U.S. commercial soft market cycle "broken": MarketScout

For the first time in more than six years, the U.S. composite commercial market has seen an average rate increase, signalling the end of the soft market, according to MarketScout.
Jumbo accounts, those worth more than $1 million, are the only segment of the market measuring a rate decrease. These accounts were down 1% in November 2011, MarketScout reported in its November 2011 ‘Market Barometer.'
All other classifications, either by coverage, industry group or account size, measured flat or up as compared to one year ago at this same time.
MarketScout added that the National Alliance for Insurance Education and Research conducted pricing surveys used in MarketScout's analysis of market conditions. The findings helped corroborate MarketScout's findings.
The following coverage classes saw the largest increases:
• Commercial property, 2%;
• Business Owner Policy (encompassing all major property and liability risks in one policy), 2%; and
• Workers' compensation, 2%.
Small accounts (up to $25,000) saw average rate increases of up to 2%. Medium accounts ($25,001-$250,000) saw an increase of 1%, MarketScout reported.
"After six years and eight months, the soft market cycle has finally broken," said MarketScout CEO Richard Kerr. "November 2011 is the first composite rate increase since the soft market began in February 2005."

Nearly 5-million Canadians admit to riding with a driver who had been drinking TEXT SIZE

Roughly 7% of Canadians surveyed admitted to being a passenger in a motor vehicle driven by someone who had been drinking any amount of alcohol on one occasion in the last month, according to the Traffic Injury Research Foundation (TIRF).
TIRF conducted a public opinion poll in September 2011 that investigated Canadians' behaviours and actions in relation to drinking and driving.
Another 6.7% of those surveyed indicated they had done so on two or more occasions - this corresponds to an estimated 2.3 million.
Adding the two above results together, the survey found a total of 4.7 million people rode with a driver who had been drinking.
Of the drivers who admitted to driving when they thought they were over the legal limit in the last 12 months, 42.2% reported doing so with a passenger in the vehicle.

FSCO introduces two new processes to expedite mediation backlog

The Financial Securities Commission of Ontario (FSCO) has introduced two expedited processes in mediation in an attempt to ease the backlog that has formed.
In its December 2011 newsletter, FSCO describes the two new processes:
• Consent failures (the option to fail mediation on consent, without a mediation meeting); and
• Mandatory settlement ‘Blitz Days.'
With consent failures, FSCO is sending letters to the claimants and insurers on the oldest files awaiting assignment to a mediator advising of the option to fail the mediation upon mutual consent.
The parties will receive a ‘Consent to Fail Mediation Form' with the letter. It requires both parties to list the issues that remain unresolved and to jointly request that the mediation be failed. The form also requires the parties to confirm that they have made best efforts to resolve the dispute without success and that there is no reasonable prospect of a resolution if a meeting were to be held.
FSCO will then assign the form and any supporting document to a mediator who will review the file. If the mediator is satisfied best efforts have been made to resolve the dispute, and if the mediator believes a mediation meeting would not likely result in a resolution, then mediator will be able to close the file.
‘Blitz Days' are aimed at closing multiple files in a single day. They will be held once a week into January 2012.
FSCO will require claimant and insurer representatives with multiple common files that have not yet been assigned to a mediator to attend one or more settlement Blitz Days. FSCO will notify the parties' representatives of their common files and Dispute Resolution Services staff will book the meetings.
FSCO will then assign mediators to facilitate the sessions and record outcomes. At the end of the sessions, a Report of Mediator will be issued reflecting the outcome. Attendance at a Settlement Blitz Day is mandatory for both sides.

Companies expect to use social media more often in the future, but most don't have plans to manage the risks TEXT SIZE

Companies expect to see corporate use of social media expand over the next year, including in marketing efforts, but many do not have a plan in place to deal with the risks.
Financial Executives Research Foundation Inc. (FERF), working in partnership with Grant Thornton LLP, developed a 23-question online survey and conducted in-depth interviews to produce a report, Social media and its associated risks.
One hundred and forty-one executives from public and private companies completed the survey, which was conducted during August and September 2011. Key interview findings indicate the speed with which social media has grown in the last five years caught many executives by surprise.
Almost half (48%) of the executives responding to the survey felt social media would be an important component of corporate marketing efforts going forward.
More than half (53%) of respondents predicted the corporate use of social media would increase significantly over the next 12 months.
And yet, companies clearly weren't yet prepared for the risks associated with the use of such media.
For example, more than three-quarters (76%) of respondent companies do not have a clearly defined social media policy.
And more than half (61%) of respondents indicated their organizations do not have an incident management plan to help them deal with instances of fraud and/or privacy breaches.
While many companies do have e-mail communication and technology usage policies, very few companies have policies that specifically address social media governance and risks.

Aviva and Hagerty partner to launch coverage for antique and classic cars

Aviva Canada Inc. and Hagerty Canada LLC have partnered to launch the ‘Hagerty Silver Wheel Plan.'
The plan offers Canadian antique and classic car enthusiasts extensive coverage, including agreed value coverage - with no appraisal requirements - and access to Hagerty's extensive network of products and resources in the United States.
As of Jan. 1, 2012, all Silver and Custom Wheel policies will be transitioned to the Hagerty Silver Wheel Plan upon policy renewal.
Current Silver and Custom Wheel clients will continue to receive all of the benefits afforded by their existing policy and there will be no changes to existing coverage.

Travelers Canada launches cyber-risk coverage

Travelers Canada has launched a product designed to limit cyber exposures and manage associated risks.
‘CyberRisk' is the newest addition to Travelers Financial and Professional Services line. It's a standalone product with 10 coverage options that address exposures and the ripple effects associated with a cyber-related event.
Third party liability coverage includes network and information security liability; communications and media liability; and regulatory defence expenses.
First party coverage includes crisis event management expenses; security breach remediation and notification expenses; computer program and electronic data restoration expenses; computer fraud; funds transfer fraud; e-commerce extortion; business interruption and additional expenses.
A recent U.S. study found the average cost of a data breach in 2011 was $5.9 million. "The reality is that over 35% of data breaches are caused by employee negligence, from lost laptops to failure to erase hard drives off company computers prior to their disposal," said Jane O'Meara, assistant vice president of management and professional liability for Travelers Canada.

State Farm Canada seeks $21 million in damages from Ontario health clinics and individuals

State Farm Canada has filed a statement of claim seeking a total of $21 million in damages from several Ontario health service providers and individuals.
State Farm's statement of claim contains allegations not proven in court. It alleges that six health clinics and eight individuals were involved in a conspiracy to submit "false and fraudulent documentation" to State Farm related to accident benefits claims.
State Farm's statement of claim requests a declaration from the court that the insurer is no longer required to pay any future or outstanding bills to the defendants.
The companies listed in the statement of claim include a numbered company and Pacific Assessment Centre Inc., Fairview Assessment Centre Inc., MD Consult Inc., MD Assessment Consult Inc. and Traffic Law Advocate (E.E.) Professional Corporation.
Phone calls to the Pacific Assessment Centre and the law firm believed to be representing the defendants were not returned.
"Auto insurance fraud, specifically accident benefit fraud, continues to be a serious industry and consumer problem in Ontario," said John Bordignon, State Farm's media representative. "Clearly, insurance fraud is a criminal activity that affects everyone. This is not a victimless crime. It's a crime we all pay for.
"We have seen progress since the Ontario government's mandated auto insurance reforms were implemented in September 2010, and the provincial anti-fraud task force will shed more light on this issue and craft positive recommendations to combat it.
"State Farm is committed to working with our industry partners, regulators and the government to reduce the impact insurance fraud has on consumers."

Injured claimant's adaptive ability should be based on more than just an inability to return to work: Ontario arbitrator

An injured person's ability to adapt to stressful circumstances is broader than just whether or not a person can return to work, an Ontario arbitrator has found.
Adaptability is one of four factors used to determine whether a person's mental or psychological impairments due to an auto collision qualify as "catastrophic." A catastrophic injury designation in Ontario qualifies the claimant for substantially increased accident benefits.
In reaching her conclusion, Financial Services Commission of Ontario (FSCO) arbitrator Rosemary Muzzi found in favour of Intact Insurance Company, which submitted that claimant Carrie Leach had not sustained a catastrophic impairment.
Leach was injured in motor vehicle accident in 2003. Her assessors found she had a moderate impairment in three out of four categories of function used to determine a catastrophic impairment.
The four categories of function include an assessment of:
• activities of daily living,
• social functioning,
• concentration, persistence and pace and
• deterioration in work or work-like settings, or repeated failure to adapt to stressful circumstances (adaptation).
Leach's assessors said Leach showed a "marked" impairment in the adaptation area of function. This was based on Leach's inability to complete a work placement at a local school as a teaching assistant in a vocational hair styling course.
Leach's marked impairment in the adaptive category alone was enough to have her classified as catastrophically impaired, the assessors argued.
Intact argued a marked impairment must be present in more than just one of the four areas used to assess the effects of psychological impairment.
But Muzzi found Leach did not even have a marked impairment in the area of adaptation, saying consideration of a person's adaptive ability should go beyond an inability to return to work.
"Ms. Leach's assessment team focused on Ms. Leach's ability to tolerate work as demonstrated in her unsuccessful work placement at a local school as a teaching assistant in a vocational hair styling course," Muzzi wrote. "I considered her work placement experience from a broader perspective and also examined her ability to tolerate stress in her other life activities and found her to be reasonably capable and flexible and only moderately impaired in this regard."

