing matters forward quickly to a solution. There were many tricky areas to be managed, but virtually all of these problems were solved without any form of litigation. Insurers have now seen that they can also trigger this mechanism to effectively save on costs and settle claims in dispute quickly. This has resulted in more appraisals being conducted across all provinces. These following two cases provide some guidance on steps that should be taken when seeking to appoint an umpire, a decision that is crucial to ensure a fair process and outcome. Kings Mutual v. Ackermann et. al, Nova Scotia Court of Appeal, March 24, 2010
In applying this test to the umpire proposed by the insurer, the judge did not feel there was a reasonable apprehension of bias. He pointed out this proposed umpire worked for a firm that had only handled three claims for ING in the previous 18 months. This limited association was deemed insufficient to suggest any bias might exist. In the end, the court appointed the candidate proposed by the insurer as the umpire.
Case summary When both appraisers cannot agree on an umpire, they can go before a judge to seek a decision. In this case, the judge looked at the two proposed umpires and picked one. In the previous case discussed (Matti v. Wawanesa), the judge gave guidance to the appraisers to go back and pick an umpire.
On Sept. 28-29, 2003, Hurricane Juan hit Nova Scotia. The Ackermanns had a dairy barn they claimed was damaged in the storm. They reported a claim to their insurer, who directed an independent adjuster to act on their behalf. In short order, a structural engineer was engaged by the adjuster to inspect the barn. This engineer gave his opinion that the barn “had not been affected by the passing of Hurricane Juan.” The policyholder engaged his own structural engineer who expressed an opinion that the barn had been damaged by the hurricane, adding he felt the barn may not be safe for continued usage. The barn was insured for $265,000 and a claim was filed for the limits. The insurer subsequently denied the claim and litigation ensued, which culminated in an eight-day jury trial in front of Justice Arthur J. LeBlanc. The case ended badly for the insurer with a full judgment of policy limits and a punitive damage award of $55,000.
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The insurer appealed the verdict on only one issue: Did the jury err in awarding punitive damages against the insurer? The Nova Scotia Appeal Court paid particular attention to the Whiten v. Pilot Insurance Co. decision. The court noted several key things: • Would a reasonable jury, properly instructed, conclude that an award of this amount was “rationally required to punish the defendant’s misconduct”? • The Appeal Court has “supervisory powers over punitive damages.” The Court is to consider if the award is a “product of reason and rationality.” • The focus is on whether the court’s own sense of reason is offended “rather than on whether its conscience is shocked.” • Punitive damages should only be awarded in rare and exceptional circumstances “where a party’s actions are deserving of punishment, deterrence or denunciation.” In considering this, the court also reviewed guidance provided in Fidler v. Sun Life Assurance Co. of Canada. Incorrectly denying a claim that is eventually deemed to be legitimate does not necessarily mean the insurer breached its duty to act in utmost good faith. But, each case has to be judged on its own facts and punitive damages can be awarded if the claim file is handled overwhelmingly inadequately. The insurer argued on appeal that the actions in handling the file had not been “overwhelmingly inadequate.” They felt their actions showed: 1. They did not ignore evidence surrounding the barn. 2. They did not display tunnel vision in how they handled the file. 3. There was no evidence that they intended from the get-go to deny coverage. 4. Their opinion was supported by an engineer. 5. There was no evidence they were trying to take advantage of the economic vulnerability of the policyholder or gain bargaining leverage by denying the claim. The Appeal Court disagreed and reviewed key pieces of evidence involv30
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ing witnesses who had inspected the barn pre- and-post loss. They all gave evidence of windstorm damage. The insurer, as part of a follow-up investigation, never interviewed these witnesses. There were also issues relating to reports for inspections on the barn property that had taken place before and after the windstorm. These reports showed vastly different facts about the condition of the barn before and after the windstorm. It was agreed the judge had properly instructed the jury on punitive damages. The appeal court felt its review of the record showed a “reasonable jury could reach an award of punitive dam-
ages” and that this was a “rational response on the jury’s part to its findings.” The punitive damage award was allowed to stand by the appeal court.
Case summary Cases can get better or worse at trial when evidence is introduced through the witness box. But what can a professional loss adjuster take from this case? • When another party introduces evidence, make sure you validate this information through your own investigation. • Be careful what you say in your file notes, reports or letters. All communication should be done with this thought in mind: How might this
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look in a court of law? • Loss investigations should reflect open minds both through actions and documentation. • There should be a full disclosure of information flowing from insurer to adjuster.
Pietrangelo v. Gore Mutual et. Al, Ontario Superior Court, E. Ducharme, Feb. 22, 2010 On Jan. 30, 2006, the tenant of a rental house in Amherstburg, Ont., decided to use a production technique he learned on the Internet to convert a half pound of marijuana into oil. Unfortunately, the plan did not work well and this tenant and a friend were badly burned in the ensuing explosion and fire. The dwelling did not fare well either, as it was subsequently ordered by the municipality to be destroyed. The insurer investigated the claim and ultimately declined to pay it on the basis of the “Marijuana Exclusion.” The insurer had introduced four new exclusions, including this one, in the spring of 2003. The relevant exclusion read that the insurer did not insure direct or indirect loss or damage to property, “used in whole or in part for the manufacture… of marijuana or any product derived from or containing marijuana.” The plaintiffs in this action owned three rental properties. In June 2001, their broker submitted an application with the insurer for insurance on all three properties. The insurer accepted all three risks, but arranged to do an inspection of the properties. This led to some repair work and a further agreement to renew coverage at the expiry date. The insurer sent a bulletin to all brokers in March 2003 announcing significant changes to its policy wordings. This was followed by a letter to all policyholders that bore the title, “IMPORTANT NOTICE.” At trial, the plaintiffs stated they did not receive this notice. One of the key witnesses for the insurer was its personal lines product manager. He testified that when the insurer changes the existing policy, the company mails out not only the billing notice, but also the new www.claimscanada.ca
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policy wordings and residential policy declarations. He also explained the insurer’s “sophisticated computer method” of ensuring mail delivery including its return to sender process. This manager went on to give very strong evidence regarding the insurer’s internal payment and renewal systems. The judge was impressed with all the evidence offered. He commented that, “Mr. Bardon’s evidence was so detailed and persuasive that I accept it as credible, honest and accurate and I conclude from it that Gore Mutual satisfied the onus to prove that it mailed the new 2003 Policy to the plaintiffs and that the plaintiffs received the 2003 mailing.” When reviewing the evidence provided at trial by the plaintiffs, the trial judge was clearly not as impressed. The plaintiffs had difficulty recollecting important details and showed inattention and an indifferent approach to record keeping. Having found that the plaintiffs received notice of the new exclusion, the judge reviewed the circumstances of the fire and related them to the policy exclusion. The judge concluded there was “no doubt” that on the date of loss the tenant was “processing and manufacturing a product derived from and containing marijuana.” The trial judge then examined the principles surrounding how to interpret insurance contracts. What was the policy intent behind the exclusion? Was it clearly articulated? The plaintiffs advanced arguments that the wording of the exclusion was not clear and the contra preferendum rule should apply. There is a good analysis of this rule in the judgment, but the result was that the activities that surrounded this loss were clearly excluded and there was “ . . . no ambiguity lurking in the language; nothing to even hint at more than one reasonable explanation.” The final point argued by the plaintiffs was the “reasonable expectations and true intentions of the parties.” This concept is also very well articulated in the judgment. The judge felt, however, that although the plaintiffs had no knowledge of the activities of their tenant, the insurer should not be expected to pay for the damages as the “Marijuana Exclusion” had a reasonable under32
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lying economic rationale. The judge commented that, “If the effect of this ruling is that, in the future, landlords will be at greater risk for a specified class of losses in which they are innocent, if it means that landlords must become more diligent still in winnowing out those potential tenants who are a threat to abuse their tenancies, then so be it shall have to be.” As you can anticipate from these remarks, the trial judge denied the plaintiff’s claim for damages. This included reviewing a potential claim for punitive and aggravated damages. He felt the insurer had not breached its duty to act in good faith and there was “no evidence of misconduct whatsoever.”
The judge felt, however, that although the plaintiffs had no knowledge of the activities of their tenant, the insurer should not be expected to pay for the damages as the “Marijuana Exclusion” had a reasonable underlying economic rationale. Case summary Going into the witness box to give evidence is a very traumatic event for most people. Clearly, the insurer’s manager presented very strong evidence, including his explanations surrounding the insurer’s internal administration system.
358296 Alberta Ltd. v. Phoenix Marble Ltd. Alberta Court of Appeal, May 14, 2008 A fire destroyed a commercial building complex, with one of the tenants admitting negligence in the handling and storage of flammable chemicals used in its manufacturing operations. This is an appeal from a trial held in the fall of 2006, where the judge refused to allow the subrogation
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claim of the building owner and other tenants to proceed. The Appeal Court examined a commercial lease that had been signed by all the tenants. The lease required the tenants to contribute their share towards the total premium cost to cover building insurance, tenant improvements and equipment. The landlord also required the tenants buy their own separate general liability policy with minimum limits of $2 million. Among other things, there was an obligation in the landlord’s lease that the tenants were required to, “reimburse the landlord for costs incurred by the landlord in making good any damage directly or indirectly wholly or partially caused to the premises, building, or lands or any part thereof including equipment and amenities thereof as a result of any act, carelessness, neglect, use or misuse on the part of the tenant.” This memorandum of judgment by the appeal court examines the lease in detail and makes reference to the leading cases in Canada on this subject, particularly the decision of the Supreme Court in Ross Southward Tire Ltd. V. Pyrotech Products Ltd. This judgment provides an excellent review of this particular contract language. A few key points were raised: 1. The clear intention of both parties was that the landlord was obligated to buy fire insurance on the building, improvements and equipment. 2. The defendant tenant was required to contribute to the premium cost of the building policy. 3. The tenants’ obligation to acquire “liability insurance” was to protect the landlord and themselves from third party claims. The Appeal Court agreed with the trial judge that there were no subrogation rights by the landlord against the tenant who caused the fire. It should be noted that this responsible party had paid the insured and uninsured losses of the co-tenants prior to this subrogation action.
