What To Do When You Receive a Force Majeure Claim Based On The  Novel Coronavirus

What To Do When You Receive a Force Majeure Claim Based On The Novel Coronavirus

The excerpted article was written by Thomas J. Timmins and Howard XIN Articling student

Gowling WLG

Start with the Clause

A force majeure clause is a common inclusion to contracts for protecting parties from impairment caused by extraordinary or extreme events. These extraordinary events are often referred to as “acts of God”. When a force majeure clause has been included in a contract and force majeure events actually do occur, the expectation is that the party or parties facing impairment as a result of the proscribed force majeure event–a hurricane, war, flooding, political unrest, epidemic, etc.–will be relieved of all or some portion of its delivery obligations under the relevant contract and from all or some portion of liability for damages arising from delay or default occurring in the performance of its contractual obligations.

In drafting these provisions, companies will often use language that defines what will or will not constitute a force majeure event, often by listing specific examples which qualify as such–hurricanes, war, volcanic eruptions, strikes, lockouts, etc. Occasionally, in the rush to get the deal done, not a great deal of thought is given to the breadth or inclusions expressed in the clause and a “boilerplate” is used.

If there is no force majeure clause, courts will still consider defences by the impaired party based on foreseeability of the impairing event. Whether there is a force majeure clause or not, the burden of proof rests on the party seeking to rely upon the force majeure provision. In any case, the key starting point is with the force majeure clause itself. What does it say? Do the events which one party alleges to have occurred actually qualify under the terms of the clause? If so, did those qualifying events actually lead to the delay or the breach in question?

Force Majeure Case Law in Canada

For the past half-century, the leading case on force majeure in Canada has been Atlantic Paper Stock Ltd. v St. Anne Nackawic Pulp & Paper Co. This was a 1975 Supreme Court decision concerning a minimum annual supply of paper pulp over a 10-year period, which allegedly became subject to extraordinary events including acts of God and substantial decline in the market for such paper pulp. In this decision, Justice Dickson established that, “An act of God clause or force majeure clause … generally operates to discharge a contracting party when a supervening, sometimes supernatural, event, beyond control of either party, makes performance impossible. The common thread is that of the unexpected, something beyond reasonable human foresight and skill” (emphasis added). Since then, no Canadian Supreme Court cases have revisited the matter in depth. However, despite the lack of Supreme Court precedents, there have been various lower-court cases affirming Atlantic Paper and exploring the interpretation of force majeure clauses.

In World Land Ltd. v Daon Development Corp., the court accepted the use of basket clauses to define the scope of force majeure applicability. In this case, a land development company was accused of failing to commence construction on the land by a specific date. In the agreement, the force majeure clause included in its definition of force majeure events, the very broad and inclusive language, “…or any other causes…beyond the control of the vendors or the purchasers”. The company had relied on this language and announced that the development would be delayed on the grounds of not having received a development permit, which it claimed was beyond its control. The court accepted the applicability of the basket clause. However, to the detriment of the land development company, it chose to interpret the language plainly and held that it had been within the company’s control to obtain the permit on time. In other words, the party alleging that force majeure events occurred was not entitled to sit idle.

Subsequently, Atcor Ltd. v Continental Energy Marketing Ltd. seemed to have revised the criteria for what constitutes a force majeure event. In this decision, a gas supplier successfully relied on force majeure when it failed to deliver gas because of various technical pipeline issues suffered by a third party pipeline owner. Here, the Alberta Court of Appeal rejected the idea that a force majeure event had to make performance impossible. Instead, “a real and substantial problem” that makes contractual performance commercially unfeasible was held to be the standard—i.e. a significantly lower threshold than the impossibility of performance standard posited in Atlantic Paper, cited above.  Despite the apparent departure in Atcor, the impossibility standard set in Atlantic Paper has continued to be followed in recent cases. Thus, from a practical viewpoint, unless you have expressly contracted otherwise, ‘impossibility of performance’ should be viewed as the basic standard when reviewing force majeure circumstances.

As if to emphasize this point, in the 2011 British Columbia Supreme Court decision Domtar Inc. v Univar Canada Ltd., there was a focus on language of the force majeure provision. The facts were that a supplier could not source and supply caustic soda on commercially acceptable terms and, therefore, alleged that an event of force majeure had occurred and that it should be exempted from its contractual supply obligations. The force majeure event, in this case, was not being able to purchase raw materials at a commercially acceptable price because of an unprecedented rise in price of caustic soda. The argument was ultimately unsuccessful. The B.C. court found that the force majeure clause in the relevant contract did not include or contemplate economic or market conditions, and agreed with earlier findings from the English courts that, “the fact that a contract has become expensive to perform, even dramatically more expensive, is not a ground to relieve a party on the grounds of force majeure.