High rate of claimants in the MIG explained by backlog of arbitrations: plaintiffs' lawyer

Currently, 75% to 80% of auto accident claimants in Ontario are ending up within the Minor Injury Guideline (MIG), but this should be of false comfort to insurers, said Adam Wagman, a lawyer with Howie Sacks & Henry LLP.
Wagman represented the plaintiff counsel's view during A Debate Between Plaintiff & Defence Counsel Concerning Those ‘Problem Cases' at the Canadian Defence Lawyers Accident Benefits seminar on Oct. 21 in Toronto.
"The stats we are hearing is that somewhere between 75% to 80% of people are currently ending up in the MIG," Wagman said. "If insurers are taking comfort in the number of people who are currently being placed in the MIG, they can continue to take comfort for as long as the mediation backlog will allow them to."
Approximately 30,000 cases are waiting to be heard by a Financial Services Commission of Ontario (FSCO) arbitrator, Wagman said.
"Once these cases start hitting arbitrators' doors, without telling you that I have a crystal ball, those people with whiplash or concussions - I think you're going to have a hard time keeping those people in the MIG," he said. "Even a 10% or 11% [reduction in the number of people in the MIG] is a really big difference. The comfort insurers are taking from this is a false sense of comfort."
Kadey B. J. Shultz, partner at Hughes Amys LLP, added defence counsel would be wise to "get creative" and work towards resolving questionable cases before arbitrations start trickling down from FSCO.
"The idea of being strategic, analytical and creative, this is the time to do it," she said. "Now is the time to be risk managers on top of being claims adjusters; not three years from now, when the decisions start to come out.
"It is time to manage the risk, to be creative, to think outside the box. Even though the accident benefits box is so codified and restricted, it does not mean you cannot be creative. It does mean that, to be creative, you need to take the time and engage in the discussion. You need to pick up the phone or respond to the [plaintiff's] call."

Liability lurks in positive employee references on social media: Advisen

An employer offering an employee a positive recommendation through social media is exposing the employer to potential liability, Advisen warns.
In its OneBeacon-sponsored report, Social Media: Employers' Liability for the Activities of their Employees, Advisen said the potential for a company to be involved in a lawsuit alleging defamation from a negative reference is fairly clear, but positive references are not without risk as well.
Many organizations have policies in place that prohibit employees from providing references. But social media sites like LinkedIn have created a feature by which an employee can easily provide a recommendation that is against company policy and without employer control over the content of the reference.
"For example, if an employer terminated an employee for poor performance and was currently being sued by that employee for wrongful termination, a positive recommendation by a supervisor or manager could hinder its defence that the termination was in fact for poor performance," it said.
To mitigate this risk, Advisen suggested organizations implement a policy that prohibits employee recommendations via social media sites without approval from Human Resources.
"The reality is that social media use by employees in the workplace is here to stay," the report says. "Social media technology is constantly evolving, [and] for this reason it is important that an employer understands its exposures, stays on top of the trends and issues and makes educated decisions about how best to protect itself."

Regulatory tweaks required to prevent 'papering' of Ontario auto insurers with treatment plan submissions

The Statutory Accident Benefits Schedule (SABS) in Ontario is in need of further refinement to prevent insurers from getting "papered over" with an overwhelming number of treatment plans and assessments — a major component of auto insurance fraud.
"There are still miles to go [in preventing accident benefits fraud], and [treatment plan] inundation is a good example," said Gregory Jones, claims manager for State Farm Insurance Company, who was a speaker at the IBC's 11th Annual Regulatory Affairs Symposium in Toronto on Oct. 27.
"There's nothing [in the SABS] that prohibits claimants from papering us with 50 treatment plans per claimant, and that's a tremendous impediment."
Jones shared a few examples of current medical fraud investigations. In one example, he presented a photo of a nicked car bumper. The slight scratch resulted in the submission of 66 treatment plans (OCF-18s) on behalf of two claimants, as well as 42 Applications for Approval of Assessments (OCF-22s) from two treatment centres, he said. The total cost of recommended assessments, treatment plans and assistive devices from the two assessment centres amounted to $214,929.01.
"We didn't pay," Jones said. His audience included representatives of Ontario's insurance regulator, the Financial Services Commission of Ontario (FSCO).
In another example of "papering over" an insurer, Jones discussed two medical providers associated with 125 State Farm claim files. The files involved 250 claimants in total, two people per file. The two health care facilities in question submitted 50 treatment plans per claimant, for a total of 12,500 treatment plans from these facilities, Jones noted.
"This is just an example of an abuse of process," he said. "The overwhelming submissions, 50 treatment plans per claimant, are ... designed to inundate claim managers, to lessen their opportunity to investigate the claim. They have six days to do this, and 10 days to do that: we're working under a very regulated environment here. That is an example of ‘papering' an insurance company."
"Just think about that: 50 treatment plans. How could the first treatment plan possibly have had a chance to be effective?"
At a cost of $1,500 to resist each treatment plan, Jones calculated that it would cost an insurer $37,000 to resist such an inundation of claims submissions.

It's official: Banks now banned from promoting non-authorized insurance on their Web sites

Canada's new regulations prohibiting banks from promoting unauthorized insurance products and services on their Web sites are now official.
The regulations came into force with very few amendments to the pre-published draft of regulations posted for public comment on Feb. 12, 2011.
The only changes were to clarify that the new regulations apply to the banks' "business in Canada." Also, the ban on Web site insurance promotion does not apply if the banks are promoting insurers that deal "only" in authorized types of insurance (as defined by statute).
Under the section ‘Web Promotion,' the regulations state:
"[A] bank shall not, on a bank Web page, provide access to a Web page - directly or through another Web page - through which there is a promotion of a) an insurance company, agent or broker that does not deal only in authorized types of insurance; or b) an insurance policy of an insurance company, agent or broker, or a service in respect of a policy, that is not of only an authorized type of insurance."
In the Canadian Gazette, where the regulations are published (http://www.gazette.gc.ca/rp-pr/p2/2011/2011-10-12/pdf/g2-14521.pdf), the federal government says the new regulations "are required to extend government policy to the Web pages of deposit-taking financial institutions in a similar fashion as the regulatory framework that applies to insurance activities in branches."
Banks are currently not allowed to promote non-authorized insurance products and services in their branches.
The Insurance Brokers Association of Canada (IBAC), which has been lobbying the federal government for these changes for years, said it was "pleased" with the introduction of the new regulations.
"The announcement today by the government extends and clarifies the protection insurance consumers currently are afforded in bank branches from coercive and predatory pressures when it comes to their insurance needs," IBAC says in a press release. "This consumer empowerment now covers the on-line world."
IBAC CEO Dan Danyluk said: "We support the Minister of Finance in his desire for insurance consumers not to be pressured by the coercive environment Canadians face themselves when dealing with a credit grantor when they apply for credit.
"The principle that credit granting institutions ought not to be selling insurance at the point where they grant credit is one that allows Canadians to make a free choice when they decide on their insurance needs; a product that is essential in so many aspects of their lives."

Ontario arbitrator finds injured trucker eligible for AB, despite his mistaken election of WSIB benefits in confusion following tribunal decision

A trucker seriously injured in an accident is entitled to accident benefits, even though he elected to receive Workplace Safety and Insurance Board (WSIB) benefits in confusion after the Workplace Safety and Insurance Appeals Tribunal (WSIAT) barred most of his tort claim.
Section 61 (formerly s. 59) of the Ontario Statutory Accident Benefits Schedule (SABS) says an insurer is not obligated to pay accident benefits if the insured person is entitled to receive benefits under any workers' compensation scheme (such as the WSIB).
An exemption says this does not apply to insureds who elect to bring a tort action under the Workplace Safety and Insurance Act, as long as the election to pursue a tort action "is not made primarily for the purpose of claiming benefits."
The AB applicant, Rimvydas Narusevicius, was seriously injured in a motor vehicle accident involving three tractor-trailers on Nov. 23, 2003. He applied for and received statutory accident benefits from Wawanesa, his accident benefits insurer.
The insurer and the insured agreed that Narusevicius was deemed to have elected to pursue a tort action when he did not file an election to collect benefits through the WSIB within three months of the accident.
Narusevicius commenced a court action against several of the drivers and owners of the tractor-trailers within the limitation period. In a decision dated Oct. 5, 2009, the WSIAT decided that at the time of the accident Mr. Narusevicius was a worker in the course of his employment and his tort claim was barred as against all but one of the defendants to the tort action.
Following release of the WSIAT decision, Narusevicius's spouse filled out and filed on his behalf an election to collect WSIB benefits dated Nov. 23, 2009.
Ms. Naruseviciene testified that following receipt of the WSIAT decision, she and her husband believed he had to apply for WSIB benefits. They noted that his lawyer had not explained the effect of the WSIAT decision on their lawsuit at that time.
According to Naruseviciene, the lawyer also indicated that Narusevicius had to continue with the lawsuit.
Naruseviciene testified that she sent in the WSIB election form since Narusevicius had no income for years and they felt he had no choice but to apply to WSIB after the WSIAT decision. Her husband was not receiving accident benefits as of this time.
The insurer argued that even if the initial election to pursue a tort action was bona fide, it is no longer so, since Narusevicius "re-elected" for WSIB benefits following the issuance of the decision by the WSIAT
"I do not accept that the applicant's evidence supports that he initiated a lawsuit primarily so that he could collect accident benefits as his evidence made clear that he was interested in suing the drivers responsible for the accident, in addition to medical benefits, so that he would have access to greater compensation," Financial Services Commission of Ontario (FSCO) arbitrator Alec Fadel wrote.
"Even if re-election was provided for in the relevant legislation, I find that the applicant's actions after the WSIAT decision are more reflective of the disappointment and confusion he experienced upon receiving the WSIAT decision and do not reflect an intention to no longer proceed with what they believed to be a valid tort claim."

Death and funeral benefit ranks the most popular optional benefit purchased by Ontario policyholders

Ontario auto insurance policyholders were about four times more likely to purchase the increased death and funeral benefit than any of the other optional benefits offered under the province's reformed auto insurance scheme.
Ontario's insurance regulator, the Financial Services Commission of Ontario (FSCO), asked the largest private passenger auto insurance insurers in Ontario to complete a survey in January 2011 regarding take-up of optional benefits.
The 24 insurance companies surveyed represented 78% of the Ontario market, based on written premium.
The survey found Ontario policyholders were most likely to purchase the following five optional benefits:
• increased death and funeral (4.76%);
• increased medical and rehabilitation to $100,000 (1.31%);
• increased attendant care to $72,000 (1.22%);
• increased medical and rehabilitation to $1.1 million and increased attendant care to $1.07 million (1.04%); and
• caregiver, housekeeping and home maintenance (0.64%).
Other optional benefits purchased included indexation (0.29%), increased income replacement to $600 (0.26%), dependant care benefit (0.25%), additional coverage to offset tort deductibles (0.19%), increased income replacement to $1,000 (0.17%) and increased income replacement to $800 (0.13%).
Optional benefits were a key component of the province's auto reforms, which were implemented on Sept. 1, 2010. The reforms essentially reduced consumers' mandatory medical-rehabilitation coverage from $100,000 to $50,000 (with an option to buy back up to $100,000) and converted some mandatory benefits into optional benefits.
FSCO approached the companies in order to understand consumers' purchasing habits regarding optional coverages. The survey covered policies written between Sept. 1, 2010 and Dec. 31, 2010.
The results of the survey were published in the Aug. 30, 2011 edition of FSCO's Auto Insurance e-Newsletter, posted online.