Case summary This type of loss situation happens quite often as there are many different types of commercial leases. There are www.claimscanada.ca
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efforts by the landlord to have tenants contribute to their fixed costs such as insurance premiums and efforts to transfer risk. These efforts may very well preclude the ability of the landlord to subrogate against a tenant who may be negligent in causing a loss. Each case has to be carefully examined, beginning with obtaining all documentation relating to the original lease agreement.
Beasley v. Barrand Ontario Superior Court, J. Moore, Apr. 9, 2010 Amendments to rule 53.03 came into force in Ontario on Jan. 1, 2010. This has resulted in directions regarding expert evidence. Any party who intends to call an expert witness at trial must, according to a specific timeline, serve every other party to the legal action with a signed copy of the expert’s report. This report must contain information that includes: • Personal and professional details on the expert, including area of expertise. • Any instructions that were provided to the expert that relate to the proceeding. • The nature of the opinion being sought and each issue in the proceeding to which the opinion relates. • The opinion of the expert on each issue. Where there is a range of opinions, there should be a summary of the range and the reasons for the expert’s opinion within that range. • Any opinion expressed should include the facts considered, research completed and a list of every document used by the expert to form an opinion. • Each expert is required to sign Form 53, which is an acknowledgment of the expert’s duty to the court. The action in this case results from a motor vehicle accident that happened in September 2002. Before a jury was selected, the trial judge heard arguments on whether or not certain expert evidence could be called to provide opinion evidence at trial. The defendants sought to call three medical experts who had completed physical examinations of the plaintiff a short time after the accident. The reports 34
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authored by these three medical specialists did not comply with Rule 53.03. This judgment goes through a detailed analysis of the reports at issue with the arguments raised by both sides. The important result of this decision is that Justice Moore provided guidance on the purpose of the rule changes. In particular, he said, “In my view, the rule advances the law that has been developing in recent years toward reigning in the growing use of and reliance upon the evidence of experts at trial.” The judge reinforced that any expert who is qualified by the court is there to lend assistance to the court. Any expert
must be and certainly appear to be acting independently of whoever retained them. They must demonstrate objectivity and impartiality in analyses and opinions. An expert is there to express opinions on areas about which the court is not knowledgeable and provide a thorough, balanced and technically sound analysis. Reference was made in this decision to the report of the Honourable Coulter Osborne when he led a review of Civil Justice Reform in Ontario. His report made a number of points that are worthy of bringing forward: • The increased use of experts is a factor in increasing the cost of litigation and the cause of delays because of trial adjournments. • A trial can result in a battle of competing experts. This can result in a legal merry-go-round.
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• There is a common complaint that experts are no more than hired guns who tailor their reports and evidence to suit their client’s needs. These factors and others led to Osborne’s recommendations that in turn inspired changes to Rule 53.03. In the case at hand, Moore was cognizant of his role as a gatekeeper of the evidence that is allowed in a trial. This includes one of the important reasons for the rule changes: to “eliminate the practice of tendering opinion evidence of questionable value at trial.”
Case summary This is a very important decision, as it is one of the first to show how trial judges are going to implement changes to the rules relating to the usage of expert evidence in a trial. This is another step towards ensuring that anyone who is seeking to provide an expert opinion must be fully aware of their obligation to give an independent opinion that will assist a court. They are not a hired gun, nor do they represent an opinion for hire. Conclusions When a loss occurs and a claim is reported to an insurer, there has been a great deal of attention paid to helping a policyholder as quickly and efficiently as possible. But, bear in mind, the insurance policy is a contract. It spells out the risks the insurer is willing to accept for a specific premium. The contract also outlines what is covered by the policy and what is not. This can, on occasion, create a dispute between both parties. This article should stimulate thought on utilizing the appraisal features of the insurance contract to everyone’s benefit. As further food for thought, you have one chance to do the job right. Don’t cut corners. When faced with conflict, seek to ensure that you are hiring the right experts to assist you. Keep in mind the purpose of an expert: to provide an unbiased opinion that might eventually be needed to assist a court of law. Glenn Gibson is the global chief strategy officer with Crawford & Company. www.claimscanada.ca
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Member Benefit: Online Claims Management CIAA partners with KLJ Computer Solutions to bring online claims management to its members BY MARCEL ARSENAULT
Internet-enabled technologies are driving new efficiencies and possibilities in every business sector. Claims management is not excluded from this trend; in fact, these new technologies are an ideal fit for a 24/7 industry that largely operates with a workforce on the road. Widespread adoption of online claims processing is inevitable. If long-term business viability is in the plans, a business will need to consider the competitive impact of increased efficiency, accessibility and compatibility offered by Internet-enabled claims management. The Canadian Independent Adjusters’ Association (CIAA) has recognized this and has responded by entering into a partnership with Nova Scotia-based KLJ Computer Solutions (KLJ). Together they aim to offer CIAA members simply acquired technology that will support members’ need to succeed in a highly competitive market. The strategic partnership, engineered by the CIAA executive, provides member firms of any size with an opportunity to participate in this new affinity program at an affordable cost. This technology is the online claims management system, Venue. Details of the affinity program are available on the CIAA’s website (http://ciaa-adjusters.ca).
Value to clients 1. Timeliness. In an occupation where so many daily activities are tied to deadlines, timeliness is everything. Online claims management systems respond to this need by allowing users to configure custom diaries and email alerts for deadlines associated with activities, such as: • reporting file progress to clients and regulatory bodies; • generating internal progress reports and financial reports; • interim billing; • first contacts; • pending expiration dates on policies; • limitation periods for responding to legal documents; and • submitting time sensitive claim documents like a proof of loss. It is increasingly important that information be accessible and deliverable in real-time. KLJ has addressed this issue 36
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by incorporating automation and user-configurable alerts into its Venue Claims Management System. These alerts can be sent by email to multiple parties simultaneously or viewed in easy-to-follow electronic reports that can be printed and shared. This can be done from anywhere, anytime. 2. Accuracy. With information accuracy being so crucial to claims handling organizations and their clients, electronic claims management systems offer a high level of precision. Powerful time and expense tracking management, client account details, billing rate management and other meticulous data tracking systems must be in place to accurately process the data, resulting in predictable service to clients. 3. Accountability. Insurers look for accountability from their claims handlers in everything they do. Likewise, users of claims management systems look for accountability from their vendors in everything their claims management system does. Some of the features that allow claims handlers to uphold the highest standard of accountability to their clients include time and expense tracking, document management, diary management, workflow, account instruction, appointment/calendars, task managers and a comprehensive client billing system. Integral to the service is responsive, reliable backup support. Online claims management vendors must deliver reliable, effective and, most importantly, responsive customer support. In the online world, vendors have custody of adjusting firms’ management systems and data. Access to predictable service is a business imperative. With that in mind, vendors also have the expertise and infrastructure to best maintain those systems. The burden of maintaining computer hardware and software infrastructure in-house is most often untenable, and certainly unreliable if not supported by dedicated IT staff. 4. Accessibility and security. Claims operations are increasingly dealing with their clients seeking online access to their files. There is also an increasing demand for the ability to accommodate a mobile workforce. Users are able to access their files anywhere there is an Internet connecwww.claimscanada.ca
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tion, made possible through rigorous assigning of roles that limits access only to parts of the database for which they are authorized. Most jurisdictions require that businesses keep their clients’ data secure in accordance with applicable privacy laws. Venue has a comprehensive security subsystem that manages access rights based on policies established by the claims organization. 5. Flexibility. Every claims organization has unique procedures driven by clients or that support a competitive advantage in the market. This requires a high degree of flexibility in setting up a claims management system, especially in relation to specific workflow, documentation, communications and billing. Venue offers configurable tools like the event or action manager, diaries, notes and document management that can be customized to comply with the needs of your client.
