IDT911 expands in Canada to offer privacy breach services to insurers and businesses

IDT911, an identity management and data risk management services provider, has expanded into Canada to help businesses minimize the chance of breaches and manage them when they occur. The Arizona-based company, which has offices in Toronto, partnered with Economical Insurance and Trisura Guarantee Insurance Company earlier this year to provide privacy breach resources to Canadian businesses. Now, its products, which include data security education and training, proactive exposure mitigation tools, breach response services, and identity management services for consumers, will now be available to clients throughout Canada. It will also offer its expertise to insurance carriers to create privacy products that fit their policyholders’ specific needs. IDT911 also has a training methodology to help brokers promote cyber-security products and services to their clients. Privacy risks within and outside of Canadian businesses are increasing, especially with more technology in the workplaces, IDT911 notes. Employee errors, lost or stolen laptops and other mobile devices and deliberate, target attacks all present major concerns for privacy breaches. Though its offerings are built for businesses of all sizes, small and mid-sized businesses are often most unprepared and unprotected, the company notes.

Low interest rates a drag on investment returns for insurance industry

The low interest rate environment and declining investment returns are putting stress on the insurance industry and having a significant impact on re/insurers, Kurt Karl, chief economist for Swiss Re, noted in a blog post on Sept. 5. “The vulnerability of different lines of business depends on the importance of investment income as a source of revenue and the ability to hedge interest rate risks,” Karl writes. “Life savings products are more sensitive to interest rates than long-tail non-life products,” he adds. “Non-life insurers can periodically attempt to re-price their products as policies are renewed, allowing them to restore profitability.”

Canadian P&C outlook stable to year-end: A.M. Best

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Best TEXT SIZE 2012-09-06 -------------------------------------------------------------------------------- The outlook for the Canadian property and casualty market for the remainder of 2012 is stable, with a low level of change to companies’ ratings, notes a senior financial analyst with A.M. Best Company. This is despite economic uncertainty in many parts of the world, Jackie Catrino Lentz commented during the rating agency’s 2012 Insurance Market Briefing in Toronto on Sept. 6. “We see no significant drivers emerging currently that would indicate a near-term change to the stable outlook.” The vast majority, 97%, of companies are “secure” in terms of financial strength rating (FSR), Catrino Lentz said. Industry consolidation from mergers and acquisitions has led to movement in ratings, mainly companies improving their ratings. “Companies are looking for market share in a very competitive environment,” she said. Among the top 10 rated companies, which include companies that have seen M&A activity in recent months, market share has grown from 58% to 68% between 2007 and 2011, she added. Since 2011, there also have been no ratings downgrades. While the first six months of 2012 have developed favourably, severe weather events in various provinces across Canada may have a negative impact in 2012 Q3. Results for the P&C market overall have been very favourable compared to the last three years, with the auto segment helping to drive the industry to a modest underwriting profit. That strength has been offset by severe damage from major storms across Canada and the United States, including the Slave Lake fire and hail storms in Alberta, Catrino Lentz said. In the coming year, industry consolidation will continue to be a key issue and may test companies’ abilities to merge cultures and even leadership styles, she added. Some companies may have to simplify their business models and refocus on profitable lines, she added.

Insurance fraud in U.S. a $30-billion problem: Deloitte

Property and casualty insurers need to adopt a multi-pronged approach to combat a growing fraud problem in the United States, notes a recent report from Deloitte. The report, A Call to Action: Identifying Strategies to Win the War Against Insurance Claims Fraud, says auto insurance and workers’ compensation are the two biggest sources of an estimated $30 million in insurance fraud. Deloitte also states the National Insurance Crime Bureau (NICB) reported that in 2011 questionable claims for the first time had exceeded 100,000 referrals and had increased by 19% compared to 2009, and specific categories saw even larger increases, such as casualty and miscellaneous claim types. To deal with claims fraud, Deloitte recommends insurers to create an integrated fraud management strategy that rests upon four pillars. Its four pillars of an integrated fraud management program include: •developing a fraud management strategy; •aligning the operating model; •improving information quality; and •leveraging advanced technology tools and analytics. “While many insurers have invested resources in an effort to improve fraud management, few have taken a broad or integrated approach,” Deloitte observes in the report. “Some companies have invested in improving data quality and adopting technology tools, but still lack the business processes, workforce competencies and organizational structure needed to act on the insights gained from data analysis.”

York Regional Police lay 142 charges in alleged auto fraud scheme called "Project Sideswipe"

Forty-six suspects have been charged in connection with an alleged auto fraud scheme called Project Sideswipe involving staged collisions and suspected false medical billings in Ontario. One hundred and forty-two charges have been laid to date, including conspiracy to commit an indictable offence, fraud under $5,000, fraud over $5,000 and obstruction of a police officer, notes a statement from the York Regional Police (YRP). Project Sideswipe involved nine alleged staged collisions that occurred in York Region, as well as suspected associated false medical billings from several medical rehab and assessment centres in Brampton, Toronto and Mississauga, notes a statement from the Insurance Bureau of Canada (IBC). The allegations have not been proven in court. Police believe a ring of recruited drivers and passengers staged collisions to support accident benefit insurance claims. Medical rehab and assessment centres would then use the names, signatures and college registration numbers of medical practitioners, without their proper authorization, and invoice insurance companies for services that were not rendered, the IBC reports. Rick Dubin, vice president of investigation services for the IBC, characterized the efforts as yet, "another step at driving a wedge into one of the alleged sophisticated fraud networks, operating throughout the Greater Toronto Area.” “The potential loss to nine insurers is still being calculated, but it is estimated to be somewhere in the neighbourhood of $5 million,” Dubin notes in the statement. “Insurance premiums are driven by claims costs and right now costs have been driven through the roof in Ontario as a result of fraud and abuse in the system.” Results from a KPMG study estimate the annual cost of auto insurance fraud in Ontario to be in the range of between $770 million and $1.6 billion per year.

FSCO rejects insurer's motion to obtain academic course records of injured woman's daughter/caregiver

A Financial Services Commission of Ontario (FSCO) arbitrator has rejected the motion of an insurer to obtain a copy of the academic course record of the daughter of a woman injured in an auto accident. The insurer in the matter, Security National, argued the course schedule of the daughter, who attended the University of Toronto between 2008 and 2010, was necessary to confirm whether or not the daughter was a full-time or part-time student. This information would then shed light on whether or not the daughter provided housekeeping and caregiving services to her mother as claimed. Mary Anothonipillai was injured in an auto accident on Apr. 21, 2008 and applied for statutory accident benefits. Security National disputed the amount she claimed for housekeeping and caregiving expenses, contending the costs were too high. Security National attempted through correspondence with Anthonipillai’s daughter, Sharel George, to establish George’s status as a student, so it could assess the amount of time she may have taken away from school to provide care for her mother A Financial Services Commission of Ontario (FSCO) arbitrator has rejected the motion of an insurer to obtain a copy of the academic course record of the daughter of a woman injured in an auto accident. The insurer in the matter, Security National, argued the course schedule of the daughter, who attended the University of Toronto between 2008 and 2010, was necessary to confirm whether or not the daughter was a full-time or part-time student. This information would then shed light on whether or not the daughter provided housekeeping and caregiving services to her mother as claimed. Mary Anothonipillai was injured in an auto accident on Apr. 21, 2008 and applied for statutory accident benefits. Security National disputed the amount she claimed for housekeeping and caregiving expenses, contending the costs were too high. Security National attempted through correspondence with Anthonipillai’s daughter, Sharel George, to establish George’s status as a student, so it could assess the amount of time she may have taken away from school to provide care for her mother. George did not supply the information to Security National, which then brought a motion asking FSCO to compel George to provide her academic course schedule during the period at issue (between 2008 and 2010). FSCO did not allow the motion, questioning the relevance and the probative value of the documents. “I am not persuaded that the records are so relevant that their non-disclosure now would prejudice a just and fair hearing so that I should therefore set aside privacy concerns around documents that contain information personal to a third party [George] but none about a party to this proceeding [Anthonipillai],” FSCO arbitrator Jessica Kowalski wrote in her decision. “Nor am I persuaded that the academic schedule is as probative as Security National asserts. That schedule will not disclose how often, or even whether, Ms. George attended her classes.”

Pocket bike is not an automobile for insurance purposes: FSCO arbitrator

An insurance company has won an appeal that a motorized pocket bike should not be considered an automobile for insurance purposes under the Ontario Statutory Accident Benefits Schedule (SABS). Motors Insurance Corporation appealed the original ruling by Financial Services Commission of Ontario (FSCO) arbitrator Denise Ashby in January 2011 that a pocket bike met at least one of the three tests for classification as an automobile. In that original ruling, Motors Insurance and Bouchard, there was an agreed statement of facts that Cassondra Bouchard was injured while riding Kristin Stratton's uninsured pocket bike at Stratton's property on Jan. 13, 2008. In Adam v. Pineland Amusements Ltd., decided in 2007, the Ontario Court of Appeal developed the following three-part test to determine what is an “automobile”: • Is the vehicle an “automobile’ in ordinary parlance? If not, then, • Is the vehicle defined as an “automobile” in the wording of the insurance policy? If not, then, • Does the vehicle fall within any enlarged definition of “automobile” in any relevant statute? Ashby determined that the first two conditions did not apply in Motors Insurance, so she looked to the Off-Road Vehicles Act (ORVA). Ashby interpreted the ORVA to mean that if the pocket bike had required insurance, that would have made it an “automobile.” If so, then Bouchard should have access to accident benefits under her father's automobile policy. Ashby held that the pocket bike met the definition of an off-road vehicle under s. 1 of the ORVA, since it was “a vehicle propelled or driven otherwise than by muscular power or wind and designed to travel [on] not more than three wheels.” Section 15(1) of the ORVA goes on to require off-road vehicles to be insured under a motor vehicle liability policy in accordance with the Insurance Act, with the exception under s. 15(9) “where the vehicle is driven on land occupied by the owner of the vehicle.” Ashby concluded that the pocket bike was required to be insured under the ORVA despite the time and circumstances of the incident because s. 15(9) is a “very narrow exclusion.” However, FSCO arbitrator David Evans disagreed with this assessment in a June 20 appeal decision. He found that the pocket bike was being operated on Stratton's property when the incident occurred. In those circumstances and at that time, the ORVA did not require Stratton's pocket bike to be insured under an automobile insurance policy. Therefore, Bouchard was not operating a motor vehicle and was not involved in an accident within the meaning of s. 2(1) of the SABS. The appeal was allowed in favour of Motors Insurance.