BC's Supreme Court orders hefty punitive damages in auto fraud ring case

British Columbia's Supreme Court has ordered fraudsters to repay ICBC more than $344,000 for claims incured as a result of an auto theft ring.
In his written decision for ICBC v. Ben-Jaafar, Justice Cullen describes how the fraud ring made phoney Alberta registration documents for stolen vehicles and resold them to legitimate buyers in BC's lower mainland in 2002 and 2003. Twenty-seven individuals and companies were named in the action.
The scheme started with the creation of false Alberta Vehicle Registration certificates (AVRC), which were used to register the various stolen or fraudulently obtained vehicles in B.C. using a false vehicle identification number (VIN), he wrote.
AVRCs were fabricated in each case because any attempt to register a vehicle that had been reported stolen in British Columbia would be caught by ICBC. The advantage of manufacturing a VIN on a forged AVRC was that the ICBC computers would not be able to reveal whether the falsely identified vehicle had ever in fact been registered in Alberta.
Other falsified documents were used to complete the process of disguising the identity of and reregistering the stolen vehicles. The vehicles being imported into BC required an inspection by a vehicle inspector who would complete a private vehicle inspection report. Then, they would be transferred from the fictitious or unwitting Alberta resident into the name of an unwitting British Columbia resident using a transfer/tax form generally used on the pre-text that the transfer was a "gift" to the unwitting recipient to avoid the payment of taxes.
There would then be a transfer of the vehicle to a real person - the ultimate owner who would pay the person or persons involved in the scheme.
Justice Cullen awarded punitive damages against the conspirators in the amount of $10,000 per vehicle and between $2,000-$3,000 per vehicle for the defendants who knowingly acquired the stolen vehicles, or who took steps to conceal the true facts from the court.
The main players in the ring received the following orders:
• Vikram Atwal was held liable for a total of approximately $113,365, together with punitive damages of $40,000;
• Jaspal Atwal was found liable for special damages of $22,931 (claims paid by ICBC), plus $5,000 in punitive damages.
• Jasraj Bains was found liable for $96,510.04 plus $40,000 in punitive damages; and
• Jagjit Gill was found liable for $68,730.67, plus $50,000 in punitive damages

Canadians lack understanding of coverage and claims process: Allstate survey

Canadians are buying insurance without understanding their coverage and do not know how to make a claim when the unexpected happens, according to a survey commissioned by Allstate Canada.
Leger Marketing surveyed 1,514 Canadians, 18 years of age or older and that held either home, tenant and/or car insurance.
Findings from the survey include:
• 48% of Canadians would have their car towed following a collision without first confirming that their insurance covers the charges;
• only 18% of Canadians know that their home insurance covers them for accidental damage to someone else's property;
• 35% of young Canadians (ages 18-34) are unsure of what damages are covered by their car insurance; and
• 29% of young Canadians (ages 18-34) don't know if their home or tenant insurance covers loss from fire.
"What is clear from our survey is that Canadians are purchasing home and car insurance without taking the steps to understand what they are getting," said Saskia Matheson, Allstate Canada's spokesperson.
"While we understand insurance policies may not offer the most entertaining read, if people are not fully aware of what their coverage entitles them to or the process to make a claim, then they may not get the full benefits of the coverage when they need it most."

Popular, but untrue urban legends about insurance alive and well: TD Insurance survey

Twenty-nine per cent of Canadians incorrectly believe driving red cars will result in more expensive insurance premiums, while 54% believe two-door cars are more expensive to insure, according to a recent TD Insurance survey.
Part II of the TD Insurance 2011 State of Insurance Report delves into these and other popular myths about insurance products. A more complete summary of the findings can be found at:
http://www.smrmediaroom.ca/TDInsuranceMyths.html
Overall, the online survey of 1,000 people conducted in March 2011 by Environics Research Group found that "when it comes to making significant decisions regarding insurance products and services, 63% of Canadians don't go to an insurance provider, but instead ask their friends, family or colleagues for advice (25%), rely on searching the Internet (33%), or simply go with their gut."
This hearsay approach to insurance knowledge likely plays a part in the spread of misinformation about insurance products and services. The TD Insurance survey identifies a number of these myths and legends.
For example, 48% of the survey respondents believe their auto insurance premiums won't increase if they get into an accident but don't file a claim.
Also, 63% of Canadians wrongly believe they will be reimbursed at today's prices if they file a home insurance claim for stolen or damaged items.
"A standard home policy only covers you for the value of your contents, less depreciation," says Henry Blumenthal, vice president and chief underwriter for TD Insurance.
"For example, if you purchased a television five years ago for $500, you might only get $100 for it if it were destroyed in a fire, even if it costs $600 to replace that same TV today. If you want a higher form of protection, you should choose to add the replacement value option to your contents coverage, which will ensure the contents of your home are insured for the amount it costs to replace them today."
Based on the results of its survey, TD Insurance expressed concern Canadians were putting themselves, their families and assets at risk by making misinformed decisions about their insurance based on hearsay and insurance urban legends.

FSCO charges Ontario Disability Management Inc. with auto insurance fraud

Ontario's auto insurance regulator, the Financial Services Commission of Ontario (FSCO), has charged Ontario Disability Management Inc. and Aksana Miakouchkina (also known as Roxanne Mitch) with knowingly making false or misleading statements to an auto insurer to obtain payment for goods and services provided to an insured.
FSCO also charged Gregori Miakouchkine, the company's director, with authorizing or permitting the company to make false statements and with failing to take reasonable care to prevent the company from doing so.
FSCO announced the charges, which have not been proven, in a post on its Web site. The first appearance for these matters is scheduled for Oct. 13, 2011.

Insurers must move quickly to get second opinion when surveillance video contradicts opinion of retained health professional: arbitrator

An Ontario arbitrator has ordered a $6,000 special award against an insurer because the insurer relied too heavily on surveillance video in support of its monthly attendant care payments of more than $2,000, instead of relying on the advice of a health care professional it had retained.
The claimant, named in the arbitration decision as ‘Mr. S.,' was 51 years old when he was knocked down by a car while crossing a busy road in May 2006. An arbitrator at the Financial Services Commission of Ontario (FSCO) found the man had suffered a catastrophic impairment.
The Economical Mutual Insurance Company retained Phillip Wendt, whose September 2009 occupational therapy report recommending $6,682.91 for attendant care. Wendt treated Mr. S. bi-weekly for one half to a full hour per day from November 2009 to July 2010.
Citing Wendt's assessment. Mr. S says he requires 24-hour supervisory care and is therefore entitled to receive the full $6,000 maximum cap for attendant care benefits.
The Economical, however, paid Mr. S. $2,106.76 per month ($2,054.30 short months) from September 2009. (Mr. S. did not claim benefits prior to September 2009.)
The arbitrator found the company relied on video surveillance in determining this payment. The company contends the video shows "Mr. S. can safely and independently walk, transfer from sitting or lying down to upright or standing, be left alone, and handle some of his personal dressing and hygiene."
The Economical retained a second expert in 2008-09 to determine catastrophic impairment, Sherry Taillefer. She issued a report to The Economical in January 2011, in which she stated she thought $1,991.54 would be a more appropriate monthly rate. Her opinion was based on personal visits in 2008 and 2009, and also on what she had seen in the video surveillance.
The arbitrator ruled Mr. S was entitled to receive a monthly attendant care benefit of $2,987.47, an increase of $850 per month from what he had been receiving from the company since 2009.
However, despite the fact that the company had been making payments to Mr. S., the arbitrator nevertheless held that the insurer had unreasonably withheld the difference from the claimant on the basis of its video surveillance. Basically, the arbitrator said the company should have acted more quickly to gather a second opinion in light of the video surveillance.
Until Taillefer's January 2011 report, the sole occupational therapy assessment had been Wendt's 2009 report, the arbitrator noted.
"I am of the view that Economical's failure to abide by [Wendt's]
recommendation or ask for professional review during the 15 months between October 2009 and January 2011 must bear consequence," FSCO arbitrator Fred Sampliner wrote. "Otherwise, insurers could simply ignore or discount their health care professionals' opinions without deterrent."

Canadian commercial lines likely to see flat pricing in 2011 Q3: Marsh

Overall Canadian market conditions remain favourable across most commercial lines through the end of the 2011 Q2, but signs of a firming market are beginning to appear in segments of the marketplace, according to Marsh.
In its Canadian Insurance Market Midyear Update, Marsh examined data from transactions brokered by Marsh through early July 2011.
The report's findings suggest the majority of commercial property, casualty, and financial and professional insurance buyers are not experiencing significant rate increases.
Property insurance rates are increasing in individual sectors such as energy and mining, and 2011 catastrophe losses could further affect rates for some buyers.
In the mining sector, specifically Canadian companies with operations outside of Canada, Marsh anticipates overall rate increases of between 5% and 10% in the second half of 2011, with a potential increase of as much as 20% for insureds with catastrophe exposures and poor loss records.
In the first half of 2011, most upstream energy exploration and production property risks were subject to rate increases of between 5% and 10%. But control-of-well general liability rates remain fairly flat.
Underwriters are also starting to look more closely at contingent business interruption and contingent exposures following the Alberta wildfires. They are requiring more information from insureds before offering such coverage, the report says.
On the other hand, in financial and professional lines, including directors and officers liability, insurers are offering broader coverage options as they seek to expand their market share.
"It is too early to tell if the second half of the year will bring any overall increases to commercial insurance rates in Canada," said Alan Garner, president and CEO of Marsh Canada Limited.
"Marsh expects that pure Canadian commercial accounts will see rates remain flat well into the third quarter of 2011, and possibly beyond."

IBC calls for regulation of medical assessment clinics

The insurance industry is calling for the accreditation and regulation of assessment clinic ownership to help put the brakes on fraudulent accident benefits claims.
Fake accident treatment charges are costing insurers roughly $1.3 billion, a recent Toronto Star article says, citing unnamed sources in the insurance industry.
To combat the fraudulent abuse of the system, IBC is calling for tighter regulation around the ownership and operation of medical assessment clinics.
For example, ownership should be restricted to regulated health professionals, who could face discipline by a professional college if found guilty of filing fraudulent treatment charges, the Star article says.
Such a measure would prevent bogus clinics from being "shut down one day and open[ing] up again the next," Ralph Palumbo, IBC's vice president of Ontario, told the Toronto Star.