tems will also be able to store documents electronically and conveniently in relation to their associated files. Various formats of documents can be stored (photographs, text, video, PDF, spreadsheet, etc.). With many offices aiming to become paperless, being able to generate forms and send them electronically is a huge benefit. In Venue, emails, attachments and documents are saved with directly associated files at the click of a button. 9. Business intelligence. While it is not necessary for a claims management operation to have a secret spy division, intelligence gathering is an important activity if long-term viability is in the plans. A well-built, consistent and comprehensive data set that contains virtually all data associated with a business is a goldmine. A claims management system will be able to generate comprehensive reports with this data so that owners and management can get a better For business value understanding of their business, iden6. Efficiency. In an industry where tify opportunities and detect deficienthere is more work than time, a claims cies that need to be addressed quickly. management system with effective 10. Profitability. At the end of the tools and appropriate automation can day, in order for an online claims help you plough through your tasks management system to add value to more quickly, more accurately and an organization, it must provide cost on-time. A well-designed claims savings through efficiencies in adminmanagement system will eliminate the istration, technology avoided, reduced need for double entry in different capital expenditures, and higher revareas of a file, or whenever a form or enue potential. Greg Merrithew, letter associated with a file must be owner of Arctic West, reports that generated. It will also centralize all Venue has increased his operation’s aspects of the business operations Venue offers independent efficiency by 25 per cent. In fact, Mersuch as job assignment, tracking, rithew is so confident in Venue, that adjusting firms a billing, payments, etc. during the CIAA’s recent Annual competitive advantage by 7. Performance monitoring. Part Conference, he sat down at KLJ’s of running a successful business enhancing current business booth and started demonstrating requires measuring and monitoring Venue to other CIAA members. CIAA practices through the performance of the most valuable and KLJ hope to bring this type of effistreamlining tasks and using ciency and increased profitability to resource — staff. The claims management system represents a repository all of CIAA members. automation. Venue of performance data that will help Venue offers independent adjustrestructures processes in a keep tabs on key indicators pertaining ing firms a competitive advantage by to claims handling (executing diary way that effectively reduces enhancing current business practices activities, closing files, interim billing, through streamlining tasks and using man-hours and saves meeting billed hours expectations, automation. Venue restructures network resources by etc.). This information is invaluable processes in a way that effectively to enable better control of the workeliminating data redundancy. reduces man-hours and saves network force, problems can be seen and preresources by eliminating data redunvented before clients are affected. The result is higher qual- dancy. Users of Venue can interact and check the status of a ity of service, which will translate into more assignments. claim, a diary, invoice or task from any given part of the 8. Document preparation and management. One thing value chain, and they can do it from anywhere there is an that there is no shortage of in the claims management Internet connection. All of this makes a strategic partnerindustry is forms, letters, reports and invoices. Paperwork ship between KLJ Computer Solutions and the CIAA a great is a necessary evil. An electronic claims management system addition to the affinity programs available to CIAA will automate document preparation and management by members. merging data from a file directly into a claim-related form, letter, invoice or report, saving the time of duplicating that Marcel Arsenault is in charge of sales and marketing at KLJ data in the document. Effective claims management sys- Computer Solutions Inc. www.claimscanada.ca
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Logical Flow British Columbia’s new Supreme Court Civil Rules BY BRIAN L. HOFFMANN
British Columbia’s new Supreme Court Civil Rules came into effect on Jul. 1, 2010. For the most part the new rules are a reorganized structure that follows a more logical and chronological flow, along with new, simplified terminology. The impetus behind the new rules was to make the civil justice system more responsive, accessible and efficient. To achieve this end, the overriding factor of proportionality has been injected into the object of the new rules. As a result, when applying the new rules the court must keep in mind the amount at stake, the importance of the issues in dispute and the complexity of the action. Although the new rules are not a complete overhaul, there are significant changes affecting pleadings, discovery, expert evidence and fast-track proceedings, and there is a new case-planning regime. These changes have implications for litigation claims professionals.
Pleadings The new rules change the form and substance of how lawsuits are started and answered. Replacing both the Writ of Summons and Statement of Claim is a single form: the Notice of Civil Claim. It must be served within 12 months of filing, but can be renewed. Defendants within Canada must file a Response to Civil Claim within 21 days of service. The response form effectively merges the old Appearance and Statement of Defence. The form of both the claim and response has changed, whereby facts and law are now distinctly separated. Drafters of the new rules have indicated the new forms are designed to force the parties — plaintiffs in particular — 38
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to craft case-specific, informative and non-boilerplate pleadings. A practical implication is that gone are the days when counsel could file a bare bones Writ to, say, protect a subrogation limitation date or file an appearance and wait until later to get details from the client before preparing the Statement of Defence. There have also been changes to the process of issuing a third party notice. A defendant no longer has until 120 days before trial to issue one; now one must be filed within 42 days of being served with a Notice of Civil Claim, unless leave of the court is obtained.
Document discovery To curb excessive delay and expense the new rules contain changes to document discovery. No longer must a party produce every document “relating to every matter in question.” Under the new rules the criteria is much narrower; a party need only produce and list: (1) all documents that are or have been in the party’s possession or control and that could be used by any party to prove or disprove a material fact, and (2) all other documents they intend to refer to at trial. However, the parties may seek an order widening the scope of production. Further, each party must now serve a List of Documents within 35 days of the end of the pleading period, which typically will mean 42 days after filing and serving the response. Oral discovery Another significant change pertains to the examination for discovery process. Under the new rules there is a seven-hour time limit on the total of all examinations conducted by one party of another party, subject to leave of the court or consent of the parties. The reason behind this lies within the new case
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planning regime in which such issues as scheduling and length of oral discovery are dealt with. Additionally, under the new rules, interrogatories are not allowed without consent of the party examined or leave of the court.
Case planning conferences Perhaps the biggest change under the new rules occurs with the addition of Case Planning Conferences (CPC). Although originally slated to be mandatory in all Supreme Court actions, the final version of the new rules make CPC’s optional. Under the new rules, once the pleading period has expired, any party of record may request that a CPC take place by filing a Notice of Case Planning Conference. Under the new CPC regime, judges have wide powers and discretion to make orders concerning the conduct of an action. For example, a judge may set a timetable for when certain steps of the proceeding are to be taken, order that the parties retain a joint expert, or order that some or all of the parties attend mediation. The court possesses this power whether or not a party applies for such orders. Experts Another noteworthy change under the new rules concerns the use of expert witnesses and the content and timing for disclosure of their reports. Under the new rules an expert must acknowledge that their duty is to assist the Court and not to advocate for any party. On this note, the new rules allow for joint experts retained by both parties. The court may also appoint its own expert(s) at the expense of a party or parties. Insurance professionals need to be aware that under the new rules the dates on which expert reports must be www.claimscanada.ca
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served has changed. Previously a party had to serve an expert report 60 days prior to it being tendered in evidence. Now a party has to serve an expert report they intend to rely upon at trial at least 84 days before the scheduled trial date. A responding expert report, commonly referred to as a rebuttal report, must be served at least 42 days before the scheduled trial date. The requirements for the form and content of an expert’s report have also been expanded under the new rules and now require inclusion of such information as: (1) instructions provided to the expert, (2) description of research conducted that led to the opinion, and (3) a list of every document relied upon. The rules regarding disclosure of the expert’s file have also changed. Now parties are entitled to pre-trial discovery of the expert’s complete file relating to the preparation of the opinion at least 14 days before the scheduled trial date.
Fast track litigation Under the new rules there is only one simplified fast track litigation procedure. This new procedure is a merger of the old Rules 66 and 68. Drafters of the new rules assert the procedure is a refinement of the best aspects of the old. The new fast track litigation procedure can apply if the claim is for less than $100,000, the trial can be completed in three days or less, or the parties consent. Under fast track, certain aspects of the litigation are limited; oral discovery of a party is limited to two hours and trial is without a jury. Further, costs are limited to $8,000 for one-day trials, $9,500 for two-day trials and $11,000 for trials longer than two days. These cost consequences also apply to actions not commenced under the fast track process where the court gives judgment of $100,000 or less or where the trial is completed in three days or less. Conclusion The new rules impose significant changes to both the form and content of our rules of court. It is too early to say which changes will have the greatest effect on the practice of litigation. Howwww.claimscanada.ca
ever, the new rules do provide litigants with new and better tools to resolve disputes in a more efficient, timely and, hopefully, less expensive manner. Of course, in order to take best advantage of these changes and to avoid being caught afoul of the new rules, all claims professionals must take the time to ensure they have a good understanding of these changes so they can adjust their file handling and litigation practices accordingly.
This is a simplified overview of the changes. For a more extensive look at the changes contained in the new rules, and the implications for claims professionals, log on to: http://www.rmcagr.com/french/_ui/publications/new_ rules.pdf Brian L. Hoffmann is an associate at Carfra & Lawton in Victoria. Carfra & Lawton is a member firm of the Risk Management Council of Canada.
THIS IS MORE THAN A HURRICANE. To business owners who have tirelessly committed themselves, it’s the loss of their dream and livelihood. To insurance professionals, it’s the challenge to fairly and accurately quantify what their loss is worth. When disasters strike, trust the firm that provides an expert, objective opinion and quality resources. BDO. More than you think. Business Interruption | IRB Calculations | Personal Injury Claims Forensic Investigations | Inventory Losses | Fidelity & Surety Bonds VANCOUVER | CALGARY | EDMONTON | WINNIPEG TORONTO | MONTREAL | HALIFAX ASSURANCE | ACCOUNTING | TAXATION | ADVISORY SERVICES Greg Hocking ghocking@bdo.ca 905 946 6800
Jeffrey C. Smith jsmith@bdo.ca 905 946 6802
www.bdo.ca/advisory
BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.
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Adjusting Claims for
Seniors BY JON BREWER
Right now, the first wave of baby boomers are approaching their mid-sixties. It is estimated that roughly 20 per cent of Canada’s population will be over 65 by 2030. Seniors are more independent and active than ever before. They remain in their own homes, and drive their own cars longer than previous generations. Consequently, adjusters in the property and casualty insurance industry will be adjusting more claims involving seniors in the coming years. Today, seniors enjoy better health than ever, but there are still common medical problems found among older Canadians. Adjusters who deal with bodily injury claims, almost instinctively consider pre-existing health conditions when dealing with elderly claimants. However, an awareness of the common health issues of seniors can be beneficial to adjusters of all types of claims. It can assist in understanding the claims occurrence itself, and also in how to best approach an older individual involved in a claim.