Anti-Fraud Task Force committee seeks public input on proposed measures to combat auto insurance fraud

The Steering Committee of the Ontario Auto Insurance Anti-Fraud Task Force is seeking public comment on several potential recommendations before it submits its final report to the government in the fall of 2012. The steering committee also reported its difficulty in pegging a precise dollar figure to Ontario auto fraud, citing a KPMG study that put auto insurance fraud in 2010 anywhere in the neighbourhood of between $769 million and $1.6 billion. The steering committee report goes on to note that Ernst & Young is reviewing the KPMG figures. Ernst & Young has indicated that KPMG may be underestimating the extent of overall auto insurance fraud in Ontario “because it does not specifically address premeditated fraud, which, as Ernst & Young noted, could range between $130 to $260 million per year.” The steering committee is seeking public input on the following anti-fraud initiatives, among others: • Regulation of health clinics. • Regulation of the towing industry. The Steering Committee of the Ontario Auto Insurance Anti-Fraud Task Force is seeking public comment on several potential recommendations before it submits its final report to the government in the fall of 2012. The steering committee also reported its difficulty in pegging a precise dollar figure to Ontario auto fraud, citing a KPMG study that put auto insurance fraud in 2010 anywhere in the neighbourhood of between $769 million and $1.6 billion. The steering committee report goes on to note that Ernst & Young is reviewing the KPMG figures. Ernst & Young has indicated that KPMG may be underestimating the extent of overall auto insurance fraud in Ontario “because it does not specifically address premeditated fraud, which, as Ernst & Young noted, could range between $130 to $260 million per year.” The steering committee is seeking public input on the following anti-fraud initiatives, among others: • Regulation of health clinics. • Regulation of the towing industry. • Enhanced authority for the Financial Services Commission of Ontario (FSCO), including the ability to regulate the business practices of health care treatment and assessment facilities. • Tightened controls on the delivery of auto accident benefits, including a proposal that would allow insurers to bill claimants $500 as “a form of cost recovery” if claimants fail to attend a medical examination requested by the insurer. • An ability to share personal information in a way that conforms with privacy legislation, but that would allow insurers and authorities to detect and prevent fraud. • Providing insurers with broader civil immunity, so that insurers might be protected from civil suits for reporting to regulators or the police when they have suspicions of fraudulent behaviour by their own policyholders.

Insurer cannot pro rate attendant care based on economic loss: Ontario Court

An Ontario Superior Court judge has held that an insurer cannot take a proportional approach to the payment of attendant care benefits based on the extent of the economic losses suffered. In Henry v. Gore Mutual Insurance Company, the insurer argued that its liability for attendant care benefits was limited to the number of hours that the attendant care provider lost from work. Ontario Superior Court Justice Timothy Ray, however, ordered that Gore Mutual had to pay the full amount of attendant care benefits as set out in the standard auto insurance policy in Ontario. In Henry, an 18-year-old man catastrophically injured in a motor vehicle accident elected to have his mother provide attendant care. The mother took a leave of absence from her full time employment at a retail store to care for her son. The attendant care needs were assessed at $9,500 per month, with the maximum payable by Gore Mutual of $6,000 per month to a lifetime maximum of $1 million, as agreed upon by a Form 1 assessment. Gore calculated that its liability for attendant care payments to the injured victim (applicant) should be limited to the number of hours that the victim’s mother was working as a proportion of the total attendant care hours assessed, or a pro rated version of the $6,000 per month. Specifically, Gore took the position that if the service provider — the applicant’s mother — could show that she had sustained an economic loss, then the expense payable would be to indemnify her to the extent of her financial loss, according to court documents. However, rather than paying her lost income, Gore calculated her number of hours and paid her a proportion of the attendant care expense. The court found in favour of the applicant. In his decision, Ray wrote: “A plain reading of the section provides that if a family member stays home from work, loses income in order to provide all reasonable and necessary attendant care to the insured — and the insured is obligated to pay, promises to pay or does pay the family member, then the definition in section 19(1) has been met. All reasonable and necessary attendant care expenses must then be paid to the insured as described in the Form 1.” (emphasis in original ruling)

Sunrise Propane explosion in Toronto causes more than $25 million in property damage: lawsuit

The law firms representing plaintiffs in an action arising out of a deadly propane explosion in Toronto four years ago report the blast caused more than $25 million in property damage. One employee and an emergency responder died following the massive explosion at the Sunrise Propane distribution plant on Aug. 10, 2008. About 12,500 residents had to be evacuated, notes a statement from Stevensons LLP, Falconer Charney LLP and Sutts Strosberg LLP. The claim includes facts that have not yet been established in court. Class counsel in this matter include Harvin Pitch of Stevensons LLP, Theodore P. Charney of Falconer Charney LLP and Harvey and Sharon Strosberg of Sutts Strosberg LLP. The action has been certified as a class action by the Ontario courts, the statement notes. The certification order allows the matter to proceed against the defendants, including Sunrise Propane Energy Group Inc., the Technical Standards and Safety Authority and a number of suppliers to Sunrise Propane.

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Man in default of auto accident judgments cannot challenge their validity in follow-up actions to recoup amounts: court

A man in default of two court judgments ordering him to pay a total of $80,000 in damages to two injury victims in a 1992 auto accident is not entitled to challenge the validity of those judgments in subsequent actions intended to recoup the outstanding payments, the Court of the Queen’s Bench in Alberta has found. Maurice Riendeau did not defend himself and was noted in default in a personal injury action arising from a September 1992 auto accident, in which Arlene Helen Zawaski and Shawn Bruce McNamara (a passenger in Zawaski’s car) were injured. Zawaski and McNamara commenced an action against Riendeau, who was noted in default, and Alberta’s Administrator of the Motor Vehicle Accident Claims Act stepped in to defend the claims on behalf of Riendeau. After serving Riendeau personally and hearing nothing back, the administrator consented to — and paid — the judgments entered against Riendeau ($35,159.84 to Zawaski and $44,888.78 to McNamara). The administrator later filed renewal actions to recoup payments in both the Zawaski and McNamara judgments in 2006-07, following a $500 payment Riendeau made against the Zawaski judgment in order to restore his driver’s licence when he moved back to Alberta. Riendeau filed statements of defence and counterclaims against the administrator’s renewal actions in an effort to recover the $500 he paid for the Zawaski judgment. The administrator sought summary judgment in the renewal actions and a summary dismissal of Riendeau’s counter-claims on the basis that the court had already adjudicated the Zawaski and McNamara matters. The court agreed with the administrator. “I am satisfied that the circumstances of this particular case warrant the application of the doctrine of res judicata [a legal term referring to a matter already adjudicated],” Alberta Court of Queen’s Bench Justice D.R.G. Thomas wrote for the court. “Further, there is evidence that the amount of $500 was paid by Riendeau on the Zawaski judgment on Mar. 21, 2006. That is evidence that he recognized and accepted the validity of the Zawaski and McNamara judgments. He is now estopped [prevented] from challenging their validity on the basis of this one payment, notwithstanding his claim that he had to make the payment to renew his Alberta driver’s licence.”

Key driving behaviours better indicators of risk than traditional rating variables: Progressive

Key driving behaviors — for example, actual miles driven, braking and time of day of driving — can predict the likelihood of a claim far better than traditional insurance rating variables such as a driver's demographic profile, age, and the year, make and model of the insured vehicle, research by Progressive suggests. Progressive released new findings from an analysis of 5-billion real-time driving miles, concluding that driving behavior has more than twice the predictive power of any other insurance rating factor. Loss costs for drivers with the highest-risk driving behavior are approximately two and a half times the costs for drivers with the lowest-risk behavior, Progressive says in a press release. The company believes the results suggest auto insurance rates can be far more personalized than they are today. Progressive has been collecting and analyzing real-time driving data for 15 years. It says it has doubled the number of miles it has analyzed in the last 18 months since the launch of Snapshot, a usage-based insurance (UBI) program. “It's a case where the data confirms everyone's intuition,” said Progressive president and CEO Glenn Renwick. “We believed that driving behavior was the most predictive rating factor — but didn't expect the difference to be this dramatic. Actual driving behavior predicts a driver's risk more than twice as strongly as any other factor. “It shows that we're not members of an arbitrary actuarial class — we're individuals with our own set of driving habits, which should be reflected in the price we pay for our insurance.” Progressive found that 70% of drivers who signed up for its Snapshot UBI program paid less for their insurance, with customers saving an average of $150 a year.