Despite reports of widespread misuse of social networks at work, nearly 50% of businesses still don't have a social network policy: survey

Nearly half of businesses do not have social media and networking policies in place, despite the fact that 76% use social networking for business purposes and many report abuse or misuse of social networks.
These findings come from an informal survey of more than 120 multinational employers conducted by the international labor and employment group of law firm Proskauer Rose LLP.
Forty-three per cent of survey respondents reported employee misuse of social networks at some point. And 31.3% reported having to take disciplinary action against an employee for misuse of social networks.
"In order to harness the benefits and minimize the risks of social networks, employers need to set distinct and specific policies and practices for their use," said Betsy Plevan, co-head of Proskauer's international labor and employment group. "Relying on employees to exercise good judgment is simply not enough."
The June 2011 survey asked 10 questions aimed at capturing current attitudes and practices concerning social media in the workplace. Survey participants included in-house counsel, executives and HR professionals across a broad range of businesses, many of which have a global presence and are clients of Proskauer.
The survey found social network use for business is a relatively new phenomenon. Of the businesses that use social networking for business, 70% only started doing so in the past three years.
Twenty-nine percent of businesses actively block employees' access to social networking sites. Only 27% monitor employee use of social networking sites.
"The business world is experiencing an ongoing and rapid proliferation in the use of social networking," said Daniel Ornstein, a London-based partner in the international labor and employment group. "Although this has many benefits, hardly a week goes by without yet another new story of a viral tweet or posting that has the potential to damage the reputation of a business, underscoring the need for companies to be proactive in this area."

Ontario auto insurance rate filings increase an average of 1% in 2011 Q2

Ontario auto insurance rate filings approved during 2011 Q2 - from Apr. 1, 2011 to June 30, 2011 - averaged an increase of 1%, based on the entire market, according to the Financial Services Commission of Ontario (FSCO).
For the 29.59% of the market that had rate changes approved in 2011 Q2, the average rate change was a 3.36% increase when weighted by market share.
Rate changes approved in the second quarter of 2011 become effective in the second quarter or later.
Among the 24 filings approved in 2011 Q2, only one company, The Dominion, received an approved rate decrease (-0.02%).
Tokio Marine and Nichido Fire Insurance Company, with a market share of 0.01%, and Lombard General Insurance Company of Canada, with a .94% market share, were approved for the largest rate increases for 2011 Q2 - a 14.76% increase for Tokio and a 13.63% increase for Lombard.
The Top 5 companies ranked by market share that applied for rate increases in 2011 Q2 received the following rate approvals:
1) The Dominion
Market Share (5.33%)
Rate Approval: -0.02%
2) Aviva Insurance Company of Canada
Market Share (4.65%)
Rate Approval: +0.03%
3) Allstate Insurance Company of Canada
Market Share (3.24%)
Rate Approval: +5.86%
4) Nordic Insurance Company of Canada
Market Share (3.03%)
Rate Approval: +9.70%
5) Traders General Insurance Company
Market Share (2.5%)
Rate Approval: -0.05%

Legal counsel for AB claimant not required to docket hours to receive credit at upper end of scale for hours worked: FSCO arbitrator

Legal counsel representing claimants in Ontario arbitrations are not required to docket their hours in order for claimants to receive their legal expenses at the high range of the scale determining hours worked, an Ontario arbitrator has ruled.
In Kamal Gogna and State Farm Mutual Insurance Company, an arbitrator at the Financial Services Commission of Ontario (FSCO) granted the insurance claimant Gogna his legal expenses of $12,000. The sum was based on 100 hours of work by two lawyers, multiplied by the counsel fee of $120 per hour.
In making his decision, the arbitrator rejected the insurer's argument that the 100 hours of legal work for which the claimant sought to be reimbursed was too high and should have been docketed by the law firm.
Gogna was injured in a motor vehicle accident in April 2004 and received accident benefits from State Farm. A dispute arose concerning his entitlement to an income replacement benefit.
An arbitration date was set, but the arbitration did not go to a hearing. Instead, the insurer settled with Gogna, who received his income replacement benefits.
The insurer noted the arbitration was not complex and did not raise any new issues of law. Therefore, since legal counsel for Gogna did not document their hours, they should not be entitled to claim their expenses at the high range of a standard scale used to calculate legal hours.
"Counsel for the applicant indicated that the lawyers at the firm do not docket their hours, noting however that 100 hours includes time for two lawyers to prepare for the hearing set in May 2010 (which was adjourned) and for one lawyer to prepare for the hearing set for October 2010," FSCO arbitrator Alec Fadel wrote. "It was also submitted that the significant amount of time a law clerk and junior lawyer had put into the file was not being claimed."
Fadel calculated the 100 hours based on a standard 3:1 ratio of days spent preparing for an arbitration against the number of actual arbitration hearing days. In this instance, the hearing (later adjourned because of the settlement) was scheduled to last four days.
Ratios used in arbitration decisions to estimate preparation time range from 1:1 to 4:1, with 4:1 usually being the uppermost level of the scale.
"I reject the insurer's suggestion that since the applicant has not provided dockets of their hours they should not be entitled to a ratio of 3:1," Fadel ruled.
"Rule 79.2(c) of the Dispute Resolution Practice Code (DRPC) lists examples of supporting documentation that must be provided. The Rule does not make mandatory that applicant's counsel keep dockets in order to be reimbursed at a higher rate, it merely indicates that if dockets are kept they must be provided.
"Also, I note that insurer's counsel has not provided me with their docketed hours, which would have assisted in my determination of a reasonable number of hours to permit."

Licensed medical doctors, neuropsychologists should lead catastrophic impairment assessment: panel recommendation

Ontario's Catastrophic Impairment Panel is calling for medical doctors or doctorate-level neuropsychologists (in the case of brain injuries) to be the lead evaluators in the assessment of people with catastrophic impairments arising from auto injuries.
FSCO established the panel of medical experts last year to produce recommendations on the definition of a ‘catastrophic impairment' under the Statutory Accident Benefits Schedule (SABS).
FSCO also asked the panel of medical experts to provide recommendations on the training, qualifications and experience of assessors who conduct catastrophic impairment assessments for auto accident benefits. The panel's full report on the training, qualifications and experience of cat assessors can be found at:
http://www.fsco.gov.on.ca/english/insurance/auto/reform/documents/CAT_Report_PhaseII.pdf
The expert panel recommends that a lead evaluator be responsible for overseeing the catastrophic impairment assessment process.
Doctors or neuropsychologists acting as lead evaluators should have at least five years of licensing or registration in Canada, the panel recommends. Doctors must be licensed to practice by one or more Canadian Colleges of Physicians and Surgeons.
The panel also recommends that "all clinicians involved in the assessment of catastrophic impairment be trained, depending on their scope of practice, in the use of the American Spinal Injury Association (ASIA) classification for spinal cord injury, Extended Glasgow Outcome Scale (GOS-E) for traumatic brain injury in adults, the Spinal Cord Independence Measure for ambulation disorders, the Global Assessment of Functioning (GAF) for psychiatric disorders and/or the American Medical Association's (AMA) Guides to the Evaluation of Permanent Impairment, 4th edition for the assessment or physical impairments."
The panel has called on Ontario's auto insurance regulator, the Financial Services Commission of Ontario (FSCO), to develop transition guidelines while training is being implemented.

FSCO identifies consideration of administrative monetary penalties as priority

The Financial Services Commission of Ontario (FSCO) has made implementing administrative monetary penalties a priority.
In its Statement of Priorities & Strategic Directions, FSCO said it will work with the Ministry of Finance to enhance regulatory effectiveness by considering the enforcement tool of administrative monetary penalties in insurance.
Such a system would allow the regulator to levy fines, for example, without having to proceed by way of a quasi-criminal tribunal, as is now required by legislation.
Other priorities identified by the regulator include:
• conducting market conduct audit reviews of compliance with the 2010 auto insurance reforms, including Statutory Accident Benefits;
• working with stakeholders to identify measures addressing fraud and abuse in auto insurance industry;
• undertaking long-term initiatives extending from the 2010 auto insurance reforms - including a new Minor Injury Treatment Protocol, a new catastrophic impairment definition and a closed claims study; and
• performing market conduct review of suitability of product recommendations for insurance.
FSCO said it would be working with the auto insurance industry to conduct a study of closed auto insurance claims.
"Many existing data sources do not provide a detailed breakdown of claims costs," the report says. "The results of the study will assist industry and government actuaries in properly assessing the impact of past and future auto insurance reforms."
The market conduct review will determine how the insurance industry is ensuring that consumers are empowered to make informed decisions and are presented with suitable product recommendations.
"The focus of the review will be to understand and assess the process agents use in making recommendations to consumers and the processes in place at insurance companies when developing and distributing products," the report says.

Canada launches public consultations on the regulation of P&C demutualizations

The Department of Finance Canada has wasted no time launching its anticipated public consultation on the demutualization of Canadian property and casualty insurance companies, setting the deadline for submissions on July 31, 2011.
The Finance Department committed to establishing regulations for the demutualization of a Canadian P&C insurance company in its budget, released on June 6. The government officially launched public consultations on June 30.
The proposed regulatory framework is a required step before The Economical Mutual Insurance Company may proceed with its plan to demutualize.
Assuming mutual policyholders approve the company's plan, The Economical would be the first Canadian property and casualty insurance company to demutualize under the Canadian Insurance Companies Act.
But the company and its mutual policyholders must first wait until the federal government establishes a regulatory framework for the demutualization of a P&C insurer. Currently, no such regulations exist.
Finance Minister Jim Flaherty has said publicly that no Canadian P&C insurer will be allowed to demutualize until regulations are in place. The public consultation is the first step in that process.
The timing of the public consultations was a wild card in whether the regulations might be in place by the end of 2011 or in early 2012. The company has said it would be ready to present a concrete proposal for demutualization to its mutual policyholders within six months after the introduction of the new regulations.