Hearing loss Seniors frequently suffer from varying degrees of hearing impairment. As such, they might fail to hear the honking horn of another vehicle, resulting in an atypical accident. Or, they might not hear the sound of the water rushing from a burst pipe, even when awake, resulting in an unusually large water damage claim. An adjuster who might routinely be justifiably skeptical when investigating these sorts of losses, should consider the possibility that hearing loss might be a factor when an older insured is involved. When communicating with an elderly person, claims professionals should also take into account the possibility of diminished hearing. Those with hearing difficulties will often advise the adjuster at the outset of a conversation. Otherwise, the adjuster should diplomatically determine if a hearing impairment exists. If so, the adjuster should speak 40
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louder, but in a conversational tone, and face the listener as much as possible while speaking. Because telephone communications with the hearing impaired are particularly challenging due to a lack of visual cues, the claimant, sometimes prefers email or other written communication.
Reaction time Diminished reaction time is another challenge often facing seniors. While a common factor in automobile accidents, this problem can also potentially lead to more significant property loss claims. For example, a senior with slower reaction time might not extinguish a cooking fire before it spreads, resulting in a larger claim. Adjusters should certainly not fault insureds in such cases. Memory loss Memory loss is also common among older Canadians. However, in a large number of instances this is not due to Alzheimer’s. There are many potential contributing factors, such as declining physical health, medications and reduced social interactions. Again, the skeptical claims representative ought to consider this when an older insured has difficulty recalling all of the details of a loss. Adjusters should also bear in mind that others may call the recollection of an elderly witness into question. Claims professionals may need to exercise extra patience with an insured with memory impairment. Claims are unfamiliar and complicated to most insureds, and adjusters may need to repeat themselves frequently. Respectfully requesting insureds to repeat back their understanding of what the adjuster has just told them can help reinforce their memory and understanding of the process. Written explanatory documents, such as “critical path” letters, are also useful. Avoid generalizations These are a few of the common medical problems facing older Canadians. While consideration of these impairments www.claimscanada.ca
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tractor they would like to have bid on the project, as opposed to simply selecting bidding contractors with no input from the insured. The insured can be encouraged to make their own selections on finishes, within the restoration budget established. They should also have some say in temporary residences. While the degree of recovery that can be reasonably expected for an older insured might be different than that Senior psychology of a younger insured, the adjuster should not treat the While awareness of medical issues facing seniors is rehabilitation of the injured any less seriously. important to adjusting, it is even more important to Older Canadians, just like the rest of the population, understand the social psychology of do not want to be dismissed or seniors. In order to adjust claims proignored. Claims professionals should fessionally and effectively, and to actively listen, determining what the avoid misconceptions about seniors, insured wants, rather than telling the it is valuable to have an accurate insured what they should do. They understanding of the way seniors should treat their claims with the think and feel. Far too often, seniors same degree of urgency as any other. are treated like children, when in Seniors also often indicate they are reality they deserve respect. These are lonely, and enjoy the company of people who have had many experiothers. They might have lost their ences and gained much wisdom spouse or many of their friends, while through their life. Claims professiontheir adult children are often busy als will develop a better rapport with with their own lives. The adjuster older insureds if they treat them with might, for this reason, find an older the respect they have earned. insured talking a little bit more — Sometimes, adult offspring of the outside the realm of the claim — as a insured will try to take control of means to have some company for a their parents claim — reversing the few minutes. While this may take up role of parent and child. Unless they some extra time in the adjuster’s busy have legally documented control over schedule, it could serve to offer up an their parents’ affairs, or are insureds understanding of the insured. This as defined under the policy, the could actually save time in the long adjuster ought to diplomatically run, decreasing the likelihood of disexplain that the insurer has a conputes or complaints. Furthermore, tractual obligation to the insured, the adjuster may find the extra few Unless they have legally only. moments of conversation enjoyable documented control over Research shows that older people — and might actually learn sometheir parents’ affairs, want to be in control of their own thing. lives, as much as possible. An insurGerontology, the study of aging, is or are insureds as ance claim, by definition, disrupts a fascinating field. Claims professiondefined under the policy, insureds’ control of their lives. They als do not need to be gerontologists may have suffered an injury that the adjuster ought to to adjust claims for seniors. Neveraffects their normal activities, or they theless, the more understanding of diplomatically explain that may have had to move out of their this rapidly growing demographic the insurer has a home due to a fire. The disruption adjusters have, the better prepared caused by a claim may well be felt they are for the coming years. Percontractual obligation more acutely by older insureds. haps the best way to understand to the insured, only. It is critical that claims professionseniors is to simply spend time talkals involve older insureds in the ing to and, more importantly, listenclaims process. Their input should be ing to them. An adjuster may just sought in any area where options are available. Of course, find this to be a fulfilling experience, and gain some wisthe adjuster should not go outside the terms and condi- dom in the process. tions of the policy. For example, on a home fire claim, the insurer would typically determine whether to repair or Jon Brewer is a staff adjuster with Johnson Unifund rebuild. However, once a rebuild decision is made, the adjuster could ask an older insured if they know a con- Assurance. is important, it is equally important to realize they do not plague all seniors. Adjusters should avoid generalizations, instead assessing every situation independently. Speaking loudly and slowly to every senior is not good practice. Instead, consider the medical factors that could affect the person, and then make subtle adjustments while speaking to a claimant, as needed.
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The Collision Repair Industry — A UK Perspective BY DOUG KIRK
T
he UK collision industry can best be described as “conflicting, but getting better”, with many years of tit-for-tat actions between: • repairers; • insurers; • manufacturers; • accident management companies; • suppliers of non-original equipment manufacturer (OEM) parts; and • distributors. This period of conflict and mistrust was mainly driven because of differing views as to who should own the customer.
History in the making To gain an understanding of how this situation developed, one needs to go back to a time fore direct repair programs (DRP). In the late 1970s and 1980s the 20,000 mainly small shops (one to four employees) worked in relative harmony with all member of the value chain. However, there was low levels of technology, poor customer focus and almost no accountability. This situation clearly could not continue. Insurance companies needed to have a repair process with predictable and dependable results and controlled costs. They sought out select repairs 42
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that would be willing to work for a lesser dollar value per hour, but have the ability to handle an increased volume of work. The DRP was born. This situation worked in the beginning, but with an increase in the number of companies providing insurance — which was viewed largely as a commodity by the public — differential had to be the name of the game. Repairers within the DRP were asked for more and more in the way of added value packages with little or no increase in the rate of compensation. This meant courtesy cars, free cleaning of the vehicle and collection and delivery of the customer became the norm again. This left the repairer feeling they were paying the bill, forcing them to come up with better ways to beat the system. The Petri dish was now ready for the bacteria to grow. And how it grew.
A new day Today there are 3,500 shops left — large, well-run and set up on a national basis. They are a strong opponent and the cycle could be set to re-run with the repairer in control,. However, the market is mature; we all understand we have a part to play, we must all improve. We can only do that if we stop
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thinking in silos and start thinking about the connected value stream and stakeholders. By aligning our collective actions and focusing on what is best for all those involved, then we can have a sustainable future and create the customer for life But how can we accomplish this? The UK collision repair industry endured years of conflict because it thought in silos and wanted to own the customer. The Canadian industry does not have to go down that road. Although it has taken the first step on the freeway, there are many exits it can take. Engage the value stream, talk to each other and understand what part each area of the industry plays in the process. Make sure that the process is being optimized. Do not minimize your part and maximize that of another, as this is all that could be needed to slow down the entire process and provide poor customer experience. This article is based on notes compiled from a presentation given at the 2010 Canadian Collision Industry Forum conference in Toronto. Doug Kirk is the strategic sales and service manager for Akzo Nobel Car Refinishes. www.claimscanada.ca
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To Stack or Not Stack? S. 267.5(7) of the Insurance Act: BY JIM TOMLINSON AND RUBY TATLA
The common law has interpreted s.267.5(7) of the Insurance Act as applying multiple deductibles for multiple motor vehicle accidents. A motion sought determination as to whether pursuant to this section of the Act, there is one deductible for nonpecuniary loss for each incident. Before the motion could be heard, the matter settled. In that case, two motor vehicle accidents occurred in June 2003 (under the Bill 59 regime) and one motor accident occurred in December 2003 (under the Bill 198 regime). Before Oct. 1, 2003, under Bill 59, the statutory deductible for general damages, which is non-pecuniary loss that does not include non-pecuniary loss under clause 61(2)(e) of the Family Law Act, was $15,000.00. The statutory deductible for non-pecuniary loss under clause 61(2)(e) of the Family Law Act (FLA) was $7,500.00. Bill 198, applicable to motor vehicle accidents after Oct. 1, 2003, increased the statutory deductible for general damages to $30,000.00 and the statutory deductible for non-pecuniary loss under the FLA to $15,000.00. The Ontario Trial Lawyers Association (OTLA) has advanced arguments against the stacking of deductibles. Herein is a summary of the OTLA arguments and advancement of arguments in favor of the stacking of the statutory deductibles.
However, OTLA did not pluralize the word “amount” and once this word is pluralized, the text maintains its original intention to deduct the prescribed amount from the damages awarded against a protected defendant on a per accident basis. OTLA contends that the limiting words “per accident” or “per collision” are not present in s. 267.5(7) or s.267.5(8) of the Insurance Act. According to OTLA, the interpretation of s.267.5(7) or s.267.5(8) at the per accident or per collision level, in the absence of express language, is contrary to the principles of statutory interpretation. However, the scheme of the Act supports an interpretation of s.267.5(7) and (8) at the per accident level. S.267.5(5) of the Act refers to multiple protected defendants, including the owner of the an automobile, the occupants of the automobile and any person present at the incident and only refers to the use and operation of one automobile and only one incident. Furthermore, the frame of reference of s.267.5(5) of the Act is the liability of the protected defendants involved in the motor vehicle accident. S.267.5(7) of the Act refers to s.267.5(5) of the Act. In assessing general damages, the court first determines if the plaintiff’s injuries exceed threshold and if the plaintiff passes the threshold test, the court assesses the quantum of damages and then applies the deductible set out in s.267.5(7) of the Act. In order to properly interpret s.267.5(7) of the Act, one first needs to refer to s.267.5(5) of the Act.