Sending AB application to the wrong insurer a "reasonable explanation" for a delay in reporting the claim to the proper insurer: arbitrator

An Ontario arbitrator has awarded a $5,000 ‘special award’ against Economical Mutual Insurance Company after the company denied a claim on the basis that the claimant, Roda Egal, had not provided a reason for a delay in making her application following her injury in a motor vehicle accident. Four months after the accident, Egal’s lawyer had provided Economical a reason for the delay — confusion, basically. Approximately three months after her injury, the claimant applied for benefits to the wrong insurer, the American Home Assurance Company, which had approved her treatment plan and began to pay accident benefits. Economical subsequently took two years to obtain Egal’s file from the firm adjusting the claim. The claimant was injured on Apr. 29, 2009, while travelling with two friends in a rental vehicle that was struck on the passenger side (Egal was sitting in the front seat). She was taken by ambulance to a Toronto hospital, where she left before receiving treatment, and was bed-ridden for six days. Egal testified she was away from work for approximately two weeks after the accident, since she could not turn her neck left or right, her chest hurt and she had back pain, knee pain and headaches. She saw a chiropractor every day until the summer of 2010. Egal originally sent her application for accident benefits in error to American Home Assurance. An adjuster from Crawford Adjusters Canada Inc. was assigned to the file. An Ontario arbitrator has awarded a $5,000 ‘special award’ against Economical Mutual Insurance Company after the company denied a claim on the basis that the claimant, Roda Egal, had not provided a reason for a delay in making her application following her injury in a motor vehicle accident. Four months after the accident, Egal’s lawyer had provided Economical a reason for the delay — confusion, basically. Approximately three months after her injury, the claimant applied for benefits to the wrong insurer, the American Home Assurance Company, which had approved her treatment plan and began to pay accident benefits. Economical subsequently took two years to obtain Egal’s file from the firm adjusting the claim. The claimant was injured on Apr. 29, 2009, while travelling with two friends in a rental vehicle that was struck on the passenger side (Egal was sitting in the front seat). She was taken by ambulance to a Toronto hospital, where she left before receiving treatment, and was bed-ridden for six days. Egal testified she was away from work for approximately two weeks after the accident, since she could not turn her neck left or right, her chest hurt and she had back pain, knee pain and headaches. She saw a chiropractor every day until the summer of 2010. Egal originally sent her application for accident benefits in error to American Home Assurance. An adjuster from Crawford Adjusters Canada Inc. was assigned to the file. In separate correspondence dated Aug. 11 and June 8, 2009, the adjuster acknowledged receipt of Egal’s application and treatment plan, which American Assurance approved in full. In late August 2009, counsel for Egal forwarded correspondence to Economical with an application for accident benefits and an authorization and direction. On Sept. 2 and 18, Economical requested the reason for Egal’s delay in reporting the claim. “On Sept. 28, 2009, Ms. Egal’s counsel forwarded an explanation for the delay to Economical stating that Economical failed in explaining Ms. Egal’s rights to her and did not provide her with an accident benefits package,” the arbitrator noted. “Therefore, her application was not forwarded until after she retained counsel.” Economical said it did not deal with Egal’s claims because of time that had elapsed between the accident and her application. Ontario accident benefits legislation requires that applicants for related benefits must notify their insurers within seven days of the accident, “or as soon as practicable afterwards.” The saving provision in the legislation is that a person is not disentitled from proceeding with a claim if the applicant has a reasonable explanation. “I find no merit in Economical’s position that it had no responsibility to adjust Ms. Egal’s file until receiving a reasonable explanation for her delay in applying,” the arbitrator ruled. “Economical received a reasonable explanation for the delay. Economical was also aware that documentation had been sent to the wrong insurer and persisted in refusing Ms. Egal’s claims long before it had received her file. “I find that Economical failed egregiously in its responsibilities to its first party insured, Ms. Egal. It did not follow up expeditiously in obtaining her file from American Assurance and it made decisions about her entitlement in its absence.”

Ontario court awards punitive damages against insurer, distinguishing between fraud and maximizing insurance recovery

Wawanesa Mutual Insurance Company employed a high-stakes litigation strategy designed to intimidate homeowners seeking damages, a choice that demands significant, but proportionate punishment, an Ontario court has ruled. In Brandiferri v. Wawanesa Mutual Insurance, et al., Ontario Superior Court Justice P.D. Lauwers dismissed the insurer’s allegations of fraud against the policyholders in a decision related to a fire at the home of Salvatore and Linda Brandiferri on Aug. 8, 2000. The fire destroyed the home’s contents and resulted in smoke penetrating the house. The Brandiferris sued Wawanesa and Strone Construction, arguing the latter is liable for deficient remedial construction work and the insurer was also liable because it selected the contractor that provided the poor work. The homeowner’s insurance policy provided “guaranteed replacement cost” coverage for the house and contents, and included a “single inclusive limit” of $564.000. Wawanesa paid slightly more than $479,000, but the Brandiferris sought $178,093.74 from Wawanesa and Strone for the house not being completely or acceptably restored. Counsel for Wawanesa submitted that the Brandiferris had brought an action without determining the amount at issue by way of appraisal. Pina Naccarato, the Brandiferris’ daughter, prepared the proofs of loss. Once completed, they were submitted to the Bradiferris’ lawyer. The proofs of loss prepared on the Brandiferris’ behalf were completed by someone who had never done these before and had no instructions on how to do so, the court determined. The court notes that everything in the house — which had earlier been taken away — was included on the list. Naccarato did not know which items were damaged. “By swearing the proof of loss, the Brandiferris swear that the items listed were destroyed in the fire,” counsel for Wawanesa submitted. As such, those statements were false. “They were not claiming these items in the context of an honest claim for indemnity, but rather in an attempt to secure the maximum payout from the policy and turn this fire as a source of gain.” Justice Lauwers notes the law in Ontario is that it is not automatically fraud for a plaintiff to put in a claim that might be seen as exaggerated. “I am not persuaded on the evidence that the Brandiferris committed fraud in preparing and filing the first or subsequent proofs of loss, even though they did seek to maximize their recovery.” Justice Lauwers determined that, in light of correspondence, it was plain that Wawanesa, through its counsel, “waived its right to insist on an appraisal, in writing, and therefore cannot now insist that it is a condition precedent to the plaintiffs’ right to recovery in this action.” The decision further notes: “The fraud allegation was late-breaking and was only made after the action was started in the statement of defence and counterclaim." Part of an insurer’s duty of utmost good faith in investigating, assessing and attempting to resolve claims must attach to the insurer’s litigation strategy against the insured when the claims is disputed, the ruling adds. Justice Lauwers calculated $108,257.78 as the amount needed to put the home in the condition it was before the fire. He ordered Wawanesa to pay $100,000 in punitive damages.

Family of Quebec man killed when a tree fell on his car should go to province's auto insurer for compensation: Supreme Court

A Quebec man killed when a tree fell on the vehicle he was driving in the City of Westmount must turn to the province’s auto insurer for compensation, the Supreme Court of Canada has ruled, thus rejecting the man’s civil lawsuit against the city. In August 2006, a tree in the City of Westmount fell on a vehicle occupied by Gabriel Anthony Rossy, killing him. His family sued the city for damages, alleging that the city, as the owner of the tree, had failed to properly maintain it. The city sought to dismiss the lawsuit, arguing that the injury resulted from an accident caused by an automobile. Therefore, any compensation should come from the no-fault benefits scheme administered by the Société de l’assurance automobile du Québec under the province’s Insurance Act. The province’s no-fault insurance scheme applies to any accidents in which injury or damage was “caused by an automobile, by the use thereof or by the load carried in or on an automobile.” The Supreme Court agreed with the city’s position. “Although the vehicle may have been stationary or moving through an intersection, the evidence on the record is that [Rossy] was using the vehicle as a means of transportation when the accident occurred,” the Supreme Court ruled, thus overturning the outcome in the Quebec Court of Appeal. “This is enough to find that the damage arose as a result of an ‘accident’ within the meaning of the act and that the nofault benefits of the scheme are triggered. Therefore, the civil claim is barred and [Rossy’s] parents and brothers must turn instead to the Société de l’assurance automobile du Québec for compensation.” Elsewhere, the court wrote: “The vehicle’s role in the accident need not be an active one. The mere use or operation of the vehicle, as a vehicle, will be sufficient for the act to apply.”

Insurers have "no choice" but to tap into social media: Accenture

The issue is not if, but how, insurers should leap into the world of social media, a new report from Accenture has concluded. “Insurers, of course, really have no choice about participating in social media,” the consulting firm noted in its study, Insurers and Social Media: Vast Potential, Significant Challenges. “With people engaged in social media all around them, the real question is how to participate.” It found the financial services industry as a whole has not generated significant social media “engagement,” although 28 insurers listed in the Fortune 500 have established Facebook pages and 20 have Twitter accounts. “Insurers are only now beginning to explore the real potential of integrated social media campaigns,” according to Accenture. The consulting firm illustrated three distinct stages for social media awareness amongst insurers: • Listen: conduct social media monitoring and analysis. • Engage: initiate marketing campaigns and customer interaction. • Optimize: link social media to customer relationship management (CRM) and building a “single view” of the customer. Accenture observed that insurers succeeding in social media will “build engagement and generate customer interest at much higher levels than many other industries. . . . “However, many insurers will need to re-examine their current IT infrastructure — particularly legacy policy administration systems — to make sure that the capabilities are in place to support (social media) initiatives at scale.”

Lawyers resign from Ontario auto insurance committee

Several lawyers are protesting recently announced changes to the definition of catastrophic injury for accident victims by quitting an auto insurance committee created by the Financial Services Commission of Ontario (FSCO). The Toronto Star reported the group of personal injury lawyers, who include Richard Halpern, partner at Thomson Rogers, Roger Oatley of Oatley Vigmond Personal Injury Lawyers LLP, Nigel Gilby, partner at Lerners LLP and Stephen Firestone of Lackman Firestone, resigned because their recommendations on catastrophic impairment were ignored. “The Ontario government is looking at narrowing the definition of catastrophic impairment,” Halpern told the Star. “This will in turn deprive many seriously injured victims of the support they reasonably need and expected from the protection they thought they were buying with their auto premium dollars.” The insurance industry “is always trying to get governments to roll back the rights of accident victims,” added Oatley. “The government will now claim they consulted with stakeholders, including lawyers and consumers. “We were invited because of our expertise, but ignored. We resigned because the process was a sham. Can you imagine, for example, that in this day and age, emotional injury has to be ignored when assessing the impact of an injury – even though our highest court recently said it should be taken into account?” The informal legal committee was established by FSCO Superintendent Philip Howell to seek advice on auto insurance. On June 12, the Ontario regulator made its recommendations to the provincial finance minister on rules for determining catastrophic impairment. FSCO supported the findings of an expert medical panel in its proposals, including not combining physical impairments with psychiatric or mental/behavioural factors for catastrophic injury, an interim status for claimants who require intensive and prolonged rehabilitation to receive immediate treatment and the use of several clinical and diagnostic tools in determining catastrophic impairment.