Privacy Commissioner audit finds Staples did not wipe data storage devices prior to resale

Canada's Privacy Commissioner has called on Staples Business Depot to review and improve compliance with its own privacy policies and procedures after an audit found the company had re-sold computers, hard drives and electronic memory devices without first wiping personal information from them.
In an audit report released on June 21, the privacy commissioner noted its audit of Staples had tested 149 data storage devices, including laptop and desktop computers, USB and internal hard drives, memory sticks and memory cards.
"The audit shows that Staples did not ensure data storage devices are wiped of all customer data prior to resale," the privacy commissioner concluded in its report. "In summary, we found that 54 of the 149 devices tested contained customer data.
"A number of these devices contained personal information that included government-issued identification numbers, email messages, personal correspondence and photographs, immigration documents, resumés, financial statements, custodial arrangements and personal contact lists."
The privacy commissioner noted Staples does have a corporate policy requiring that a vendor's personal information be wiped and removed from electronic devices prior to re-sale. Staples strengthened these policies after a 2009 investigation by the privacy commissioner into the same issue.
"While the revised procedures include key control mechanisms, they are not consistently applied," the report of the privacy commissioner found. "In 15 of the 17 stores audited, we noted instances where data storage devices were:
• resealed and verified as being wiped when such was not the case;
• not verified by a manager prior to being restocked; or,
• sent directly to the RTV [return to vendor] bin without being processed (wiped) by a technician."

Accident benefits not selected are not "available" to an insured; cannot be deducted from past income loss in tort

When an Ontario insured is required by law to select one of three statutory accident benefits, the benefits they do not select are not "available" to them. Therefore, they cannot be deducted from a claim for past income loss in a bodily injury action.
The Ontario Court of Appeal thus overturned a lower court ruling, which found a defendant in a tort case might indeed make such a deduction, in Sutherland v. Singh, released on June 22.
Section 267.8(1) of the Ontario Insurance Act provides that in an action for a loss or damage from bodily injury in an auto accident, the damages to which a plaintiff is entitled shall be reduced by payments for statutory accident benefits that the plaintiff has either received, or that were "available" to them.
The law is intended to prevent "double recovery," in which a plaintiff recovers from a defendant in tort and also receives accident benefits for a past income loss.
The plaintiff in this case, Derrick Sutherland, was rear-ended by defendant Gurmeet Singh. Sutherland has a wife and three children.
At the time of the accident, Sutherland was employed full-time as a machine operator at Winpack. He claimed he was temporarily unable to return to work and therefore perform caregiving duties for his three children.
Under s. 36(1) of the regulations for the Insurance Act, Sutherland must choose one out of three benefit options for lost income: an income replacement benefit (IRB), a non-earner benefit and a caregiver benefit (CGB).
The non-earner benefit did not apply, since Sutherland was working at the time. He elected to receive the caregiving benefits.
He later issued a statement of claim in which he claimed for past income loss, among other things. The defendants sought to deduct from Sutherland's past income loss the value of the income replacement benefits that Sutherland did not select.
Even though Sutherland chose to receive the caregiving benefits, the defendants argued, the IRBs were also "available" to the plaintiff at the time of the choice.
A lower court agreed with the defendants, but the Appeal Court overturned the finding.
The defendants' argument, "ignores the underlying purpose of s. 267.8, which is to prevent plaintiffs from double recovery for their losses," the Appeal Court concluded. "If the defendants' argument is correct, they will be entitled to both CGBs, which Mr. Sutherland received, and IRBs, which he never received.
"This would lead to a situation in which Mr. Sutherland is undercompensated and the defendants would receive a windfall. This would not be a fair result and it cannot have been intended."

Brokers welcome and insurers review the CCIR's discussion paper on credit scoring

Ontario's broker association is encouraging the province's consumers to provide input to the Canadian Council of Insurance Regulators (CCIR) on the use of credit scoring in insurance.
The Insurance Brokers Association of Ontario (IBAO) was responding to the release of a discussion paper on the topic by the CCIR on June 17.
"Regulators should be commended for the release of this issues paper because it acknowledges the risks to consumers that the IBAO has been raising with government and consumers," said IBAO CEO Randy Carroll. "All consumers should provide input on this stakeholder process and should consult our Web site, www.SoaringInsuranceRates.ca, to learn more about making their voices heard."
The CCIR's paper identifies seven potential risks to consumers related to the use of credit scoring by insurers. The CCIR is asking for stakeholder input on whether these risks in fact represent a harm to consumers and whether or not current law already addresses these risks.
The Insurance Bureau of Canada, representing Canada home, auto and business insurers, said it is reviewing the report and intends to make a submission of its own as part of the consultation process.
Bryan Yetman, IBAO board chairman, observed in an email that three issues identified and discussed in the CCIR paper - consent, disclosure and privacy - played a role in a recent decision by the B.C. privacy commissioner. In that case, the privacy commissioner found an insurer had not disclosed clearly enough to a consumer that it was using the customer's credit score for the purpose of underwriting.
The CCIR paper does note there seems to be a "discrepancy between what insurers and consumers are reporting" when it comes to obtaining a consumer's consent to use a credit score for underwriting purposes.
Such a disconnect "suggests to the CCIR that the consent given is not sufficiently informed," the CCIR says in its paper.
IBC does not have an official position on the use of credit scoring. It points to a voluntary code it has published for insurers that do use credit scoring.
"Some of our member companies use it as an underwriting tool, others do not," the IBC said in its statement. "In general, we support the right of our member companies to use a variety of tools for underwriting purposes.
"For property and casualty insurance companies that use credit information, IBC has introduced a voluntary Code of Conduct that enhances the protection of privacy and other consumer rights."
IBC's voluntary code calls on an insurer to gather prior consent, whether verbal or in writing, to collect and use credit information.
The code says the consent must be informed; it cannot be given on behalf of someone else; the insurer must retain proof of the consent; and the consent is assumed to be valid for the duration that the policy is in effect.

Distracted driving, inexperienced driving leading contributors to teen crashes

Preventive programs seem to be helping reduce the incidence of teens driving under the influence of alcohol, reported the Insurance Information Institute.
Immaturity, lack of driving experience, night driving and teen passengers are the primary contributors to the high crash rate among teens, the III reported.
Motor vehicle crashes are the leading cause of death among 15- to 20-year-olds, and teenagers are involved in more motor vehicle crashes late in the day and at night than at other times of day, the III reported in its June issue of The Topic.
But preventive programs aimed at reducing the incidence of drunk driving in teens seem to be having an effect.
A survey of 2,300 high school students in April 2011, commissioned by Liberty Mutual Insurance Company and Students Against Drunk Driving (SADD), found 6% of students say they have driven under the influence of alcohol on prom night - "a very low proportion when compared with the perception of prom night behaviour," the III said.
"In a 2009 study, 90% of the teen respondents thought that their peers would be more likely to drink and drive after the prom than at other times."
The new study cited possible reasons for the low incidence of prom night drinking and driving, including school programs and policies designed to keep teens from engaging in illegal behaviours.
"Eighty-nine per cent of students said their school had programs to discourage underage drinking at school events. Some employ security guards or police at the events, organize transportation and use breathalyzers."

Residential burglary activity heats up in the summer: Aviva

Aviva Canada is warning consumers that residential burglaries spike in the summer months, when the warm weather tends to draw people away from the homes more frequently and for longer periods of time, leaving them vulnerable to thieves.
Aviva insurance claims data show residential burglaries spike in summer months with 13%, 20% and 31% higher frequencies in June, July and August, respectively, than in April, which shows the lowest occurrence of residential theft claims.
Data also indicate break-ins are more common at the start of the weekend. The number of Friday break-ins is 26% higher than Sunday, the day with the lowest incidence of break-ins.
Overall in Canada, burglaries are on the decline. Aviva claims data show a 42% decline in claims between 2003 and 2010.
Based on Aviva Canada data covering between 2005 and 2010, Quebec homeowners have the highest frequency of break-ins - two times that of the national average, an Aviva release says.
Atlantic Canada provinces, on the other hand, have the lowest frequency of burglary claims, at just over one-third of the national average.

FSCO highlights amendments to Insurance Act concerning public transit auto claims

The Financial Services Commission of Ontario (FSCO) has released a bulletin highlighting recent amendments to the Insurance Act intended to help municipal transit systems control fraudulent claims.
These amendments include adding a definition of ‘public transit' to the act, where previously it was not included; adding a section that clarifies the liability of a public transit vehicle owner or driver in a single-vehicle collision, where previously they were not liable in these types of crashes; and the addition of a section that states public transit passengers cannot claim statutory accident benefits if the vehicle did not collide with another vehicle or object.
Under the amendments, ‘public transit' is now defined as:
• any service for which a fare is charged for transporting the public by automobiles operated by or on behalf of a municipality or a local board, but does not include special transportation facilities for persons with disabilities or transportation by special purpose facilities such as school buses or ambulances; and
• any service prescribed by regulation to be public transit.
A section (s. 267.5 (6.1)) was added to the Insurance Act that essentially says a driver or owner of a public transit vehicle can be found liable if the vehicle is involved in a single-vehicle collision.
"In respect of an incident that occurs on or after the date this subsection comes into force, subsections (1), (3) and (5) do not protect the owner or driver of a public transit vehicle if it did not collide with another automobile or any other object in the incident."
A second section (s. 268(1.1)) was added that provides no statutory accident benefits are payable from any source to an occupant of a public transit vehicle if the public transit vehicle did not collide with another automobile or object.

FSCO charges director of a Toronto-area treatment centre in connection with auto insurance claims payments

The Financial Services Commission of Ontario (FSCO) has charged the director of a Greater Toronto Area-based treatment centre with knowingly making false or misleading statements to an auto insurer to obtain payment for goods and services provided to an insured.
The allegations have not yet been proven in court.
Following an investigation, FSCO found that Misha Saltanov, the director of York Disability Management Centre, had submitted false invoices to get paid for treatment that was never provided, a FSCO statement says.
The first court appearance for this matter is scheduled for July 14, 2011.
"This action clearly demonstrates that FSCO will not tolerate and will continue to prosecute abuses by unscrupulous participants in the Ontario auto insurance system," said Philip Howell, CEO and superintendent of FSCO.
FSCO investigates allegations of misconduct, unfair practices and non-compliance with legislation or regulations in its regulated sectors. If warranted, FSCO takes enforcement action, such as initiating a prosecution.
In March, FSCO released a bulletin reminding insurers of their rights and responsibilities in curbing questionable and abusive claims. Verifying invoices and expenses was an area of concern highlighted in the document.
On July 1, an amendment to Ontario's Insurance Act will essentially allow insurers to delay paying for suspect treatment plans until the treatment provider provides the insurer with all of the necessary and required information.