Statutory interpretation The modern principle of statutory analysis is where the words of an Act are to be read in their entire context, in their grammatical and ordinary sense harmoniously with the scheme of an Act, the object of the Act and the intention of Parliament, Elmer Driedger wrote in a leading textbook on statutory interpretation. S.67 of the Legislation Act states that singulars should be read as plurals. Accordingly, OTLA argues that the word “action” can be interpreted as “action or actions” and the word “protected defendant” can be interpreted as “protected defendant or defendants.” This, thereby, leads to an overall interpretation wherein there is one deductible regardless of the number of accidents.
The intention of Legislature OTLA submits the Legislature did not intend to abolish, limit or otherwise interfere with the rights of subjects. Specifically, it is OTLA’s submission that the Insurance Act limits the right to sue in tort by the application of the deductible, and any interpretation that provides for multiple deductibles ought not be allowed, absent clear and plain language. However, these submissions do not take into consideration the fact that s.267.5 of the Act is drafted from the perspective of the protected defendant. Accordingly, by only applying one deductible, regardless of the number of accidents, one is taking away or limiting the rights of the protected defendant and it is the rights of the protected defendant that are the focus of s.267.5 of the Act.
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Furthermore, the OTLA position does not take into ed to show that he had sustained a serious impairment of consideration the no-fault scheme and the balance between an important physical, mental or psychological function. the no-fault scheme and tort. Through the no-fault Under Bill 59, in order to succeed against the defendants, scheme, a plaintiff is entitled to statutory accident benefits the plaintiff needed to show that he sustained a permanent from his/her own insurance company. These benefits are serious impairment of an important physical, mental or paid on a per accident basis, which means for each and psychological function. every motor vehicle accident, the injured party has the Justice Bolan assessed the plaintiff’s injuries, on a global right to bring a separate claim for no fault benefits against basis, and then allocated the general damages assessment the insurance company. This is part of the trade-off that among the three motor vehicle accidents by assessing the the Legislature made. While the injured party’s rights are plaintiff’s injuries after each accident at appropriate times limited on the tort side, those same in order to determine the combined rights are expanded on the no-fault effect of the accidents up to that side. A system where there is only one point. The court then applied an deductible would undermine the balindexed $11,508 deductible to the ance between the tort and no-fault plaintiff’s general damages from the scheme. 1995 accident, pursuant to Bill 164. Bill 198 eliminated the deductible Then, the court applied a nonwhen general damages exceed indexed deductible of $15,000 to the $100,000 or the non-pecuniary FLA plaintiff’s general damages from the damages exceed $50,000. By increas1997 motor vehicle accident, puring the statutory deductible for genersuant to Bill 59. al damages to $30,000, from $15,000, In Coulter v. Liberty Mutual Insurand non-pecuniary FLA damages to ance Co., where the plaintiff was $15,000, from $7,500, the balance involved in a motor vehicle accident between tort and no-fault benefits was on May 30, 1999 and a subsequent further promoted. motor vehicle accident on Jan. 11, The legislation is presumed to be 2001, the court assessed the general accurate, well informed and drafted in damages award from the first accident a straight-forward style. If the Legislaat $45,000 and then deducted the ture intended a single statutory statutory deductible from that award. deductible to apply to multiple sepaThe court held the plaintiff had not rate unrelated accidents, the Legislasustained a permanent serious ture would have provided a method impairment of an important physical for dividing the deductible between function from the second motor vehimultiple separate unrelated motor cle accident, but specifically stated if If the Legislature vehicle accidents. This issue was not the plaintiff were to be awarded genintended a single addressed because the Legislature eral damages for her soft tissue intended one deductible to apply per injuries from the second accident, the statutory deductible to accident. statutory deductible pursuant to apply to multiple s.267.5(7) of the Insurance Act would Case law separate unrelated then be applied. In Ontario, although no case has accidents, the Legislature Conclusion directly addressed the issue, when would have provided a statutory deductibles are applied, The common law has interpreted pursuant to s.267.5(7) of the Act, they s.267.5(7) of the Act in its grammatimethod for dividing the are to be applied on a per accident cal and ordinary sense harmoniously deductible between basis. with the scheme of the Act by applymultiple separate Gorman v. Falardeau, was a deciing multiple deductibles for multiple sion where the plaintiff was involved motor vehicle accidents. Only applyunrelated motor vehicle in motor vehicle accidents in 1989, ing one deductible for multiple motor accidents. 1995 and 1997. Since the Ontario vehicle accidents is contrary to the Motorist Protection Plan amendintention of the Legislature. Continments to the Act were introduced in 1990, the 1989 acci- uing to apply a separate deductible for each separate motor dent was not subject to the threshold test and there was no vehicle accident maintains predictability. statutory deductible for non-pecuniary damages. Bill 164 was in place at the time of the 1995 accident and Bill 59 was in place at the time 1997 accident. Under Bill 164, in Jim Tomlinson specializes in insurance litigation and Ruby order to succeed against the defendants, the plaintiff need- Tatla practices in civil litigation at McCague Borlack LLP. www.claimscanada.ca
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LIGHTS, CAMERA, DAMAGE BY NEIL GIBSON
Third party property losses are one of the most difficult and challenging types of claim in the film and television business. A film production is looking for that picture perfect location to match their storyline. Dan, a location manager, scoured various cities and before settling on what he believes to be the ideal setting. After approaching the homeowners and taking various photographs to show the director, a deal is reached to use the location — a place never before seen on film. Dan and the production team believed they found the perfect location, and the homeowners are excited at the thought of their property being portrayed on the big screen. The compensation for the use of their home for a period of 10 days didn’t hurt either. However, from the first day of filming the homeowners were overwhelmed as forty crew members with lights, rigging and camera systems besieged their home — it was an experience they had never imagined. At the conclusion of filming, Dan and the homeowners completed a thorough inspection of the house, where they found more then fifteen areas of damage. While production acknowledged they had caused some of the damage, they completely disputed others. For other areas of contested damages, production had no idea if their work and actions could even have caused them to occur. This example is something seen all too frequently when dealing with third party property damage losses in film production claims.
Who caused the damage? There are a number of reason why a production company will rent a loca46
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tion: Most commonly to suit the plot or because the cost is less than that of constructing a set. While extensive steps and precautions are taken to prevent damages, it is sometimes unavoidable. Most of the time, the damages are minor in nature, including scratches to the hardwood or scuffs on the wall. Unfortunately, sometimes things go very wrong, and as many as twenty or thirty areas of damage can occur over a one-week shoot. Occasionally, a situation arises where a production team is adamant that the third party is taking advantage of them and dispute causing any — or at least some — of the damages being claimed. This is the general situation an adjuster must face when dealing with a third party property damage claim. The relationship between the parties can affect a loss of this type. On some occasions there is a close relationship between the employee of the production (location manager) and the property owner. If the location manager tends to use the property or deal with the owner regularly, he may have a slight bias in wanting to take care of the property owner, legitimate or not. It must also be kept in mind that while productions are not malicious or intentional when it comes to damages at a location — and they generally do take some precautions — their focus and attention is almost always on the camera and the job at hand. Most production package insurance policies contain what is known as third party property damage protection. It provides coverage for the property of others while in the care, custody and control of the production, for physical loss or damages for which the insured is legally liable. There are also various conditions and exclusions applicable such as reasonable care or
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intentional acts that need to be closely reviewed and assessed on any loss.
Examining documents There are several key factors that need to be determined by the adjuster, including an examination of the agreement between the production company and the owner, how the damages were caused, the production team’s level of liability for the damage and the recovery entitled to the third party. The first key document that needs to be obtained is the location agreement. This is essentially a lease document that not only stipulates the dates and compensation that will be provided for the use of the premises, but it usually outlines production’s responsibility with regard to damages and other pertinent terms including agreed alterations and use of the premises. Within the contract is also usually a clause relating to the acceptance of responsibility for damages and a valuation clause. In most cases, the terms simply require production to be responsible for reparation or restoration of the property to its original condition. However, on occasion it could stipulate replacement cost without deduction for depreciation. On any given film shoot, there can be thirty or more individuals working on different aspects of the production, and typically no one will acknowledge or even notice the damage occurring. Additionally, there are times when production has nothing to do with the damage — it pre-exists the production team — but no one ever noticed or recorded it and the damage is only discovered once production has left and the property is inspected closely. It is essential, for several reasons, that the cause of loss for each area of damage be determined. Firstly, it needs to be verified that the production is www.claimscanada.ca
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responsible — and more importantly liable — for the damages. Secondly, the policy generally carries a per occurrence deductible, so if there are fifteen areas of damage, then there is a possibility there was anywhere from one to fifteen occurrences.