Big Data represents big challenge for insurance industry: study

The growth of unstructured, disparate information will create problems for insurance companies that don’t have the technology infrastructure or tools to handle it, according to a recent report from consulting firm Novarica. ‘Big Data,’ defined as data sets that are too large or complex to work with using traditional database systems, could create a broad “analytics” gap between large and midsize insurers, noted Matthew Josefowicz, Novarica’s managing director, partner and co-author of the study, Analytics and Big Data at Insurers: Current State and Expectations. “While data analysis has always been at the core of the insurance industry, legacy technology environments and business practices have inhibited the embrace of Big Data by insurers,” Josefowicz stated. “But the hype around Big Data has renewed focus on little data — traditional enterprise data and analytics — which is still an area of underinvestment for many insurers, especially midsize insurers.” In a survey of 86 insurers, 15% to 20% said they are preparing their technology infrastructure for Big Data projects. Josefowicz noted that adoption rate of technology around Big Data was “tepid” in the insurance industry and lags behind other sectors of the economy. “When it comes to Big Data areas like geospatial data, Internet clickstreams, audio data, social media content, mobile data, telematics, video data and others, usage rates are still very low,” Josefowicz commented. “And while few insurers have invested in the specialized infrastructure required to manage Big Data, a sizeable minority are planning to do so within 12 months.”

Global study shows consumer support for bank branches offering insurance

A new study from Cisco indicates 65% of respondents globally would favour bank branches offering an expanded portfolio of financial and advisory services, including insurance. The Cisco Internet Business Solutions Group (IBSG) Omnichannel Study: Winning Strategies for Omni-Channel Banking surveyed 5,300 consumers in both developed and emerging countries, including Canada, France, Germany, United States, United Kingdom, Brazil, China and Mexico. The suggestion to have bank branches offer an expanded portfolio — including financial education, legal accounting, tax and insurance — had more appeal in emerging countries than in developed countries. The expansion was supported by 56% in developed countries and 81% in emerging countries. Overall, the Cisco statement notes, “the study shows consumers want banks to deliver financial advice and banking services through both virtual and physical channels, ushering in a new era of omnichannel banking.”

Insurers to target social media and cloud computing in IT: Deloitte

Property and casualty insurance companies must address a range of “disruptive” technologies to succeed in a changing competitive marketplace, according to a recent report from Deloitte Consulting L.L.P. The notion of “maintaining a high level of operational efficiency (is) merely table stakes,” the consulting firm noted in its report, Insurance Tech Trends 2012: Elevate IT for Digital Business. “Insurers are investing in technology enablement. . . with the goal of spurring real innovation now.” This innovation spending is mainly directed towards social and mobile computing, “a tangible manifestation of the concept that customer needs and experiences will drive marketplace differentiation,” Deloitte stated. “The doors are now open for social business. Leading insurance companies today are applying social technologies like collaboration, communication and content management to both internal (think employees and agents) and external (customers and prospects) social networks.” Cloud computing is another emerging area of adaptation for insurers, according to Deloitte. “Most insurance organizations are behind the maturity curve on cloud technology, but there is broad acknowledgement that they need to catch up quickly and proactively develop a cloud strategy before one is thrust upon them.”

Apparent lack of concern over possibility of directors and officers being sued disconcerting: Chubb survey

Past lawsuits and increased merger and acquisition (M&A) activity have done little to curb the apparent, “disconcerting” lack of concern among directors and officers about the possibility of being sued. Public company executives may be in for surprise lawsuits if findings from the new Chubb Public Company Risk Survey are any indication. Conducted by Pollara, results are based on telephone interviews with decision-makers at 145 public companies in the United States and Canada. More than 80% of respondents believe it is unlikely they will be sued, notes a press release from Chubb. The “general lack of concern is disconcerting,” says Evan Rosenberg, senior vice president and global specialty lines manager for Chubb. Past trends should cause company executives to be careful, Chubb notes. In fact, the directors and officers of almost 23% of the public companies surveyed have already been sued. In addition, some company directors and officers (D&O) policies cover M&A-related lawsuits and, therefore, any increase in M&A activity may increase the likelihood of a related lawsuit. Chubb notes that M&A activity is reported to have increased more than 14% last year, and 64% of the survey’s respondents have been involved in a merger, acquisition or restructuring over the past two years. Finally, enforcement of anti-bribery laws south of the border is increasing the exposure of directors and officers to future suits by shareholders, regulators, customers, vendors and competitors. The executives’ apparent lack of concern about litigation may be translating into a lack of preparation. Chubb reports that 26% of surveyed companies do not have documented merger and acquisition protocols, and have no plans to develop them in the next 12 months. “While M&A-related lawsuits may be covered by the company’s directors and officers liability policy, documented protocols may help improve the company’s defence in court or result in a lower settlement amount,” Rosenberg suggests. “Companies that actively manage this exposure have a greater chance of receiving more favourable terms and pricing for their directors and officers liability insurance.”

Towers Watson study shows more evidence of commercial rate hardening

Commercial insurance pricing in the United States increased by an average of 5% in 2012 Q1 over the same period last year, noted Tower Watson consulting. This represented the fifth consecutive quarter that prices rose for all standard commercial lines, according to the professional services company’s Commercial Lines Insurance Pricing Survey (CLIPS). In addition, Towers Watson stated that commercial insurers' loss ratios stabilized for most insurance lines and improved in lines with the largest price increases. “We are seeing a continuing trend of price-level increases in the commercial insurance marketplace,” said Thomas Hettinger, property and casualty sales and practice leader for the Americas at Towers Watson. “This quarter, the industry reached a significant threshold — an aggregate price increase of nearly 5% — the largest quarterly increase we've seen since 2004." CLIPS figures showed that the largest price increases were in commercial property and workers compensation lines, with the most significant premium hikes in mid-market accounts. “We are likely to see improving loss ratios in the near future if this level of price increases and loss trends continues,” Hettinger noted. “This would be welcome news for the insurance industry, which has been dealing with low asset returns and significant catastrophe activity for the last few years.”

Insurers could feel significant impact from Ontario court's new privacy tort: legal paper

The Ontario Court of Appeal’s January 2012 decision in Jones v. Tsige, which recognized the tort of “intrusion upon seclusion” as a cause of action in Ontario, may have significant implications for policyholders and insurers, a paper from Blaney McMurtry LLP states. The New Tort Relating to Invasion of Privacy: Insurance Implications is co-authored by David R. Mackenzie and Jason P. Mangano. “It is clear that modern concepts of privacy, and more importantly, the concept of what constitutes a violation of privacy, have expanded beyond the fixed parameters of [U.S. tort scholar William] Prosser’s four forms of privacy violations,” the paper note, adding the “Ontario Court of Appeal’s decision broadens the reach of the tort considerably.” The court’s decision means a plaintiff must establish three broadly drawn elements: • the defendant’s conduct must be intentional or reckless; • an invasion, without lawful justification, of the plaintiff’s private affairs or concerns; and • a reasonable person would regard the invasion as highly offensive, causing distress, humiliation or anguish Policyholders and insurers will watch with interest as each of these factors is reviewed by courts, and the scope of each is determined,” the paper states. “Perhaps none will be so closely watched as the development of the term, ‘private affairs or concerns.’ “What constitutes ‘private affairs and concerns?’ The Jones decision clearly demonstrates that bank accounts fall within the scope of the term.” Also, the application of the tort in the context of social media will undoubtedly give rise to interesting case law, the paper adds. “Can a Facebook page or Twitter account, where a person may have hundreds or thousands of ‘friends’ or ‘followers,’ constitute ‘private affairs or concerns?’ Does spam email constitute an ‘invasion’ of a person’s privacy? What about taking a picture of a neighbour sunbathing in their back yard?”

Arbitrator finds "semblance of relevance" test is too low for production of Facebook photos in dispute resolution hearings

An Ontario arbitrator has dismissed the appeal of an order for a claimant to produce photos from her Facebook account, but in doing so, the arbitrator rejected the “semblance of relevance” test for producing photos from social networking sites. In Eniko Rakosi and State Farm Mutual Automobile Insurance Company, Eniko Rakosi made a claim for accident benefits after she was injured in a motor vehicle accident in May 2008. She and State Farm did not agree on her entitlement to attendant care, income replacement and medical benefits. At the arbitration pre-hearing discussion, State Farm sought production of photos from Rakosi’s Facebook account. The arbitrator found that the claimant’s Hi5 account, a social networking site accessed by State Farm on Oct. 6, 2010, had photographs of the claimant engaged in various social and recreational activities. The arbitrator was satisfied that at least a “semblance of relevance” existed between these photographs and Rakosi’s claim that she was unable to work or engage in certain self-care activities due at least in part to a chronic pain condition. The arbitrator was persuaded that Rakosi’s Facebook profile likely contained photographs similar to those on the Hi5 site. Financial Services Commission of Ontario (FSCO) delegate Lawrence Blackman upheld the arbitrator's order and rejected Rakosi’s appeal. However, in doing so, he agreed with Rakosi’s counsel that the “semblance of relevance” threshold test for producing Facebook photos was too low. Blackman found that the “semblance of relevance” test came from the Rules of Civil Procedure governing the courts. But the rules guiding arbitration in the Statutory Powers Procedure Act call instead for a test based on relevance and reasonableness. “Changing commission production from the Rule 32.2 ‘reasonably necessary’ and Rule 32.3 ‘relevant’ tests to a ‘semblance of relevance’ test undermines this alternative dispute resolution system, creating a less expeditious, more complicated and costly, ‘trial by avalanche’ system, just as the courts are moving in the opposite direction,” Blackman ruled.