When does a motor vehicle "accident" become a slip-and-fall claim?

The Financial Services Commission of Ontario (FSCO) has confirmed that getting out of a motor vehicle "safely" falls within the definition of the ordinary use or operation of a motor vehicle - even when that means the driver has locked the car door and walked around the car without incident to get to a shoveled "access point" next to a snow bank on a curb.
A FSCO arbitrator made the finding in Daphna Webb and Wawanesa Mutual Insurance Company, heard in March 2011.
Daphna Webb, a 36-year-old mother of two boys, drove to visit a friend who lives in a residential neighbourhood in Ontario. Parking on the street was only permitted on the north side of the street, where the friend lived. That side of the street does not have any driveways.
On the day Webb arrived, she testified there was no snow or ice on the road, but there was a snow bank two feet high that jutted from the curb. The only way to get to the sidewalk was through access points that had been shoveled out.
Webb testified she parked her car directly in front of an access point to the sidewalk. She exited her vehicle on the driver's side, locked the door and walked around the car to the front.
When she put her foot on the shoveled-out access point, she slipped on the ice and fell, breaking four bones in her right foot. She claimed she was injured as a result of a motor vehicle "accident," as defined in S. 2(1) of the Statutory Accident benefits Schedule.
The insurer submitted the use or operation of Webb's vehicle had long ended by the time of the slip and fall. The insurer noted she had turned off her car, took her key out of the ignition, closed her door and locked her car. Most importantly, she had navigated the roadway safely up until the point that she slipped on the access point.
But a FSCO arbitrator held that the access point was still part of the roadway, because the snow bank jutted out from the curb to the road.
"On the facts of this case, I find that because of the snow bank, Ms. Webb was compelled to park her car at the access point and that she was still disembarking from her vehicle when she fell on the roadway at the entry of the access point," the arbitrator found. "Succinctly, I find that Ms. Webb had not safely and completely disembarked from her vehicle when she fell."

Ontario regulation allows insurers to hold-off paying for suspect treatment plans until complete information provided by provider

An amendment to Ontario's Insurance Act will essentially allow insurers to challenge claims suspected to be fraudulent by refusing to pay for treatment plans until the treatment providers produce reasonable information.
Ontario Regulation 194/11 takes effect on July 1, 2011. The regulation gives insurers the authority to request the following information from treatment providers, who will have 10 business days to produce it after receiving the request:
• the originals of any treatment confirmation form, treatment and assessment plan, assessment of attendant care needs and other documents giving rise to the claim for payment;
• a statutory declaration as to the circumstances that give rise to the invoice, including particulars of the goods and services provided; and
• the name and full address of the provider, and of every provider that provided any of the goods or services referred to in the invoice.
Should a provider fail to comply, the amount payable by an insurer under an invoice is not overdue and no interest accrues on it, the regulation continues.
And finally, under the regulation, an insured is unable to commence a mediation proceeding if any of the following circumstances exist:
• the insured has not notified the insurer of the circumstances giving rise to a claim for a benefit or has not submitted an application for a benefit within the times prescribed;
• the insurer has provided the claimant with notice that it requires an examination under section 44, but the insured has not complied; and
• the issue in dispute relates to the insurer's denial of liability to pay an amount under an invoice on the grounds that the insurer requested information from a provider under subsection 46.2(1), and the insurer is unable, acting reasonably, to determine its liability for the amount payable under the invoice because the provider has not complied with the request in whole or in part.

Rehab clinic in Ontario convicted for submitting false invoices and treatment plans, fined $50,000

Pioneer Rehabilitation Clinic Inc. has pleaded guilty to knowingly making false or misleading statements to an insurer in order to obtain payment for goods and services provided to an insured in the Ontario Court of Justice in Toronto on May 12, 2011.
The court ordered a conviction and a $50,000 fine. Pioneer must also pay a $12,500 surcharge to the Victims' Justice Fund.
The Financial Services Commission of Ontario (FSCO) laid charges against Pioneer in August 2010. Following an investigation, FSCO found Pioneer had submitted false treatment plans and false invoices, in some cases to get paid for treatment that was never provided.
"Abuses of the auto insurance system by unscrupulous participants will not be tolerated," Philip Howell, CEO and superintendent of FSCO, said in a statement posted on the financial regulator's Web site. "FSCO will continue to prosecute these abuses."

The Ontario Divisional Court ruled in Aviva v. Pastore that the determination of a Class 4 (marked) or Class 5 (extreme) psychological impairment under subsection (g) cannot include consideration for pain associated with physical injuries.
The decision reverses a Financial Services Commission of Ontario (FSCO) Appeal decision.
In Aviva and Pastore, a FSCO director delegate ruled there is no inconsistency in defining an auto injury victim as "catastrophically impaired," even though she suffered only a single Class 4 impairment, and her physical and psychological injuries fell well below the 55% threshold for a person to be classified as catastrophically impaired under s.2(1.1)(f) of the province's Statutory Accident Benefits Schedule (SABS).
The Divisional Court, in a 2-1 split, also found that FSCO's interpretation of the SABS cannot be supported. Rather, the SABS, AMA Guides and the Superintendent's Guidelines, make it clear that all four areas of function are to be accounted for in an assessment of catastrophic impairment.
The Divisional Court majority set aside the decision of the FSCO director's delegate without prejudice to the matter being re-heard by a different director's delegate or, if appropriate, Anna Pastore could make a fresh catastrophic impairment application.
In an email, Kadey B.J. Schultz, a partner at Hughes Amys LLP, outlined Pastore's options moving forward. These options include:
• to have her claim reheard by Director's Delegate David Evans;
• to appeal this ruling to the Ontario Court of Appeal;
• to re-submit an OCF-19, "but any such application would quite possibly be barred by the two year limitation period," Schultz said; or
• accept the ruling of the Divisional Court.
"It will be interesting to watch this case to see if a further appeal will be made to the Ontario Court of Appeal," Schultz wrote. "In the meantime, the Court of Appeal will consider the Kusnierz matter and perhaps that decision will render any further appeal moot."

Peel cop arrested following investigation of staged collisions

A Peel Regional Police Officer has been arrested in Brampton following a fraud investigation into staged motor vehicle collisions.
With the assistance of the Insurance Bureau of Canada, investigators with the Internal Affairs Bureau conducted an investigation into a series of motor vehicle collisions that occurred in 2010.
The alleged fraud involved the staging of motor vehicle collisions followed by insurance claims for damaged vehicles and injuries sustained during the impact. It is alleged an officer facilitated the reporting of the accidents as legitimate collisions.
These allegations have not been proven in court.
Officers from the Internal Affairs Bureau arrested and charged Peel Regional Police Constable Carlton Watson, an 18-year veteran, on Apr. 14, 2011.
Watson is charged with uttering a fraudulent document, obstructing justice and breach of trust. He is suspended with pay and will remain on suspension pending the completion of court proceedings.
Investigators have also arrested Wayne Isaacs, a 46-year-old resident of Brampton, charging him with defrauding the public.
The investigation is ongoing. Both men are scheduled to appear before the Ontario Court of Justice in Brampton, on May 16, 2011.

Ontario arbitrator says AB insurer must pay full cost of expert report used in both accident benefits and tort proceedings

An Ontario arbitrator has ordered an insurer to pay for the full cost of an expert report even though the report was also being used in a related tort case.
In Sanmuganathan Elaiathamby v. State Farm Mutual Automobile Insurance Company, Elaiathamby claimed $8,505.42 for expert reports and disbursements at a Financial Securities Commission of Ontario (FSCO) expense hearing related to his accident benefits claim.
At the expense hearing, a FSCO arbitrator awarded only $6,289.68 for the expert reports and disbursements. The arbitrator allowed only one half of the cost of reports by four experts (two of them doctors), whose reports were also being used in a related tort case.
The decision at the expense hearing was overturned on appeal.
In his appeal decision, FSCO Director's Delegate David Evans said the original decision to half the expenses on the basis of their use in a tort case was "without reference to case law or legislation."
Evans noted that Subsection 282(11) of the Insurance Act provides that all or part of the expenses incurred in an arbitration may be awarded based on prescribed criteria set out in s.12(2) of Reg 664, R.R.O. 1990. "Those criteria do not include whether a party may potentially be entitled to recover a portion of his or her expenses in another proceeding [such a tort case]," he wrote.
State Farm argued that allowing only half of the disbursements would prevent "double recovery." This describes a situation in which the accident benefits carrier and the tort insurer each pay the full cost of an expert report used in both accident benefits and tort proceedings.
"However, the arbitration and appeal decisions are public, so there is no reason to assume there would be double recovery, even aside from the assumption that counsel will act honorably," Evans countered. "Finally, while the automobile insurer is the insurer or last resort, that does not apply to legal expenses incurred in arbitration."

FSCO's expert panel says 'no' to combining physical and psychological in catastrophic impairment designations

Physical and psychological impairments should not be combined for the purpose of catastrophic determination, according to an expert panel appointed by the Financial Services Commission of Ontario (FSCO) to draft a new definition of catastrophic impairment.
The FSCO panel released its draft report, part of the province's auto insurance reform package, on Apr. 15, 2011. Stakeholders have until May 13 to submit their comments on the draft report.
"The expert panel did not find that combining physical and mental/behavioural conditions can be achieved in a valid and reliable way with the currently available methods of impairment cross-rating," the report says.
"The panel had difficulty understanding how combinations of physical impairments and psychological conditions that independently do not meet the criteria outlined in the revised version of 2(e) and 2(f) could be equated to a severe injury to the brain or, spinal cord, or to blindness."
The panel suggested further research is needed in order to draft a clinically comparable combined psycho-physical whole person impairment threshold that corresponds to the currently accepted physical threshold.
"Therefore, until further scientific evidence is gained, we recommend that separate criteria and methods of evaluation be used for the determination of catastrophic impairment and that physical and psychiatric impairments not be combined for the purpose of catastrophic determination," the report says.
Also among its recommendations, the panel suggested an "interim" status be established to allow insureds with traumatic brain injuries and major physical impairments to obtain immediate access to rehabilitation services.