Document the scene The first tool in evaluating the loss is something that is done before any of the damages occur. Prior to a shoot, the location manager attends the property and takes scout location photographs. These are generally taken from different angles throughout the location and presented to the director so he can get a feel for the location and see how it will look on camera and consequently choose the location for filming. Although these photographs are not taken for the purpose of an insurance claim investigation, they can be a key tool as they can sometimes identify if a certain area of damage is pre-existing or not. A prime example of this was a shoot at an old abandoned mansion that contained hundreds of antiques. At the conclusion of the shoot, the owner contended that production had caused cigarette burns, cracks, scrapes and other damages to approximately forty antiques throughout the house. Production had no knowledge of causing any of the damages, and when the scout location photographs were reviewed, they clearly showed that thirty eight of the items being claimed were damaged prior to production’s attendance. The scout location photographs can also assist in the assessment of depreciation, if applicable, as they may show the condition of the property prior to any damage. The production insurance business has always made a push for the location manager to document any and all damages prior to production’s attendance on scene. This would make verification of any and all damages after the fact a much simpler process. Unfortunately this process is rarely completed. Another helpful hint is there is often a prototypical nature to a lot of the damages that occur on a film shoot. For example, most damages to floors by a production team are generally from one of three causes: (1) They were scratched www.claimscanada.ca
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when the crew was bringing in the gear, (2) they were scratched by a camera dolly system or (3) production placed tape on the floors that removed the surface. So while no one may report exactly what occurred, sometimes it can be fairly obvious to determine through an examination of the damage itself. There are some relatively straightforward aspects to the handling of the claim that simplify the review and verification of the loss. However, there are
also aspects which make it more difficult. The key is to understand how a production works, the relationship and role of each individual involved and how they can assist in the assessment of the loss, and what is needed to determine the coverage, liability, and quantum involved. Neil Gibson is a senior general adjuster with Crawford Global Technical Services.
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Solving the Meaning of Life The loss of dependency claim: calculating for the present value BY RANDAL S. CARLSON AND DANIELLE BOURGEOIS
Litigation arising from fatal injuries in Alberta, as in most other provinces, centers on two types of damages. The first type of damages is awarded by statute to family members pursuant to the Fatal Accidents Act1 (FAA), or similar legislation. This award for the intangible claim for “grief and loss of the guidance, care and companionship of the deceased person.”2 The second type of damages is based on the claims made by those family members dependent on the deceased individual, such as a surviving spouse or children, for the financial and household support they would have received from the deceased. The loss of dependency claim is not an easy one to calculate, as it includes a multitude of considerations including future income streams, the deceased’s own personal consumption habits, negative contingencies and numerous other factors. Expert evidence is normally required in the calculation or assessment of such claims.
Bereavement claims All common law jurisdictions in Canada have a statute allowing an action to be brought by the estate of a deceased person against the person or persons that caused the death, for the benefit of dependents. The reason for such statutes is that, surprisingly, the common law prior to the mid-1800s did not allow such claims either by deceased persons or by their dependents.3 In most injury actions, general damages are based on an assessment of the relative “pain and suffering” of the injured individual. When the plaintiff is an immediate family member of a person killed in an accident, the loss is undoubtedly significant. In Alberta, claims for “bereavement” are limited by 48
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the FAA — $75,000 for spouses and interdependent partners and $45,000 for each child.
Loss of dependency claim Separate from the bereavement claims are those arising from the loss sustained by dependents of the deceased person. This is not a claim based on the intangible loss of a loved one. It is a pecuniary or monetarybased claim for the financial loss suffered by a dependent based on the expected value of the deceased’s person’s future income that could reasonably have been expected to be spent for the benefit of each dependent plaintiff. Separately, the FAA also allows claims for expenses incurred in the care of the deceased prior to death, funeral expenses and grief counseling. Typically, however, the most significant part of a FAA claim is the loss of dependency. As an aside, historically, even after FAA-type legislation was introduced, the estate of a deceased person did not have a claim for the deceased person’s own future earnings. The court decided that claims by the deceased individual for loss of future earning capacity (called a “lost years” claim) fell within the meaning of “actual financial loss” in the Survival of Actions Act4 (SAA). This situation was again changed in 2002, when the applicable section of the SAA was amended to exclude, among other things, claims based on future earnings by the deceased. The amendment was not made retrospective, however, and therefore claims based on fatalities prior to the amendment can still include the lost years claim. In such cases, the lost years claim and the competing dependency claim must be reconciled.5 The loss of dependency claim is most usually significant when brought by the deceased’s spouse and under-age children. However, others have potential claims of the same type as well. Loss of dependency claims can be advanced by parents based on expected support
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in their old age, and by adult children dependent on the deceased. The starting point in the calculation of the claim is that the dependents are entitled to “an award of such amount as will assure them the comforts and station in life which they would have enjoyed but for the accident.”6 The steps involved in calculating the claim can be succinctly summarized.7 First, it must be determined what the total amount of money the deceased would have earned but for the accident. Having determined total earnings, the second step is to deduct the taxes that would have been paid on those earnings. The net total is therefore the amount that would have been potentially available (disposable income) for the benefit of the dependent plaintiffs. Third, and finally, having determined net earnings, the amount is reduced by what has been called the “personal consumption rate” of the deceased, and further adjusted for any positive or negative contingencies. The opposite perspective of the same calculation is referred to as the “dependency rate.” To provide a general illustration of the dependency rate, the author C.J. Bruce, in Assessment of Personal Injury Damages, 3rd ed.,8 noted a “standard” approach for the dependency rate for a couple was 70 per cent, with four per cent added for each child to reflect the reality that personal consumption decreases as more family members are added. Bruce’s dependency rate has been followed or noted in several decisions in Alberta and elsewhere.9
Contingencies and other issues The starting point for the dependency calculation is normally statisticsbased. The individual characteristics and spending patterns of the deceased may provide further guidance for a court in determining an appropriate award. “Pre-death” contingencies are those that might have affected the depenwww.claimscanada.ca
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dants financially if the deceased had not died. Such contingences include the possibility of unemployment, divorce, or early death in any event due to poor health or a particularly dangerous occupation. “Post-death” contingencies are factors that could affect the dependants’ loss post-judgment. Commonly, the likelihood of a surviving spouse remarrying is the subject of consideration. Whether or not such additional contingencies are actually introduced is another matter. Justice R.P. Fraser summarized the challenges involved as follows: “The nature of the “crystal ball gazing” required in this analysis is that there may be, and likely are, other contingencies that have not been taken into account by the experts. For example, if he had lived, [the plaintiff] might indeed have become a general manager of a five star hotel; he might have remained at a $40,000 position for the remainder of his working life; or he might have changed careers again at age 50.” 10 Interestingly, in the same decision, no additional specific contingencies of
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this type were argued, and no additional adjustments were made, perhaps reflecting that in the context of such actions, such additional considerations may be seen as petty for defendants or “gilding the lily” by plaintiffs. As an example of further considerations in loss of dependency claims, there is an issue as to whether the claim should be based on “cross” or “sole” dependency. These terms relate to whether the calculation of the dependency claim should be based on just the deceased’s income (sole dependency) or whether, and arguably more appropriately in a two-income household, reduced by what the surviving dependent would have spent on the deceased (cross dependency).
Conclusion Quantification of the loss sustained by family members as a result of a death is one of the greatest challenges in assessment of damages. Starting from a statistical base, a court must assess all aspects of the deceased’s lifestyle and income pre-accident, and make projections on what would have been the case
in the future. Compounding the difficulties, the overall family dynamics and consumption patterns must be considered. Examiners working on files with dependency claims should expect eventual expert involvement to properly assess such claims. Randal Carlson is a partner and Danielle Bourgeois is an associate with the firm Field LLP. 1. Fatal Accidents Act, RSA 2000, c. F-8 2. FAA, s.8(2) 3. An informative history of fatal accidents legislation can be found in the Alberta Court of Appeal’s decision of Ferraiuolo Estate v. Olson 2004 ABCA 281. 4. Survival of Actions Act, RSA 2000, c. S-27. 5. Brooks v. Stefura (2000), 266 A.R. 239 (C.A.) at pp. 243-44 6. Keizer v. Hanna, [1978] 2 S.C.R. 342, cited in Chernetz v. Eagle Copters Ltd., 2006 ABQB 353 at para. 9 7. see, for example, Chernetz v. Eagle Copters Ltd., 2008 ABCA 265 8. (Toronto: Butterworths, 1999) at p.210 9. Millott (Estate) v. Reinhard, 2001 ABQB 1100 at paras. 236-9. 10. Millott, supra at para. 228
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A Mistaken Understanding of Injury BY ROBERT PARKINSON
We have all heard the expression the straw that broke the camels back. For biomechanists, it is a simple way to describe a minor event, which results in an unexpected injury. Unfortunately, the concept of a trivial event being responsible for an unexpected injury has been accepted by far too many intelligent people and has led to poor determinations of cause and effect in the insurance and legal industries. However, with a basic understanding of injury, there is some valuable knowledge contained within this expression. An injury occurs when the forces within a tissue (muscle, bone, ligament, etc.) reach a level that is greater than that tissue can handle. Certainly, no one would expect a straw to apply sufficient force to break the back of a camel, or any animal for that matter, would they? What if the camel had been working, day after day, for many years, walking the same path while carrying the same heavy burden? Like all structures, the body changes with time. With the right amount of physical activity and rest, the body can strengthen, becoming more capable of meeting our demands. However, without adequate rest, the body can weaken, becoming increasingly less resistant to the same demands. This progressive weakening is the basis for a fatigue related injury. Using the example of the camel, its spine was weakening as a result of too much work 50
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and not enough rest. This weakening became so great that the camel was unable to resist even the slightest load. Looking at the repeated demands placed upon the poor camel, the camel’s broken back should not have been unexpected. In fact, it was predictable. Just like any other structure, the tissues of our body fail in known patterns. We only need to understand the form and function of the body to appreciate why certain areas are more susceptible to fatigue and injury.
pitcher. Interestingly, this fatigue injury can happen with little or no change in the other tissues of the shoulder joint. As a result, an athlete or person working a physically demanding job may attempt an ordinary task that they have successfully completed hundreds of thousands of times before and suddenly experience pain. Like the camel, knowing the required demands of a pitcher or industrial laborer makes these injuries predictable.