Trial lawyers and rehab groups speak out against recommended catastrophic impairment definition

The Ontario Trial Lawyers Association (OTLA) and Alliance of Community Medical and Rehabilitation Providers are launching a media campaign against proposed changes to the definition of a catastrophic impairment for victims injured in car accidents. Currently, accident victims who are deemed to have suffered a catastrophic (CAT) injury are eligible for basic medical and rehabilitation benefits of up to $1 million. But the OTLA and rehab alliance group argue that if the province accepts the recommendations of the expert panel, the CAT threshold will be raised significantly. “We estimate that the number of cases deemed catastrophic will be reduced by half if these changes are implemented,” says OTLA president Andrew Murray. “If the government goes ahead with this, it will hurt a lot of very vulnerable people,” says Nick Gurevich, president of the Alliance of Community Medical and Rehabilitation Providers. The two groups are running full-page ads in newspapers this week and next, and urging people to contact their local MPPs. An expert panel commissioned by the Financial Services Commission of Ontario (SCO) issued its report on catastrophic impairment definition in April 2011. That report made several recommendations, including not combining physical and psychological injuries in determining catastrophic impairment, requiring medical doctors or qualified neuropsychologists to be the lead evaluators in catastrophic injury assessment and establishing an interim status for people with traumatic brain injuries and major physical impairments to get quick access to rehabilitation services. In a June 12 report posted online, Ontario’s regulator of auto insurance accident benefits, the Financial Services Commission of Ontario (FSCO), has proposed to the government that the expert panel’s recommendation be adopted. Insurance Bureau of Canada (IBC) noted in a recent submission to a provincial government committee studying auto insurance that between 2004 and 2010, the number of no-fault injury claims rose 28%, while the count for large claims has more than doubled. Hospitalizations from motor vehicle accidents are down 12%, yet auto insurers are being presented with many more catastrophic injury claims, according to IBC figures

IBC accuses critics of proposed CAT definition of "fear-mongering"

Insurance Bureau of Canada (IBC) laid down the gauntlet against critics of the province’s recommended catastrophic (CAT) impairment definition, accusing them on June 12 of “fear-mongering.” IBC responded quickly to a media campaign mounted by trial lawyers and medical and rehabilitation service providers. The campaign features full-page ads in daily newspapers opposing a proposal to change the definition of a “catastrophic impairment” suffered by victims injured in auto accidents. In a report to Ontario’s finance minister, the superintendent of the Financial Services Commission of Ontario (FSCO) makes a number of recommendations to change the catastrophic impairment definition. Among them, the superintendent recommends against combining physical impairments with psychiatric or mental/behavioural impairments for the purpose of determining a catastrophic impairment of the whole person. “We estimate that the number of cases deemed catastrophic will be reduced by half if these changes are implemented,” says Ontario Trial Lawyers Association (OTLA) president Andrew Murray. The OTLA’s concerns are endorsed by the Alliance of Community Medical Rehabilitation Providers and the Ontario Safety League. The ads encourage people to contact their local MPPs. “This is false, misleading, singularly irresponsible and is nothing more than self-serving fear-mongering,” IBC’s vice president for Ontario, Ralph Palumbo, responded in a press release. “It is part of a campaign by people who make money from auto collisions and want to maintain the status quo. They’re worried that more money will go to treatment instead of their legal fees. Ontarians should listen to the advice of the medical experts and not lawyers.” IBC’s press release notes the superintendent’s recommendations followed on the advice of an expert medical panel established by FSCO. In addition, the government has promised a public consultation in the 2012 budget. “The panel of experts was of the view that the current system leads to inconsistent catastrophic impairment determinations and frequently gets the diagnosis wrong,” IBC notes. “The proposed changes would make the process more accurate, consistent and objective and would incorporate leading edge science-based evidence into CAT determinations.” Auto insurance benefits remain $1 million for catastrophic injuries, including the option to purchase more coverage. The superintendent’s recommendations would create a new “interim” catastrophic injury category to get people the care they need even before a determination is made. Also, it puts children under 18 into the catastrophic category immediately.

Toronto police charge woman for driving a e-bike while over the legal blood alcohol limit

Toronto police have charged a 27-year-old woman with operating an e-bike with a blood alcohol level of over 80 milligrams. The charge has not been proven in court. An e-bike is capable of being propelled by muscular power and is equipped with one or more electric motors of 500 W or less and can propel the bike no faster than 32 km-h. E-bike riders do not require insurance, the Ontario Ministry of Transportation states on its website. Under the Ontario Highway Traffic Act, an e-bike is not classified as a motor vehicle, so penalties for impaired driving under the act would not apply. The act defines a ‘motor vehicle’ as “an automobile, a motorcycle, a motor-assisted bicycle unless otherwise indicated in this Act, and any other vehicle propelled or driven otherwise than by muscular power.” The definition goes on to exclude “a street car or other motor vehicle running only upon rails, a power-assisted bicycle, a motorized snow vehicle, a traction engine, a farm tractor, a self-propelled implement of husbandry or a road-building machine [emphasis added].” Under the Criminal Code, however, the definition of a motor vehicle is “a vehicle that is drawn, propelled or driven by any means other than muscular power, but does not include railway equipment.” This definition “would include an e-bike and anyone operating an e-bike intoxicated could be charged for impaired driving,” the Ontario Ministry of Transportation notes. “If convicted, [an] offender would be subject to the Criminal Code penalties, including a fine or jail time, and a driving prohibition.”

Plaintiff sues too quickly to determine the presence of a serious and permanent impairment: court

The Ontario Superior Court has found that a plaintiff injured in an auto accident “rushed” to trial before full recovery from two shoulder surgeries and therefore has not met the threshold for a permanent serious impairment. In Iannarella v. Corbett, the plaintiff in the case was injured in a motor vehicle accident in February 2008. Following the accident, he complained of left shoulder pain, which he said restricted the mobility of his left arm and shoulder. The judge noted some evidence had been tendered that suggested the plaintiff’s complaints had morphed into chronic pain syndrome. At the time of the accident, the plaintiff worked for Fenco Company, a car parts manufacturer where he supervised several workers and drove a forklift vehicle in the plant. The plant laid off a number of workers in October 2008, a few months after the accident. One of several doctors caring for the plaintiff after the accident performed surgery on the plaintiff’s shoulder in early 2010 to repair a partial tear in the ligaments. After the doctor concluded the first operation, which he deemed to be a “success,” he performed a second surgery in September 2011 to improve the pain situation. The doctor found the second surgery was also successful, adding that the plaintiff’s response to the surgeries would take into 2013 to determine. The doctor did not recommend that the plaintiff was ready for work after the surgeries. The court found that the plaintiff did not meet the threshold for a serious and permanent impairment that prevented the plaintiff from returning to work. For one thing, the plaintiff had no work to which to return. He had not been looking for work since he had been laid off. Secondly, the plaintiff had not allowed sufficient time to recover from the effects of the surgeries before proceeding to trial. “This trial began only seven and a half months after surgical intervention aimed at improving [the plaintiff’s] left shoulder pain complaints,” the court found. “As will be seen later in these reasons, recovery from that surgery is ongoing and a prognosis for the future and the eventual medical outcome cannot yet be made.”

FSCO warns of mail scam using Aviva Canada logo

The Financial Services Commission of Ontario (FSCO) is telling consumers to be on the alert for a mail scam that is using the Aviva Canada logo, address and name. Designed to look like they have come from a law firm in Spain, the letters ask recipients to contact the author for more details. The letters are currently circulating with the promise of a large payout from an estate sharing the same last name as the addressee, FSCO reports in an advisory. Aviva Canada has confirmed it has no connection to this proposal or any similar transactions, and consumers are advised this type of scenario is commonly involved in an advance fee fraud. Any consumer receiving such correspondence is asked to contact the Aviva ombudsman at ombudsman@avivacanada.com and to forward the correspondence to the Canadian Anti-Fraud Centre

Aviva data show theft season has begun

Summer is here, bringing with it warm weather, time away from home and a spike in residential burglaries. Insurance claims data from Aviva Canada Inc. show the frequency of thefts on the home front during June, July and August are 13%, 22% and 32% higher, respectively, than in February, when theft is least likely to occur. The favourite day of the week for thieves is Friday, when break-ins are 25% higher than on Sunday. “The longer residents spend away from their homes without taking the proper precautions, the greater chance that thieves will strike,” Wayne Ross, vice president of national property claims for Aviva Canada, says in a press release. The good news is that residential theft claims dropped almost 50% between 2003 and 2011, Aviva data show. The bad news is that the value of property being stolen — including easy-to-grab electronic devices — is on the rise, increasing 51% over the same period (from $4,574 to $6,912). An Aviva-led customer survey indicates some Canadians take precautions against theft, but only 33% of those polled have a security system.

Companies using social media for business purposes need to be insured: ACE Canada

The business benefits of using social media are getting impossible to ignore, but a new paper and podcast from ACE Canada suggests lack of understanding around this new way of communicating can also put organizations at risk. “Be sure that you have adequate insurance coverage for your company’s social media activities and review the coverage parameters and amounts regularly,” notes Social Media: the Business Benefits May Be Enormous, But Can the Risks – Reputational, Legal, Operational – Be Mitigated? “Commercial general liability may not cover online content, and your company will need coverage not only for your own website, but for content you’ve placed anywhere on the Internet,” the paper advises. “Social media activity might compromise or leak sensitive company information (or client information) that could have legal consequences.” Risks may be reputational, legal and operational in nature. They can have an impact on privacy, intellectual property and employment practices, adds a statement from ACE Canada. “Once you’ve taken the steps to mitigate these considerable risks, your company will be in the best possible position to reap the enormous business benefits of social media participation,” says David Brosnan, division president of ACE Canada Property and Casualty and chief underwriting officer.