Entitlement to optional benefits under Ontario auto reforms could expose weakness in communication between consumers-brokers

If an auto insurance consumer in Ontario purchases optional benefits under the province's new auto insurance regime, that doesn't mean the policyholder is entitled to such benefits if they suffer a minor injury arising out of a motor vehicle accident.
A misunderstanding around this point may lead to prickly communications in the future between brokers and consumers, a panel of speakers told the 2011 CIP Society Symposium in Toronto on Apr. 6.
Panelist Jim Cameron, president of Cameron & Associates Insurance Consultants Ltd., noted in his presentation that caregiving and housekeeping benefits are no longer mandatory auto insurance benefits, but optional benefits. This is one of the changes made in the auto insurance reforms Ontario introduced on Sept. 1, 2010.
"The problem being that people buy it as an optional benefit, that doesn't mean you are entitled to it," said Cameron. "You have to have a [more serious] injury than a minor injury in order to qualify, even though you purchased the product. It could be a tough sell. We haven't really seen that come out yet."
Kadey Schultz, partner at Hughes Amys LLP, flagged this as an issue for broker-client communications.
"This is going to be an issue for conflict resolution between brokers and clients down the road," Schultz predicted. "Because someone is going to speak with their broker, find out what optional benefits they want or need, purchase those optional benefits.
"And [then], one year or two years down the road, they [might] get in an accident, they will think they are automatically entitled to these coverages, but they will have to meet the medical test for entitlement. So then there's going to be a big fight with the broker about the level of communication -
"You never told me," chimed in panelist Hugh Fardy, senior vice president of the CG&B Group Inc., mimicking what a consumer might say to the broker in that situation.
"It is going to create a conflict and probably within a year we'll start to see that emerge," Schultz continued.
The issue prompted subsequent discussion between the panelists and the audience about the public's take-up of optional benefits.
Joel Baker, president of MSA Research, made an observation as an audience member. He said he had spoken recently with two insurers, one operating in the direct channel and the other operating in the broker channel.
According to Baker, the insurer representatives told him the take-up on the optional benefits at their companies was only 3-5%.
Fardy said the take-up depends on the area and upon how aggressively the options are sold. He said in some areas, the take-up percentage on optional benefits is more in the territory of between 9% and 10%

Four charged in insurance scam

The Essex County has arrested and charged four people involved in an insurance scam.
The Criminal Investigations Unit has completed an investigation into an arson which occurred in Kingsville in November of 2000.
The charges have not yet been proven in a court.
According to the investigation, the homeowner, along with two other individuals, allegedly planned to burn down the residence as a means to collect insurance proceeds.
Four people have been charged with arson for fraudulent purpose and fraud over $5,000.

Ontario insurance regulator outlines insurers' rights and responsibilities in curbing "questionable or abusive claims"

Ontario's insurance regulator, the Financial Services Commission of Ontario (FSCO), has issued a bulletin outlining an insurer's "rights and responsibilities to challenge questionable or abusive claims."
The bulletin comes in the wake of the province's auto insurance reforms, implemented on Sept. 1, 2010.
"FSCO is monitoring on an ongoing basis the interpretation and application of the SABS and associated guidelines by its stakeholders, with a view to identifying and responding to actions that are inconsistent with the recent auto reforms," the regulator says in its bulletin.
"FSCO recognizes that an overwhelming majority of stakeholders are fair and responsible participants in the auto insurance system. However, FSCO is also aware that a small group of service providers and representatives continue to abuse the system."
FSCO outlines several areas of concern, including:
1) It notes the new SABS introduced an interim Minor Injury Guideline (MIG), which defines "minor injuries" as one or more of a sprain, strain, whiplash associated disorder, contusion, abrasion, laceration or subluxation and includes any clinically associated sequelae to such an injury.
All persons with minor injuries fall under the MIG, with limited exceptions, including if compelling evidence demonstrates that a pre-existing condition will prevent that person from achieving maximal recovery if he or she is limited to MIG treatment.
"It appears that some providers are requesting approval for treatment of minor injuries on a Treatment and Assessment Plan (OCF-18) rather than providing pre-approved treatment under the MIG by submitting a Treatment Confirmation Form (OCF-23)," FSCO notes.
"The auto reforms are still fairly new and not all providers are familiar with the minor injury definition and the MIG.
"In particular, not all providers are aware that the existence of other injuries and conditions will not necessarily bring a claimant outside the MIG if the predominant impairment falls under the minor injury definition."
Insurers have a role to educate health care providers on the new MIG, FSCO noted, adding most already perform this role.
2) FSCO notes a few health care providers are flooding insurers with treatment plans.
"It appears that a small number of providers engage in the practice of flooding insurers with multiple versions of similar or identical treatment and assessment plans (OCF-18s) in an apparent attempt to overwhelm adjusters," the FSCO bulletin says. "In many cases it appears that the objective is to cause adjusters to miss the approval timelines set out in the SABS.
"This type of behaviour is clearly inappropriate."
FSCO notes an insurer is not obligated to undertake an assessment for each treatment or assessment request.

'Funds withheld' arrangements for unlicensed insurance: a possible alternative to reinsurance security agreements?

In an article outlining Canada's new requirement for reinsurance security agreements when using unlicensed reinsurance, McMillan LLP has raised the alternative possibility of administering an unlicensed reinsurance agreement on a "funds withheld" basis instead.
Canada's solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI), has changed the mechanism by which Canadian insurers are allowed capital or asset credit for reinsurance placed with non-Canadian licensed insurers.
Previously, collateral arrangements for unlicensed reinsurance took the form of a reinsurance trust agreement between a cedant insurer and an unlicensed reinsurer, as prescribed by OSFI.
Now, however, the regulator is calling for trust arrangements to be replaced by reinsurance security agreements. These security agreements are to be vouchsafed by a legal opinion.
In an article for the International Law Office, McMillan LLP suggested the possibility of collapsing the trust arrangement and administering the reinsurance on a "funds withheld" basis instead.
"OSFI's related new guidance on reinsurance generally contemplates these arrangements, but cautions that the reinsurance agreement must clearly state that in the event of an insolvency of the ceding insurer or the reinsurer, the funds withheld (minus the amount properly due to the reinsurer) form the property under the cedant under applicable Canadian insurance law," McMillan LLP writes. "This appears to be a matter of legal drafting and as yet OSFI has not stated that a legal opinion confirming the legal effect of the wording will be required.
"However, it is uncertain whether this type of legal arrangement could have a regulatory impact on the reinsurer."
McMillan LLP suggests getting in touch with OSFI before attempting such an alternative arrangement.

Court of Appeal upholds agreement blocking brokerage from suing third party insurer in claim regarding underinsurance

Ontario's Court of Appeal has upheld an agreement blocking an independent insurance broker from claiming indemnification against a third party insurance company in a case in which the insured accused the brokerage firm of leaving it underinsured.
The Court of Appeal lifted a stay on an action between the company, Shoeless Joe's, and its brokerage firm, Insurance Portfolio Inc., meaning a court is now open to assess Shoeless Joe's allegations that Insurance Portfolio caused the company to be uninsured. The allegations have not been proven in court.
Insurance Portfolio arranged for loss insurance for Shoeless Joe's. When Shoeless Joe's called on that insurance, it as told there was insufficient coverage.
Without the broker's assistance, Shoeless Joe's settled with the third party insurer, the Dominion of Canada General Insurance Company, for less than the value of its loss. At that time, Shoeless Joe's signed a release in favour of Dominion, agreeing not to make a claim against anyone who might claim contribution or indemnity from Dominion.
Shoeless Joe's then sued Insurance Portfolio, which then sought indemnification against Dominion.
Dominion moved to stop (or "stay") Shoeless Joe's action and Insurance Portfolio's claim for indemnification, based on the release it signed with Shoeless Joe's.
The court lifted the stay on the main action, meaning Shoeless could proceed with its claim against the broker.
But the broker's indemnification action against Dominion couldn't succeed, the court ruled, not only because of the waiver, but because the broker was arguing Shoeless Joe's was actually properly insured, and that Dominion was negligent in paying less than what it should have.
"In our view, it is plain and obvious that [Insurance Portfolio's] third party claim [against Dominion] for indemnification arising from [Shoeless Joe's] underinsured claim cannot succeed," the court ruled.
If Shoeless Joe's was successful in proving it was underinsured, then the basis of Insurance Portfolio's third party indemnity claim against Dominion - i.e. that Shoeless Joe's was properly insured - fell away, the court noted.
Conversely, if Shoeless Joe's was unsuccessful in proving it was underinsured, it suffered no loss. Thus, the brokerage couldn't claim contribution or indemnity from Dominion.

Court voids claims waiver based on power imbalance between adjuster and plaintiff

The Ontario Superior Court of Justice has voided a release waiving all claims against a defendant and his insurer in an auto accident claim, based on the fact that the insurance adjuster had used his unequal bargaining power to lowball a settlement agreement with the plaintiff.
Specifically, the court noted the adjuster did not share information with the plaintiff about the true extent of the plaintiff's serious injuries. Also, the adjuster had incorrectly applied Fault Determination Rules, significantly reducing the settlement offer.
In Jones v. Jenkins, the plaintiff, Brandon Patrick Jones, was injured in a motor vehicle accident when his motorcycle collided with a vehicle driven by Jack Jenkins.
Jenkins wanted the court to enforce a release in which the plaintiff agreed to receive a payment of $19,411 in return for a waiver of any future claims against Jenkins and his insurer, ING Insurance Company of Canada.
The agreement was reached after discussions between the ING insurance adjuster and Jones. The adjuster asked Jones to make a settlement offer based on heads of damages such as disfigurement, pain suffered, future pain and future loss of employment. Jones proposed $241,000.
The adjuster made a counter-offer. A deductible of $30,000 was applied to the general damages. Also, based on the adjuster's assertion that Jones was 75% responsible for the accident, the general damages ($35,000 net of the deductible) and future economic loss ($22,500) were reduced by 75%. The total counter-proposal was $19,411.
The court described the plaintiff, who trusted the adjuster, as "unsophisticated" and "not good with words."
Jones feared losing his job after the accident, and so he stated to a person filling out a medical report that he felt he had recovered and could return to work.
But the adjuster had access to Jones' accident benefit file, which indicated Jones had suffered a much more serious injury - severe and acute radial nerve damage - than disclosed in the medical report. The adjuster should have shared this information in the file with the plaintiff, the court noted.
Also, the court found: "More troubling is the fact that the adjuster reduced the general damages and future economic loss claim by 75% purportedly on the basis of the plaintiff being 75% responsible for the accident. There is no evidence that this was the case.
There was no reason to apply Fault Determination Rules as they were guidelines which were only applicable as between insurers and not as between a plaintiff and a defendant."
As a result, the court found the adjuster had "used his position of power to achieve an advantage and that the agreement reached was sufficiently divergent from community standards of commercial morality as to be unconscionable and it should be set aside."