Kiss of death for baseball greats Take a rotator cuff injury, for example. This is an injury that reportedly precipitated the retirement of baseball greats Curt Schilling and Randy Johnson. This small, deeply seated group of muscles functions to keep the upper arm in place within the socket of the shoulder blade. As a result of their location and purpose, they are active when we move our arms, and when we work with our hands at or above shoulder level. Individuals who experience these demands and positions (like baseball pitchers or some assembly line workers) are required to use the rotator cuff muscles for a large portion of their time. When active, the force within the muscle can limit blood flow, resulting in damage to the cells of the muscle and subsequent tearing. If inadequate rest is provided, the muscles can break down over time, becoming painful and losing functionality — the “kiss of death” for a major league
Similarly, disc herniations within the spine are also fatigue-related injuries.1 Everyone has heard stories of someone bending down to tie their shoe when all of a sudden back pain renders them unable to stand upright. Is it logical that the act of tying your shoes generates significant loads to injure an otherwise healthy back? Not really, otherwise this same individual would have hurt their spine previously. Like the rotator cuff, the intervertebral discs can be injured by repetitive motion, particularly bending forward or twisting. These movements subject certain areas of the disc to higher stresses than others. If the movements are repeated over and over, these stresses can force the material in the middle of the disc out beyond the edges (herniation). Interestingly, there is evidence only the outer layers of the intervertebral disc contain nerves, which explains why individuals suffering from disc herniations may not report pain or discomfort until there is substantial
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Discs gone bad
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progression of the injury. When a person feels back pain while tying their shoe, it is not the incident task that exclusively led to the injury. If so, throwing a baseball or tying a shoe should be viewed as injurious events. In actuality, it is a gradual decrease in the tolerance of the tissue (fatigue) that was responsible for the outcome, not the event itself — just like the camel. Also, like the camel, these injuries are predictable. If an individual is reporting a torn rotator cuff or intervertebral disc herniation as a result of a motor vehicle collision, it is critically important to determine what their job demands were or what they did outside of work. It may be that the involved person had a history of physically demanding work that required use of the hands at or above shoulder level, or that they were required to do frequent lifting that would require bending and twisting. Often, these demands reflect the correct injury mechanism, where the forces and
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occupant movement resulting from a motor vehicle collision do not.
Accompanying damage This is not to say that traumatic rotator cuff tears and disc herniations do not occur. However, when these
We only need to understand the form and function of the body to appreciate why certain areas are more susceptible to fatigue and injury. injuries are traumatic they tend to be accompanied by damage to other tissues in the area. The presence of bone fractures, joint dislocations or ligament tears in such circumstances, is a telltale
sign of significant loading in the region. One remaining question, which is more legal than biomechanical, concerns the understanding of fatiguerelated injuries in the context of the “crumbling skull” consideration. Individuals who are in the process of advancing rotator cuff tears or disc herniations are in an unstable state, as these injuries will continue to progress unless the person seeks intervention or their demands change. However, the time course of these injuries is variable and a single medical imaging study is not sufficient to determine the course of such an injury. For this reason, a thorough understanding of the mechanisms of injury, including fatigue, is required to establish the likelihood a specific event caused an injury. Robert Parkinson is a forensic biomechanist at Giffin Koerth, specializing in injury analysis. 1. Referring to disc herniations not resulting from age related degeneration.
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A SERIES OF ARTICLES PROVIDED BY THE INSURANCE INSTITUTE OF CANADA
The Proof is in the Pudding Product liability claims
A
ny party involved in a product’s production, distribution or preparation for use — manufacturers, wholesalers, retailers, jobbers, repairers and installers — can potentially be held liable for injuries and damage caused by the products they manufacture, fix or sell. Product liability claims may be based on breach of contract or in tort the breach of a legal duty — the loss adjuster assesses the eligibility of the injured party to make a claim according to the approach chosen. This article focuses on the bases of such claims in common law provinces. Suppose that a consumer buys a sofa bed from a retailer and then is injured when the bed collapses. The buyer might have two options for pursuing redress: • Sue the retailer who sold the sofa bed for breach of contract, alleging that the item was not fit for the purpose for which it was intended. The buyer will need to prove that the sale was made, prove breach of the warranty of fitness and prove the amount of damages that resulted. • Sue the manufacturer in tort for the negligent manufacture of the sofa bed. The buyer will need to prove negligence and prove the amount of damages that resulted. 52
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Liability under contract When a product is purchased, privity of contract is established between the buyer and the seller, and the seller makes certain warranties to the buyer. Only parties to the sales contract, the buyer and the seller, can enforce warranties; if the product injures a third party, the action must be brought in tort instead. A seller must warrant to the buyer that the item sold is reasonably fit for the purpose for which it is purchased. An adjuster investigating such a claim must therefore know the conditions under which the product was sold. Did the seller describe the product to the buyer? Did the buyer tell the seller why they were buying that product? In other words, was the buyer relying on the seller for guidance in selecting and purchasing the product? Representations made in advertising and marketing are also implied warranties that could form the basis of a claim in contract. Loss adjusters should gather documentation on such representations. Not only does a contract exist between the buyer and the retailer, but similar contractual relationships may also exist between the retailer, the wholesaler and the manufacturer. Any intermediary handling the product may have damaged it during preparation for
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sale. A loss adjuster must investigate whether anyone else in the chain might have contributed to the injury. Finally, the bill of sale between any of the parties may contain special provisions or express warranties that attempt to narrow the liability — for In a product liability claim, questions to consider include: • Was the product used in accordance with any instructions or warnings accompanying it? • How likely is this product to cause harm? • Was the consumer aware of the potential dangers? • How easily could the consumer have avoided being injured? • Was the product defective or the design flawed? • Did the defect or design flaw cause the injury? • Did the manufacturer fail to exercise reasonable care? • How easy would it have been to design the product differently? • Are competing products similar in quality and safety of design? Are they distributed with similar instructions and warnings?
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example, limiting liability to repair or replacement of the product and excluding any resulting injury or economic loss. Conversely, greater liability may be assigned when special qualities of the product are claimed on the invoice, in manuals or in brochures. In other instances, a manufacturer may agree to indemnify a wholesaler or retailer against any liability arising out of a product it manufactures.
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turer’s peers in the industry to determine what product standards could be considered reasonable. However, there is a risk in this approach: courts sometimes decide that an industry’s standards are inadequate. Where a manufacturer has sent out a recall notice to its customers, this constitutes proof that the product was indeed defective.
Liability in tort A manufacturer owes a duty to any third party who might reasonably be affected by the product, even if no contract is made between them. The manufacturer has a duty to exercise reasonable care in designing and manufacturing products, and must also label them appropriately. Design and manufacture To investigate a claim that the product was negligently designed or manufactured, a loss adjuster must examine quality control processes to show that they were reasonable for the product. The required standard of care for the insured would be reasonable care in the circumstances. The nature of the product, its capacity to do harm, and the intended users can all influence the level of care considered reasonable. For example, the level of care required for children’s products is generally higher than for products aimed at the general public. Governing statutes can be a useful guide to standards of care. Loss adjusters may also look to a manufac-
Res ipsa loquitur This rule of evidence (a Latin phrase meaning “the thing speaks for itself”) allows an injured party to construct a prima facie case on circumstantial evidence implying that the insured was negligent. As with strict liability, the burden of proof is shifted and the manufacturer or retailer must disprove negligence.
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A general warning is not adequate; the warning must specifically outline the dangers and consequences associated with the product. In addition, packaging and labelling must meet legislated criteria. Special cases For food and beverage products, medical products, and products considered inherently dangerous (firearms, gas furnaces, noxious chemicals, etc.), strict liability applies: The burden of proof shifts and the manu-
facturer must prove it was not negligent. Taking reasonable care is not a defence in a claim subject to strict liability.
Labels and warnings Manufacturers have a duty to warn consumers about products that are defective or that could pose a danger to them. This duty includes providing adequate instructions on how to use the product and providing specific instructions on how to deal with an accidental injury if it occurs. The foreseeable risks associated with the use of the product must be made known. And if a defect is discovered after a product is released into the market, then consumers must be alerted to the problem. It is often difficult for an injured party to prove that a product was defective, whereas it may be comparatively simple to establish that labels or warnings were inadequate. For warnings to be adequate, enough information must be presented to allow the consumer to make an informed decision as to whether to accept the risk of using the product. A general warning is not adequate; the warning must specifically outline the dangers and consequences associated with the product. In addition, packaging and labelling must meet legislated criteria. Loss adjusters should request the original packaging and any other material that was sold with the product in order to analyze the information that was provided. It can also be useful to compare the labelling and packaging of similar products from other manufacturers. In the next issue of Claims Canada, Education Forum looks at defences to product liability claims. This article is based on excerpts from the study material in the Claims Professional Series of applied courses – a core of the CIP Program that helps adjusters learn the functional knowledge and skills required of their profession.