NDP bill would ban territory as auto insurance rating factor

Insurance Bureau of Canada (IBC) is urging Ontario MPPs to vote down an NDP private member’s bill that would ban the use of territory as a rating factor in auto insurance. Any reduction in premiums for constituents in some areas of the province would become an expense for drivers elsewhere, notes an open letter released yesterday by Ralph Palumbo, vice president of IBC’s Ontario division. If given the green light, the bill would dramatically alter the way auto insurance premiums are calculated in Ontario, Palumbo states. All MPPs – and, in particular those representing northern and rural constituencies – should vote to defeat the bill during second reading on June 7, the letter adds. “There is a serious problem with claims costs in the south, not the north,” Palumbo writes. The reason that southern Ontario drivers pay high auto insurance premiums, he explains, is because it costs more to underwrite insurance in those communities. In the Bramalea-Gore-Malton riding in southern Ontario, for example, the average premium is $1,914 a year and insurers repaid $2,981 per vehicle in claims, Palumbo notes. That compares to an average premium of $1,053 in Sault Ste. Marie because the per vehicle claim cost is only $981. Claim costs do not include insurance company operating expenses such as salaries, overhead, taxes and health care levies, he adds

Recruiter in staged collision ring sentenced to three-and-a-half years in jail, ordered to pay $375,000 in restitution

A man personally involved in more than 12 staged auto collisions received a three-and-a-half-year prison term and a freestanding restitution order for $375,000 for his participation in a staged collision ring. Uthayakanthan Thirunavukkarasu, also known as Max or Mano, entered a guilty plea to instructing the commission of offences for a criminal organization, proceeds of crime, criminal negligence causing bodily harm and fraud charges in connection with a staged collision ring, known as Project 92, across the Greater Toronto Area. Project 92 uncovered 50 staged collisions. The Insurance Bureau of Canada (IBC) estimates insurance exposure to be as high as $25 million. To date, with the support of two dedicated prosecutors, nearly 300 criminal charges have been laid and 22 individuals convicted. Thirunavukkarasu recruited more than 40 participants and instructed them to stage collisions in order to make fraudulent property damage and injury claims with insurance companies. In January, he entered a plea of guilty to 17 charges for his role in a dozen separate collisions netting him approximately $1.2 million. He is the 29th person convicted in relation to this investigation. He is the second person convicted of committing or instructing offenses for the benefit of a criminal organization. “This significant sentence is the result of teamwork and cooperation among Toronto Police Service, Crown prosecutors, Insurance Bureau of Canada and the insurance industry,” IBC notes in its release. “Insurance crime is not victimless. The cost to everyone is reflected in the health care, emergency services, court and insurance costs…. “In the Project 92 case, one particular staged collision in 2007 went very wrong, and a teenager who acted as a participant suffered a severe and permanent brain injury.”

Privacy document crucial for Canadian organizations: Chubb underwriter

A guideline from the federal privacy commissioner on how organizations should handle data security is a “very important document” for privacy management, says Matthew Davies, a senior underwriting specialist with Chubb Canada. The Office of the Privacy Commissioner of Canada and its counterparts in British Columbia and Alberta released the guidance document, entitled Getting Accountability Right With a Privacy Management Program, on Apr. 17. It sets out key steps for organizations to be in compliance with federal and provincial privacy legislation, such as hiring a privacy officer, implementing policies and education and risk assessment. “This document basically outlines how a breach will be investigated and what kind of things privacy regulators expect from a company,” says Davies, who oversees cyber liability and professional media coverage for Chubb. “Organizations should be looking at this carefully in terms of guidance and compliance on privacy and data breach protocols.” Davies also notes that cyber insurance liability policies are on the upswing so far this year, with more than 25 insurance carriers offering some form of cyber risk protection. “We have seen a 40% increase in submissions on a month-by-month basis, compared to the same time last year,” he adds. “I think organizations are recognizing this is not just an information technology concern, but an enterprise risk management issue.”

Claims costs for Ontario auto insurers "still out of control": IBC

Claims costs for Ontario auto insurers remain high despite the gains realized as a result of the provincial reforms in 2010, notes the Insurance Bureau of Canada’s (IBC) submission to the Ontario Committee Hearings on Auto Insurance on May 28. “While the September 2010 reforms were a needed first step in reducing the pressure on no fault injury costs, claims costs are still out of control,” IBC’s vice president for Ontario Ralph Palumbo told the hearings. The Standing Committee on General Government passed a motion Apr. 16 to strike the select committee, which is holding public hearings to propose recommendations to the minority government. Palumbo listed four reasons why claims costs remain high, namely mediation backlogs, an increase in catastrophic injury claims, an increase in bodily injury costs and the persistence of auto insurance fraud. “First, there is an excess of 30,000 unresolved claims cases awaiting dispute resolution at [Financial Services Commission of Ontario, FSCO] and these have undetermined costs,” Palumbo said. “Depending on how these cases are decided, it could re-ignite the accident benefits costs spiral. “I cannot stress strongly enough how this backlog is a major risk to insurance premium stability. Claimants don’t know what their benefits will be and insurers don’t know how much their claims are going to cost.” Second, Palumbo said, the number of catastrophic injury claims is rising faster than other claims. Between 2004 and 2010, the number of no-fault injury claims rose 28%, while the count for large claims has more than doubled. Hospitalizations from motor vehicle accidents are down 12% and yet auto insurers are being presented with many more catastrophic injury claims, Palumbo said. “This is a mystery.” Third, bodily injury (BI) claims costs on the tort side are increasing rapidly. Palumbo said latest available figures show that the frequency of these claims has been rising, as has the average claims cost. BI claims represent more than $2 billion in annual costs. “It is very concerning that the volume and average cost of these types of claims appear to be rising so rapidly, Palumbo said. “BI is on the same track accident benefits were before the 2010 reforms and more needs to be done to assess the causes and what can be done to alter this concerning trend.” Finally, fraud persists in the Ontario auto insurance system. “Many [insurers] are currently in the process of preparing responses to a FSCO [Statutory Accident Benefits Schedule] questionnaire about their internal practices to address fraudulent and abusive claims,” Palumbo said. “Companies have taken significant steps to enhance their claims management process — for some companies this has meant wholesale restructuring of their claims departments. As well, consumers are becoming more educated. “We want to continue this momentum because society as a whole will benefit from fighting this crime.”

Dog bite claims in 2011 cost about $1 million: State Farm Canada

Dog bites in the three Canadian provinces in which State Farm operates chewed up slightly more than $1 million in claims costs last year. In 2011, State Farm paid out $917,670 for 25 claims in Ontario, $99,800 for the two claims in Alberta and there were no dog bite claims reported in New Brunswick. The company reported its dog bite claims in May 2012, in advance of Dog Bite Prevention Week, which runs from May 20 to 26. Ontario’s 2011 total was approximately 39% higher than the $659,786 paid out for 19 claims in 2010. Overall, the highest claims toll was in 2007, when the insurer paid out almost $1.2 million for these sorts of claims. Almost 3,800 dog bite claims across North America in 2011 prompted claims costs that topped $109 million. State Farm cites estimates from the Insurance Information Institute (I.I.I.) that U.S. insurers south of the border paid almost $479 million in dog bite claims, representing more than one-third of all homeowners insurance liability claims payments. An analysis of homeowners’ insurance data by the I.I.I. found the average cost of dog bite claims was $29,396 in 2011, up 12.3% from $26,166 in 2010. From 2003 to 2011, the cost of the average dog bite claim increased by 53.4% from $19,162 to $23, 396 – attributed to increased medical costs and size of settlements, judgments and jury awards given to plaintiffs. A dog’s tendency to bite depends on such factors as heredity, obedience training, socialization, health and the victim’s behaviour, notes the statement from State Farm. The insurer does not refuse insurance based on the breed of a customer’s dog, but does require customers to answer questions about their dog’s history on a homeowner insurance application

10 habits of highly ineffective drivers

Sympatico.ca Autos is counselling drivers to cure themselves of 10 bad habits that frequently lead to vehicle collisions. These bad habits are as follows: •Holding the wheel incorrectly. For example, the wheel should not be held with the wrist draped over the top. Holding the wheel at the 9 o’clock and 3 o’clock positions is actually better than the traditional 10 and 2 positions, the online post states. This allows the driver to fully turn the wheel from one direction to another without having to take his or her hands off the wheel. So-called ‘hooking the wheel’ – that is, turning the wheel while holding the top of the wheel underhanded – is another bad habit. Should a collision deploying the airbag occur, this could break the wrist. •Failing to look both ways at intersections. Drivers can miss pedestrians if they focus too intently on viewing oncoming traffic. •Driving with impaired vision. Drivers must take the time to clear all of the snow from the car’s windshields, and change wiper blades when they no longer clean the windshield correctly. •Improperly adjusted mirrors. •Talking or texting. •Crowding crosswalks at intersections. This makes tight turns for vehicles difficult, if not impossible. Also, this habit pushes pedestrians into a live traffic lane. •Driving in the wrong lane. If driving more slowly than traffic around you, your car should not be operating in the middle or left-hand passing lanes. •Driving in a manner unsuited to road conditions. •Sitting incorrectly. An example would be passengers who sit in the front with their feet up on the dash. Think of what the 200 km/h force of an airbag might do. •Not using turn signals

Ontario court denies bid to use new summary judgment rules to determine "catastrophic impairment"