Common law spouse of husband who dies of injuries sustained in home fire cannot receive full home insurance payout until estranged children of spouse are contacted: judge

The widow of a common-law husband, who died without a Will as a result of injuries from a fire that engulfed their insured home, cannot receive the balance of the home insurance payment until her husband's estranged children can be contacted, the New Brunswick Court of the Queen's Bench has ruled.
In the same ruling, Stanley Mutual Insurance Company received permission to pay the unresolved balance of the home insurance policy proceeds ($45,447.26) into court. The court thus discharged the insurer of all liability for the monies while the issue of whether the widow is entitled to the money is resolved.
"This matter is indeed complicated by the intestacy of [the deceased husband] Vernon Pell and the fact that he and [June Yvonne] Shepherd, although they lived as common law spouses for many years, never married," Court of Queen's Bench of New Brunswick Justice Thomas Riordon wrote.
Pell and Shepherd lived as a common-law couple for approximately 28 to 30 years. Pell, who was divorced prior to his relationship with Shepherd, had children from his previous marriage, but had not had any contact with them for many years. The whereabouts of the children were unknown.
In 2001, the couple moved to New Brunswick from Ontario and purchased the house. They bought a home insurance policy from Stanley Morgan.
The house was damaged in a fire on Sept. 18, 2009. Pell died the next day as a result of a heart attack connected to serious burns to his body in the fire.
Pell died without a Will at the age of 75.
Stanley Mutual paid proceeds owing to Shepherd, and made an application to the court to pay to Shepherd the remainder of proceeds owed to Pell ($45,447.26). The court ordered that some effort be made to find Pell's surviving children first, prior to determining Shepherd's entitlement to the remainder of the insurance policy payment.
"I can understand and appreciate the arguments advanced on behalf of the respondent, Ms. Shepherd," the judge wrote. "However, considering that Mr. Pell died intestate, that he and Ms. Shepherd were not married and that he had children and the provisions of the Devolution of Estates Act [in which the widow of "marital property" is entitled to an intestate's proceeds], I am not prepared at this time to approve payment of the remaining proceeds to Ms. Shepherd."
The judge allowed the insurer to pay the balance of the proceeds into court, pending a search to find Pell's children and/or heirs.

Ontario Court of Appeal holds up marijuana exclusion clause

The Ontario Court of Appeal has upheld a marijuana exclusion clause when landlords tried to make a claim for damages arising from an explosion on their property caused by a tenant running a marijuana grow-up.
In Pietrangelo v. Gore Mutual Insurance Company, Valentino Pietrangelo and Antoinette Pietrangelo owned a rental property. The tenants of the property caused an explosion resulting in total destruction of the house.
As a consequence of the explosion, the tenant pleaded guilty to intentionally or recklessly causing damage to a dwelling house and unlawfully producing cannabis resin.
Following the explosion, the Pietrangelos filed a proof of loss claim under their home insurance. The insurer, Gore Mutual Insurance Company, denied the loss based on an exclusion clause in the policy that excluded coverage to properties directly or indirectly damaged while used in the processing or manufacture of marijuana.
The Pietrangelo's appealed the use of the exclusion clause, arguing that:
• the word "use" in the clause is ambiguous, and that it was an error to hold that the exclusion clause was intended to apply regardless of any knowledge or involvement of the insured;
• the exclusion clause was unjust and unreasonable and s. 151 of the Insurance Act should apply because an insured should not be expected to pay for wreckage caused by the criminal acts of a third party;
• by accepting evidence of the draftsperson as to his intent, the trial judge ignored the clear language of the insurer's Notice that the clause was in relation to ‘marijuana grow houses.'
The Court of Appeal upheld the lower court's rejection of each of the submissions.
The reasonings are as follows:
• the trial judge was correct to interpret the word ‘use' in accordance with its ordinary, commonly understood and literal meaning;
• the trial judge correctly observed that the issue is not whether the exclusion clause creates unfairness to the insured, but whether there is a rational basis for its existence. Since the trial judge determined it was valid and legitimate, s. 151 of the Insurance Act has no application; and
• the draftperson's evidence did not go to the interpretation of the clause, rather, it was in relation to the reason for the existence of such a clause.
"We agree with the trial judge, the exclusion clause in the circumstances of this case is neither "unjust nor unreasonableness," the panel of Court of Appeal Judges wrote. "There are certain risks, which insurers are entitled not to cover for legitimate business reasons relating to the ability to assess risk and set premiums."

Insurer not obliged to pay for independent counsel retained by insured to defend against damages beyond coverage limits: Ontario court

An insurance company does not have to pay for counsel retained by an insured to defend the insured's interests in the event that damages exceed prescribed policy coverage limits, the Ontario Superior Court has ruled.
In 137328 Canada Inc. (Alliance Security Systems) v. Economical Mutual Insurance Company, Alliance installed a security system at a warehouse occupied by Richelieu Hosiery in 2003. During the five-year contract period, the warehouse roof collapsed as a result of excessive snow, causing a water main to burst and damage to the premises and inventory alleged to be in excess of $7 million.
Richelieu commenced an action against Alliance, alleging the security company failed to notify it when the roof collapsed, contributing to the extent of the loss. Alliance purchased liability insurance of $2 million from The Economical.
The Economical advised Alliance that it would defend the action and provide coverage up to the coverage limit. It then retained a lawyer of its choosing.
Alliance, however, retained independent counsel of its own, saying there was a conflict of interest between Alliance and Economical.
Alliance argued The Economical didn't rule out a "remote possibility" that a coverage issue might arise during litigation, which would put the insurer at odds with the insured. [The Economical gave evidence that it was not aware of any coverage issues going into the trial, and seemed to be simply cautioning the insured.]
Also, Alliance said it needed to retain independent counsel in the event that the damages exceeded the policy limits.
But none of these concerns suggested a divergence of interests between the insured and the insurer that warranted taking the defence out of the hands of the insurance company, the court ruled.
"The insurance policy does not contain any term requiring Economical to pay for counsel for Alliance to protect itself with respect to claims in excess of the policy limits," the court ruled. "At this point in time the issue of protecting any interest it may have in any dispute with the insurer is non-existent, because the insurer acknowledges and has agreed that it will provide coverage for the claim up to its limits."
The court ruled the insurer had a right to choose its own defence counsel and to direct the defence. Alliance had a right to retain independent counsel to defend its interests if damages went beyond the coverage limits, but the insurer was not required to pay for the independent counsel.

Best practices help to avoid special arbitration awards when no benefits are in dispute

A recent Financial Services Commission of Ontario (FSCO) decision - which granted a special award when there were no benefits in dispute - should prompt adjusters to follow a set of best practices to avoid a similar decision in the future, Kadey B.J. Schultz, a partner at Hughes Amys LLP, told delegates of the Ontario Insurance Adjusters' Association (OIAA) annual conference.
Schultz referred to the October 2010 FSCO arbitration, Cowan & Motor Insurance, during her joint presentation with Laurie Walker, McLaren's director of Ontario accident benefits. The presentation was entitled 'AB Update: Looking Forward Into the Future.'
"The most important part of Cowan & Motor is that it's a case about a special award when there were no benefits in dispute at the time of arbitration," Schultz said.
"For all of those years in which we felt fairly confident that if we resolved the issues in dispute, the claimant wouldn't proceed to arbitration on just the claim for special award - or an arbitrator would be loath to award a special award when there were no benefits outstanding because they had been resolved consensually and voluntarily - I submit those days have been over for about three years now.
"If people weren't listening, then Cowans is the decision to really, really get your attention."
Schultz urged adjusters to follow best practices to avoid these kinds of special awards in the future. Her suggestions included:

No one is holding the insurer or adjuster to a standard of perfection. You have to do your best and do what's reasonable.
An examiner or supervisor is expected to have sound and moderate judgment. But if a mistake in judgment is made, a second pair of eyes in an organization should review the file to make sure the first error in judgment is rectified.
Take reasonable steps that a reasonably prudent and careful examiner would take in the adjudication process.
Schultz gave an example of what reasonable and moderate steps might entail. For example, if a claimant says he or she should be bounced out of the Minor Injury Guideline due to pre-existing medical conditions, reasonable steps would include obtaining documentation. If the documents obtained are difficult to read or are illegible, as is the case with many doctors' records, then pay to have them transcribed.
"A reasonable and moderate decision cannot be made on illegible information," she said.

Ontario Court of Appeal allows cross-claim, despite being beyond limitation period

defendant can still file a cross-claim for contribution and indemnity even after the limitation period of the plaintiff naming that individual has expired, Ian Gold, a founding partner of Thomas Gold Pettingill Lawyers, told delegates of the Ontario Insurance Adjusters' Association (OIAA)'s annual conference.
Gold delivered a presentation on casualty claim developments on Feb 9. During the seminar, he pointed to the Ontario Court of Appeal case, Waterloo Region District School Board v. CRD Construction Ltd.
In this case, a severe storm blew down the walls of a new school gymnasium that was under construction in 2002. At that time, the Professional Engineering Act provided a 12-month limitation period for the engineer that provided the engineering services for the construction of the gym.
In 2008, the Waterloo school board commenced an action. Since the limitation period had expired against the engineer, the school board named various contractors that had constructed the gymnasium.
The named defendants filed various cross-claims against the engineer seeking contribution and indemnity, Gold said.
"And that was the question before the court: Could these defendants, even though it was beyond the limitation period, advance a claim for contribution and indemnity beyond the limitation period against the engineer? And the court said, ‘Yes,'" Gold said.
Under the Limitation Act, claims for contribution and indemnity have a two-year limitation period from the time a defendant was served with a statement of claim, Gold said.
"There may be a knee-jerk reaction to say, ‘Oh, the limitation period is over and those [plaintiffs] weren't smart enough to sue me," he said. "Well, one of those named defendants might be smart enough, and you have to worry about that for two years."