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p54-55 on the scene
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O on the scene CIAA New Members — July 2010 CORPORATE MEMBERSHIP Arthur Adjusters Inc. INDIVIDUAL MEMBERSHIP Arthur Adjusters Inc. Ross Arthur
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Bannatyne & Company General Insurance Adjusters Inc. Michael Bannon Hamilton, ON Level 3 Karen Sunter Hamilton, ON Level 3 Coast Claims Services Ltd. Ryan McAvena, BA, CIP
Duncan, BC
Level 3
Crawford & Company (Canada) Inc. Michelle Baumann Barrie, ON Susan Sutton, CIP Cambridge, ON Liviana Del Bel Belluz Etobicoke, ON Christina Black, FCIP Hamilton, ON Erin Seely, CIP Hamilton, ON Nancy Brooks, CIP Kingston, ON Paul Morgan Kingston, ON Cindy Lavoie London, ON Shawn Heather Bryan Mississauga, ON Denise McDowell Mississauga, ON Praveen Sharma Mississauga, ON Jan Tatarski Mississauga, ON Anupam Chohan Ottawa, ON Michael Gooley Peterborough, ON Lauren Wallace Toronto, ON Corrinne Pollard, CIP, CRM Toronto, ON Deepali Shah Toronto, ON Renee Lewis-Ancog, CIP Toronto, ON
Level 1 Level 2 Level 1 Level 2 Level 2 Level 2 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 3 Level 2 Level 2
Georgian Claim Services Inc. Anjelica Relic, CIP Barrie, ON
Level 3
J.P. Hamilton Adjusters Ltd. Michael Lucas
Winnipeg, MB
Level 1
Horizon Adjusters Ltd. Amy Hessler
Grande Prairie, AB
Level 1
Kernaghan Adjusters Limited Louis Ferreira Marla Saper Keith Edwards Neal Jardine, B.Sc. Silvana LoMonaco Deanna Peters
Duncan, BC Edmonton, AB Flin Flon, MB Toronto, ON Toronto, ON Toronto, ON
Level 1 Level 2 Level 1 Level 2 Level 1 Level 1
Lennox & Company Insurance Adjusters Inc. Diana Lennox Burlington, ON
Level 1
Marsh Adjustment Bureau Limited Susan Hatt New Minas, NS
Level 1
PCA Adjusters Limited Eric Colson, CIP
Kingston, ON
Level 1
Sedgwick CMS Canada Inc. Alison Belair, CIP Ranjit Bhatia Nordica Fairweather Allen Hadfield Kathleen McIsaac Elke Paulsen, CIP, CRM Valerie Watson, CIP Mark Wozny, CIP
Mississauga, ON Mississauga, ON Mississauga, ON Mississauga, ON Mississauga, ON Mississauga, ON Mississauga, ON Mississauga, ON
Level 3 Level 1 Level 1 Level 1 Level 1 Level 3 Level 3 Level 1
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Claims Canada
CIAA New Members — August 2010 INDIVIDUAL MEMBERSHIP Crawford & Company (Canada) Inc. Patricia Gayadat Barrie, ON Annunziata Guagliano Hamilton, ON Paul Hancock, B.Sc., CIP Toronto, ON
Level 1 Level 1 Level 2
East Coast Claim Services Inc. Monique Chamberlain, CIP Moncton, NB
Level 2
Kellow & Associates Inc. Jill Dixon Robin Kellow
Level 1 Level 1
Marsh Adjustment Bureau Limited Paul Addicott Halifax, NS Daniel Cavanaugh Bedford, NS
Level 1 Level 2
ProFormance Adjusting Solutions Inc. Shawna Gillen, CIP Markham, ON John Scott Markham, ON
Level 3 Level 2
Townsend & Leedham Adjusters Ltd. Justin Paul Edmonton, AB
Level 1
Joan Takahashi
October/November 2010
Orangeville, ON Orangeville, ON
Gilbertson Davis Emerson LLP has recruited accident benefits and insurance defence counsel Joan Takahashi to its team of insurance lawyers. Takahashi previously practiced with a large firm in Toronto and has nearly 20 years of insurance defence experience. She also spent more than 10 years working in the insurance industry in multi-line claims adjusting, as well as in supervisory roles in casualty and property, personal and commercial lines. ●
Erin Coons, Ross Memorial Hospital; Tim Shauf, president and CEO of Farmers’ Mutual; Donna Barry, Kawartha Haliburton Children’s Foundation.
Farmers’ Mutual Insurance Company’s 8th annual charity golf tournament, held on July 21 at The Lindsay Golf and Country Club, was another great success raising $32,720. The charities that benefited this year were the Kawartha Haliburton Children’s Foundation and The Ross Memorial Hospital Foundation (Diagnostic Imaging MRI and CT Campaign) each received $16,360.00.This brings the total funds raised over the last eight golf tournaments to $222,959.66. ● www.claimscanada.ca
p54-55 on the scene
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3:05 PM
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McLarens Canada’s St.Catharines branch celebrated its 20th anniversary on Aug. 1, 2010. In honour of the milestone event, the branch manager, Marie Gallagher, hosted a luncheon for staff, company management and clients on Aug. 19, 2010 at Henry of Pelham Winery. The St. Catharines branch was the company’s first and only branch, until 1996. ●
www.claimscanada.ca
October/November 2010
Claims Canada
55
p56,57 on the scene
10/18/10
3:13 PM
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O on the scene Almost 100 passengers sailed aboard the Obsession III on Sept. 10 during the Second Annual Mix & Mingle Boat Cruise. The event, presented by Winmar Toronto/Brampton and No Problem Movers, was made possible thanks to the following partners: Gilbertson Davis Emerson LLP, Safetech Environmental Ltd., Carstar, A.S.A.P., Williams & Partners Safety Express, Madeira Hardwood Floors and Direct Line Environmental Corp. The event raised $1,500 for Kerry’s Place Autism Services. �
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Claims Canada
October/November 2010
www.claimscanada.ca
p56,57 on the scene
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The Toronto Insurance Women’s Association (TIWA) celebrated summer in style with their 7th Annual Summer Social (formerly Pub Night) on July 8. Insurance industry guests enjoyed a summer evening at Fionn McCool’s in downtown Toronto.l●
www.claimscanada.ca
October/November 2010
Claims Canada
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p58 on the scene
10/18/10
3:09 PM
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O on the scene A zealous group of 221 golfers attended the 11th annual WICC Ontario Golf Tournament on July 12 at Angus Glen Golf Club in Markham, Ont. Attendees enjoyed a day complete with a barbeque lunch, silent auction, raffle and excitement well beyond the ordinary, everyday tournament — with a hole-in-one scored by Elizabeth Kepes of Desjardins General Insurance. The winning play of the day was made during WICC’s cheque presentation to the Canadian Cancer Society: that’s when golf committee chair and WICC director Lyna Newman presented the CCS with a cheque in the amount of $200,000 ●
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Claims Canada
October/November 2010
www.claimscanada.ca
ciaa conf ad 2010 final
10/14/10
4:43 PM
Page 1
Canadian Insurance Claims Managers’ Association / Canadian Independent Adjusters’ Association United & Committed Leadership through - Education • Professionalism • Communication
CICMA/CIAA Ontario Chapters’ 44th Annual Joint Conference Tuesday, February 8, 2011 Metro Toronto Convention Centre, Toronto, Ontario Registration 8:00 a.m. • Seminar 9:00 a.m. Reception and Lunch 12:30 p.m.
LITIGATION MITIGATION
and Strategies In Between. A panel of guest speakers will discuss best practices of litigation and cost containment – this year’s format will be an open forum to accommodate questions and answers.
Price: $195.00 — CICMA/CIAA Members Price: $245.00 — Non-Members Register early - Space is limited Tickets will not be sold at the door.
Guest Speakers / Key Note Speaker to be Announced. Luncheon Speaker —
Maureen Holloway Canadian Radio Personality, Entertainer and Comedian
CICMA
NAME:____________________________________________________ COMPANY: ________________________________________________ ADDRESS: ________________________________________________ CITY: ___________________________POSTAL CODE: _____________
Please send registration to: Ray Schostak Global Reinsurance Company, 480 University Avenue, Suite 1400, Toronto, ON M5G 1V2 RETURN WITH CHEQUE PAYABLE TO: CICMA/CIAA JOINT CONFERENCE
EMAIL: ___________________________________________________ PHONE: (_________) ________________________________________ FAX: (_________)___________________________________________
Please Indicate affiliation: CICMA ❏ CIAA ❏ Other ❏
SFW
Client: Campaign:
RSA 300 Years
Job no: HM001643_Canadian _UW_Oct Publication:
Canadian Underwriter
On sale date:
October
Issue:
October
Copy date: Size:
17th September
THE TORNADO LEFT AN AFTERMATH.
276x206 Hot Mash check list
Hot Mash approval
For twelve minutes of August 20th, 2009 the close-knit community of Vaughan was under siege.
WE LEFT AN IMPRESSION.
Mark and his son Simon were about to sit down to dinner when Mark looked outside and saw a huge funnel cloud in the park behind his house. Seconds later, debris began falling from the sky. Drilling rain, lightning and vicious winds whipped around their home. An F2-strength tornado, packing wind gusts of 180 kilometres per hour was ripping roofs off homes, flipping cars and downing fences, power lines and trees with truly shocking speed and violence. Fearing for their lives, Mark instinctively grabbed his son and took shelter in the basement. Several kilometres away, Peter, an RSA Adjuster, was finishing work when he heard news of the unfolding devastation on the radio. He ran to the RSA Mobile Claims Response vehicle and drove towards the battered community.
Peter’s timing was perfect and his thinking fast. He came across a convoy of Emergency Services vehicles en route to Vaughan and gained access to the area behind the rescue cordon, worst affected by the storm. The streets were almost in total darkness. People like Mark and Simon had only just had time to survey their wrecked home when Peter arrived on the scene to reassure them that everything would be taken care of. His presence there meant that the rebuilding of their lives could begin immediately. Damage was assessed, calls made and the claims process started. In those dark, frightening hours after the tornado, Peter provided them with hope, confidence and the certainty that they were not alone. A little help that left a long-lasting impression. From the epic to the everyday, we continue to help the world’s people and businesses move forward. To learn more, visit www.rsabroker.ca
Underwriting progress since 1710
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