The Ontario Superior Court has derailed a plaintiff’s bid to obtain under new provincial rules for summary judgment a declaration that she suffered a “catastrophic impairment.” Nancy Stewart was severely injured in a motor vehicle accident on Nov. 4, 2005. The plaintiff was insured by State Farm and applied for no-fault benefits under the Statutory Accident Benefits Schedule (SABS). State Farm agreed Stewart was entitled to some benefits and paid her more than $281,000 as of Feb. 29, 2012. But the insurer argued that Stewart had not established she had suffered a “catastrophic impairment”, and as such, was not entitled to enhanced medical-rehabilitation benefits of as much as $1 million. Based on Ontario’s new rules for summary judgment, Stewart argued the court had sufficient evidence before it to find a “catastrophic impairment” on a balance of probabilities. Therefore, she submitted, there was no genuine issue requiring a trial to determine “catastrophic impairment.” State Farm responded there was insufficient evidence on the summary judgment motion for the court to make a finding on “catastrophic impairment.” In support of its submission, State Farm noted the findings of a September 2008 assessment could not be relied upon and additional tests, including a psychiatric examination the plaintiff had refused to attend, had been ordered. The plaintiff responded this test request was invalid, because it had not been made within 30 days or in writing, as required under the SABS. In its decision, the Ontario Superior Court observed the province’s recently amended rules for summary judgment now say the court shall grant summary judgment if it is satisfied “there is no genuine issue requiring a trial with respect to a claim or defence.” In Combined Air Mechanical Services Inc. v. Flesch, the Ontario Court of Appeal in 2011 established a “full appreciation test” to determine whether or not there is no genuine issue requiring a trial. In essence, the court requires a trial if it cannot achieve a full appreciation of the evidence and issues before it on the summary judgment motion. “Can a ‘full appreciation’ of the evidence and the issues required to make a finding of ‘catastrophic impairment’ be achieved by way of this summary judgment motion?” the court wrote in its decision. “In the case at bar, expert evidence will be critical in determining whether or not Ms. Stewart is ‘catastrophically impaired.’ “There is potential for conflicting evidence from a number of expert witnesses as to physical, psychiatric and psychological impairments. There is a significant gap in the evidence with respect to psychiatric impairment, although there is some evidence from a psychologist regarding psychological impairment. Evidence from an expert in applying the AMA [American Medical Association] Guides may also be required. “The motion record presented by the plaintiff in this case, even if supplemented by hearing some oral evidence on discreet issues, would not enable me to achieve the ‘full appreciation’ of the evidence and issues required to make a dispositive finding of ‘catastrophic impairment.’” The full decision can be found at: http://www.canlii.org/en/on/onsc/doc/2012/2012onsc2615/2012onsc2615.htm

Safety advances could spell end of auto insurance: Celent

The auto insurance industry may suffer a steep decline if technology that reduces the frequency and severity of car accidents is widely adopted, concludes a new study by research firm Celent. The research points to four specific types of technology — telematics, collision avoidance, automated traffic law enforcement and, to a lesser degree, robotic vehicles — as examples of widely available safety tools. If these are deployed at national and local government levels, Celent suggests that insurers would see a significant drop in revenues and premiums. “The scenario is plausible because most of the technologies on which it depends are already available — and to some extent are already in use,” the research firm states in A Scenario: The End of Auto Insurance: What Happens When There Are (Almost) No Accidents. “The likelihood of the scenario depends primarily on political decisions.” Under the scenario, insurers could see reductions in total property/casualty industry premium by 9% from 2013 to 2017, and by 26% from 2018 to 2022. “Celent believes that… the probability of it occurring is sufficiently high that auto insurers should devote some resources to considering the scenario and its implications for their business model and enterprise,” notes the report. “For an insurer whose auto premium is a material percentage of its total premium

Insurers should prepare for the rise of the emerging global middle class

A huge market for personal insurance — perhaps as much as 1 billion people — is about to emerge in developing countries, and this new global middle class will need to learn all about insurance. The global growth and transformation of the middle class is one of three megatrends of which Forbes.com is recommending that people be aware. Two others are the growth of more individualistic capitalism and the rise of the new business ecosystem, noted Steven Weisbart, senior vice president and chief economist for the Insurance Information Institute. Weisbart presented these trends to a San Diego seminar audience in a slide show entitled, The Past and Future of P/C Insurance. As the middle class in advanced economies is shrinking, the global middle class is emerging. Whole populations will need to be taught what insurance is, how it works and why an individual would choose one brand over another, Weisbart’s presentation notes. With regard to the other megatrends, online services — retailers and special-interest community/peer sites — are giving customers and users more control, resulting in a more personalized shopping and information-gathering experience. Can new technology — through such platforms as Amazon and Apple — set in motion radically different claims apparatus or distribution system? Also unclear at present is how indications of a hardening market may play out — if at all. Weisbart’s presentation notes there are several criteria to signal a true hard market, none of which seem definitive right now: •A sustained period of large underwriting losses. This is somewhat in place. Overall, property and underwriting losses exceeded $10 billion in three of the last four years and combined ratios are rising, although these are masked by reserve releases. •Material decline in surplus/capacity. This isn’t even close to happening yet, Weisbart says, noting the surplus hit a record $565 billion as of the end of March 2011. Some excess capacity may still remain in reinsurance markets. •Tight reinsurance market. This is somewhat in place, with higher prices in Asia/Pacific, but only modestly improved pricing for U.S. risks. •Renewed underwriting and pricing discipline. This is not broadly evident, Weisbart notes, adding that commercial lines pricing trends are now modestly rising and there is no broad tightening in terms and conditions

Ontario auto insurance rates decline by 0.18% in 2012 Q1

Ontario auto insurance rate filings approved during 2012 Q1 declined an average of 0.18%, based on the entire market. Rate filings for the Top 5 individual companies, ranked in order of market share, are: 1) State Farm Mutual Automobile Insurance Company Market share: 12.43% Rate Action: Flat (0.00%) 2) Aviva Insurance Company of Canada Market share: 4.65% Rate Action: -0.84% 3) Co-operators General Insurance Company Market share: 4.35% Rate Action (Effective New Business Date and Effective Renewal Business Date of Mar. 26, 2012): -1.94% Rate Action (Effective New Business Date and Effective Renewal Business Date of Apr.15, 2012): -4.46% 4) Wawanesa Mutual Insurance Company Market share: 4.27% Rate Action: Flat (0.00%) 5) Economical Mutual Insurance Company Market share: 3.70% Rate Action (Effective New Business Date and Effective Renewal Business Date of July 16, 2012): -0.82% Rate Action (Effective New Business Date and Effective Renewal Business Date of July 15, 2012): +2.2%

Creating transparency in the Canadian insurance market

InsureEye Inc. has introduced an online service intended to enhance transparency and provide consumers with a sneak peek at reviews for home, auto and life insurance. Touted as a first in Canada, the independent and consumer-driven tool was rolled out in April. Beyond gaining access to more than 600 reviews for home, auto and life insurance, users will be able to see reviews of Canadian providers, notes a statement from InsureEye, a Canadian company that provides online analysis to help buyers manage their insurance. The consumer reviews cover almost all Canadian insurers — including large, nationwide carriers and smaller regional providers — and their products. Consumers can rate insurance companies on a scale of 1 to 5. Before publishing, consumer reviews are assessed by moderators to ensure the quality of the content, the company adds. “We have created a service for consumers that changes the rules of the insurance game, providing a trusted tool to navigate the insurance space,” company co-founders Dmitry Mityagin and Alexey Saltykov add in the statement. The service is available at: https://tools.insureye.com/pct/rating

Ontario Appeal Court muddies waters regarding homeowner coverage of innocent co-insureds

The Court of Appeal for Ontario has issued a ruling that may have muddied the waters concerning homeowner coverage of innocent co-insureds. “There may now be coverage for an innocent co-insured who is alleged to have failed to act to prevent an intentional act, as long as that failure to act is not, in and of itself, intentional or criminal,” Dutton Brock LLP, a firm specializing in insurance law, notes in a May 3 bulletin. “If the innocent co-insured’s actions are not proven at trial to be intentional or criminal, indemnity will follow as well.” The case at issue, Durham v. Grodesky v. ING, follows an incident in which a child was accused of setting fire to the contents of recycling bins at a school owned by Durham District School Board. The fire spread to the building, causing extensive property damage, notes the Apr. 27 ruling by the Court of Appeal for Ontario. The parents were sued for their failure to prevent an intentional act by their son. They failed to properly and adequately supervise the boy, and knew or ought to have known he had a propensity for getting into mischief, the ruling says. ING Insurance Company Canada (now Intact Insurance) denied coverage, prompting a response by the father to advance a third-party claim against ING for indemnification under his homeowner’s comprehensive form insurance policy. The appeal court concluded ING had a duty to defend the father under the liability coverage of his homeowner’s policy. The phrase “failure to act” was modified by the preamble “intentional or criminal,” the bulletin points out. In denying the claim, ING relied on an exclusion clause in the homeowner’s policy: “We do not insure your claims arising from (6) bodily injury or property damaged caused by any intentional or criminal act or failure to act by: (a) any person insured by this policy.” Harms resulting from negligence can typically be characterized as a failure to act, the appeal court notes. “This would render the insurance coverage provided by the policy largely useless.” The high court set aside the judgement with the appellants cost fixed at $3,500 as agreed by counsel. The bulletin says the appeal decision appears to be at odds with an earlier decision by the court. In Thompson v. Warriner (2002), the appeal court held there is no coverage for an innocent co-insured under a policy’s liability insurance coverage where there is an exclusion that precludes coverage to all insureds for an intentional act by “any insured.” The full ruling can be found at: http://www.ontariocourts.ca/decisions/2012/2012ONCA0270.htm

IBC encourages Ontario to act with urgency on auto insurance file

The Insurance Bureau of Canada (IBC) is keeping a watchful eye on the impact of Ontario’s 2010 auto insurance reforms and ongoing related initiatives, urging the provincial government to act quickly on its commitments to amend the catastrophic impairment definition and Minor Injury Guideline. Ontario committed to a new definition of a catastrophic impairment in its 2012 budget, and the Financial Services Commission of Ontario (FSCO) is currently working on this. FSCO says it also expects to have completed a new, evidence-based Minor Injury Treatment Protocol in two years. In the meantime, FSCO is working on a range of other initiatives related to the auto insurance reforms, including measures to prevent auto insurance fraud. All of these initiatives are key features of the auto insurance reforms that Ontario implemented in 2010, but the urgency to move the file along has not abated. “Without urgency in reform delivery, and specifically in the definition of catastrophic impairment, the danger exists that reforms will not achieve government’s goals, the industry’s goals or, most importantly, meet the needs of consumers over the long-term,” IBC president and CEO Don Forgeron said in an address to the bureau’s annual general meeting in Toronto on Apr. 25. Forgeron noted that while the industry waits for these items to be addressed, other auto insurance issues remain or are emerging on the IBC’s radar that may threaten the affordability of auto insurance in Ontario. There are still some health care clinics and providers who regularly exact exorbitant payments for physical assessments of injuries,” he said. “This predatory practice adds far too much unnecessary cost to the system,” he said “Also, bodily injury claims have been on the rise, with the loss ratio rising by more than 23 percentage points since the end of 2009. “IBC has put forward solutions to these problems. We urge government to implement them.”

Ontario committee to hold public hearings on auto insurance

A committee of the Ontario legislature has voted to conduct a “fair and balanced study” into auto insurance industry practices and trends. The Standing Committee on General Government passed a motion on Apr. 16 to strike the select committee, which will hold public hearings and propose recommendations to the minority government. The motion was presented by NDP MPP Rosario Marchese and passed despite objections by Liberal MPP Donna Cansfield. The mandate of the committee is wide-ranging, but will include an examination of: • the profitability of the property and casualty industry, with an emphasis on auto insurance underwriting in Ontario; • the adequacy of medical-rehabilitations treatment per the capped minor injury guideline; • the current definition of “catastrophic injury;” • the auto insurance dispute resolution system; • the impact of fraud in the insurance industry and on insurance rates; and • risk assessment factors of drivers and corresponding rates assigned to particular drivers. “We’re basically saying to the government that it needs to take steps to find out why claim costs are ballooning and to get a handle on the spiraling cost of injury claims that are driving up auto premiums and hurting household budgets, especially in some areas like the GTA and others,” Marchese said to the Standing Committee on Apr. 16. He cited a report from the Alliance of Community Medical and Rehabilitation Providers, which says 42% of treatment requests are now being rejected by insurers. In addition, in about 50% of the cases in which an independent examination has been ordered, it’s now taking longer than 30 days for the report to be produced, according to Marchese. “Something is happening; I’d like to know what it is,” he said. IBC has said in the past that the results of the Alliance survey should be read in the context of the province’s efforts to curb the number of fraudulent insurance claims. Marchese, who represents the Trinity-Spadina riding in Toronto, also indicated the committee will examine “the relationship between insurance underwriters and their sales representatives and/or the role independent brokers of insurance play in the industry. This would include an in-depth look at the extent to which brokers that portray themselves as independent of insurers really are independent.” Ontario’s Standing Committee on General Government is a three-party committee composed

Industry reacts to Ontario auto insurance study

Another review of problems plaguing Ontario’s auto insurance sector will likely duplicate ongoing government-sponsored initiatives, according to Insurance Bureau of Canada (IBC). IBC was responding to the recent announcement of a study by the Ontario Standing Committee on General Government into auto insurance industry practices and trends. “IBC believes that most, if not all, of the issues being referred to the committee are already being dealt with by the government elsewhere,” says Ralph Palumbo, IBC vice president of Ontario. In particular, he cites the anti-fraud task force formed by the McGuinty government and the expert panel examining an appropriate definition of catastrophic impairment. “For example, the CAT issue was the subject of lengthy and rigorous review by an expert panel of health care providers,” Palumbo says. “All stakeholders were provided with the opportunity to make submissions, both in writing and before the panel itself. There is no need for another review.” Other groups welcomed the news of a government-led auto insurance study, especially related to catastrophic impairment. “We are optimistic that the formation of this committee will at least forestall any changes to CAT and will certainly provide an opportunity for our organization to engage in a meaningful dialogue relating to what we see as fundamental flaws in the current auto insurance system,” states Paul Harte, president of the Ontario Trial Lawyers Association in a notice to members. It appears that committee intends to conduct a rare, far-reaching inquiry into insurance industry practices,” Harte adds. “This takes the business of insurance from the policy backrooms of FSCO and the Ministry of Finance to center stage at the legislature.” Rick Orr, president of the Insurance Brokers Association of Ontario (IBAO), observed the actions of the standing committee appear to duplicate current ongoing efforts within the industry and government in areas such as auto reform review and fraud. However, the association is interested in the examination of intermediary independence, according to Orr. “We are pleased that they are looking at all intermediaries, not just brokers,” Orr said. “IBAO has a longstanding position against the ownership and control of brokers by insurers. I expect our discussions with the committee will . . . focus on issues such as strengthened transparency and disclosure.” Both IBC and IBAO representatives indicated they would participate in the standing committee’s review process

Everyday carelessness with work data a major source of data breach liability

‘Hacktivists’ randomly exposing millions of dollars worth of personal and corporate information may grab media headlines, but more common — and equally disturbing — forms of data breaches relate to everyday carelessness with non-encrypted work data, according to a panel of experts discussing the topic on Apr. 11.

The Chartis-sponsored event, Data Breaches, Coming to a Network Near You, was held in Toronto on Apr. 11. Panelists at the event said companies need to do a better job of creating a “climate of security” regarding the everyday handling of sensitive work information that includes employee and client records.

This means more than making sure IT people plug any holes in the company’s software, observed Jason Straight, managing director of risk consulting company Kroll Inc. “There’s a patch for software, but there’s no patch for stupid.”

In his presentation, Straight observed that companies are still too casual about dealing with their sensitive information, unnecessarily exposing them to potential data breaches.

“I cannot tell you the sheer volume of the cases that we have of laptops that have been left at a supermarket parking lot,” he said. “We had one guy, he worked for the IT department of a major company, he left a laptop in his car when he went into the supermarket. It was stolen. And of course the data was not encrypted.

“You’d be amazed how many times that situation plays out.”

In addition, company employees and IT people can often be lax about passwords at work, caught in that grey area between securing information and simply trying to get their work done quickly.

“People make mistakes,” said Straight. “Sometimes it’s out of frustration of having to remember several passwords, so they just use the word ‘Password.’ Or they don’t change default passwords. I could speak for an hour about password data, but it is a huge issue and we see it again and again and again.”

Also, a weak economy has led to disgruntled employees. This may lead the employees to loot company data for the purposes of vengeance, sabotage or extortion.

Andrea Laing, partner at Osler Hoskin and Harcourt LLP, said encrypting data is crucial.

She noted the federal government introduced amendments to the Personal Information Protection and Electronic Documents Act (PIPEDA) in 2011 that would require companies to disclose a "material breach of security safeguards.”

Part of the notification test is whether “it is reasonable in the circumstances to believe that the breach creates a real risk of significant harm to the individual.”

If data stolen from the company is encrypted, it will be a lot more difficult to prove that it might “harm” someone if stolen, said Laing. “Sometimes it might be unclear as to whether the information could be used in a harmful way, but I would say that whether or not the data has been encrypted is a very, very important consideration.”

Several panelists suggested the urgent need for companies to establish policies about the proper and improper use of data. These policies can be used in court to establish that an employee stealing company information acted as a “rogue,” and clearly contrary to company policy. This can help to mitigate a company’s exposure to liability in the event of a data breach.

Customer retention is key for North American insurers: Gartner

The top priority for information technology leaders at insurance companies is keeping the clients they have, Gartner Inc. said in a recent report.

In a survey of IT professionals from five Canadian and 57 U.S. property and casualty insurers, 81% of respondents cited client retention as their Number 1 priority for technology investments.

“Insurers have increasingly been looking to customer retention as a means to preserve revenue and avoid customer churn,” said Kimberly Harris-Ferrante, vice president and distinguished analyst at Gartner. “Protecting the customer base through improved customer service is key for P&C insurers, as well as helping to avoid negative brand images as consumers continue to use social media channels to share complaints and opinions about insurance companies in a public forum.”

The next top-rated priority is to promote relationships with brokers and agents, followed closely by the need to move from legacy assets to more modern claims and policy management solutions, according to Gartner.

Denial-of-service attacks surge in 2012

A wave of distributed denial-of-service attacks plagued financial services companies during the first quarter of this year, according to a report from Prolexic Technologies Inc.

A distributed denial-of-service attack is one in which several compromised systems attack a single target, causing denial of service for legitimate users. The flood of incoming messages to the target system essentially forces it to shut down, thereby denying service.

The Florida-based company said its client data showed a 25% increase in the number of attacks in the first three months of 2012 compared to the same period last year. The largest number of attacks originated from China, followed by the United States and Russia.

“The considerable increase in attack intensity indicates that attackers are evolving their strategies, increasing their firepower and focusing on specific targets such as financial services,” the report noted.

It also stated shorter average duration of attacks showed hackers are using “shorter, stronger bursts of traffic to conduct” denial-of-service campaigns.

Ontario court ruling that establishes a civil action for privacy breaches is a "game-changer" for defence counsel: lawyer

The Ontario Court of Appeal’s decision in Jones v. Tsige, which found a right to a civil action for breach of privacy, may be a “game-changer” for insurance defence counsel.

“We have this [data breach] case out there, and it may well change the landscape,” Andrea Laing, a partner of Osler Hoskin and Harcourt LLP, told a Chartis-sponsored event in Toronto on Apr. 11. “We should pay attention to it.”

In Jones, Sandra Jones, a customer and employee of the Bank of Montreal, became aware that another bank employee, Winnie Tsige, had snooped in Jones’ personal financial records at the bank 174 times over a period of four years. Jones was the former spouse of an individual with whom Tsige was involved in a relationship.

Jones and Tsige apparently did not know each other but Tsige took advantage of her employment at the bank to snoop in Jones’ banking records.

In its ruling on the matter, the Ontario Court of Appeal found there is a cause of action in tort for invasion of privacy. The court says an element of the civil action would include, among others things: “a reasonable person would regard the invasion as highly offensive causing distress, humiliation or anguish. However, proof of harm to a recognized economic interest is not an element of the cause of action.”

Laing said these boundaries of the new tort remain somewhat vague. They may be better defined in the future through more civil actions related to data breaches. But defence counsel are particularly worried about the suggestion that the absence of a proven economic harm, the reason why many actions have failed before, may no longer be an avenue for dismissing an action.

“One of the problems we have with a test that doesn’t really create a bright line [is that] it is going to be very difficult to get future cases to be struck at a preliminary stage,” Laing said. “Indeed, in some cases, it may be necessary to take it all the way to trial just to demonstrate [the case doesn’t meet the test]. Obviously, this raises the costs of settlement. It raises defence costs.”