Domtar Inc. suggests that “economic” force majeure would be extremely difficult, if not impossible, to justify. It also emphases the point which we made above—start by reading the force majeure clause in your contract.

Considering the Novel Coronavirus

It is not uncommon for force majeure clauses to include specific references to terms such as “plague” or “epidemic” when describing force majeure events. In light of global health emergencies that have surfaced in the last few decades, we have found that these types of clauses have included increasingly specific event references such as “public health emergencies” and “communicable disease outbreaks”. However, whether these specific wording inclusions will be of use to the party alleging that a force majeure event which can be relied upon as relieving it from its contractual obligations has occurred remains uncertain.

The Canadian case law surrounding force majeure provisions based on global health concerns is limited. For example, most mentions of the 2003 SARS outbreak or the 2015 Ebola pandemic pertain to cases of domestic occupational health and safety and refugee protection. Reported cases that refer to these specific health crises as triggers of force majeure are few. There is one 2005 decision issued by the Canadian Radio-television and Telecommunications Commission (CRTC) concerning rate adjustment plans in the Telecom industry that linked SARS to a force majeure event. In the decision, Bell Canada, TELUS, and several other telecom companies submitted that the 2003 SARS outbreak in Toronto fell within the scope of the following force majeure clause:

“No penalty shall apply in a month where failure to meet the standard is caused, in that month, by fire, strikes, default or failure of other carrier, floods, epidemics, war, civil commotions, acts of God, acts of public authorities or other events beyond the reasonable control of the Company which cannot reasonably be foreseen or provided against.”

In this case, Canadian telecom carriers sought to rely upon the force majeure wording above, arguing that factual circumstances, including the necessity to quarantine of a number of Bell Canada employees, and the specific mention of “epidemics” in the force majeure clause, lessened their respective quality of service obligations. (In many force majeure clauses, epidemics are not specifically included in the clause and left to be read-in under the sweeping category “other events beyond the reasonable control of the Company”.) In the end, the CRTC held that the approach to be adopted in order to determine whether or not SARS-related events were sufficient to trigger force majeure clause protections was a case-by-case one.

READ FULL ARTICLE HERE AT GOWLING WLG

Centre eyes artificial intelligence to modernize the federal hunt for dirty cash

By Jim Bronskill

THE CANADIAN PRESS

OTTAWA _ The federal anti-money laundering centre is exploring artificial intelligence and machine learning to help sort through a deluge of data in the hunt for hidden dirty cash.

In its annual report made public Wednesday, the Financial Transactions and Reports Analysis Centre of Canada, known as Fintrac, says rapid change in the global financial system, spurred by quickly evolving technology, is both a challenge and an opportunity.

Fintrac says technology can help money launderers but also create more efficient and effective ways of doing business for enforcement agencies.

The federal centre tries to pinpoint cash linked to money laundering and terrorism by sifting through millions of pieces of information annually from banks, insurance companies, securities dealers, money service businesses, real estate brokers, casinos and others.

Overall, the centre disclosed 2,276 pieces of financial intelligence to police and security agencies such as the RCMP and Canadian Security Intelligence Service last year.

Of these, 1,702 were related to money laundering, 373 to terrorism financing and threats to the security of Canada, and 201 to a combination of these.

Fraud, drugs and tax evasion were the most common offences linked to the disclosures. Many of the drug-related ones involved the movement of money related to deadly fentanyl.

The top three recipients of information were the RCMP, municipal police forces and CSIS.

In December, Fintrac warned casinos to scrutinize customers who pay for their gaming with bank drafts _ the latest method of choice for criminals trying to disguise tainted money.

The agency published the alert as part of Project Athena, an RCMP-led public-private partnership aimed at disrupting money-laundering activity in British Columbia and across Canada. The initiative was modelled on previous efforts targeting the fentanyl trade, romance fraud and human trafficking.

B.C. launched a public inquiry into money laundering in May after a series of independent reviews revealed that billions of dollars were being laundered through the province’s casinos, real estate market and other sectors.

B.C. was second only to Ontario among provinces in the number of financial intelligence disclosure packages received from Fintrac in 2018-19.

The federal centre depends on sophisticated technology to receive, store and secure over 25 million new financial transaction reports every year.

Filtering and analyzing the information to generate useful intelligence is only possible with modern systems that can manage the high volume of data, make the connections and produce the needed results, all in real-time or close to it, the report says.

“Over the past year, the centre engaged in research and consultation aimed at better understanding how to take advantage of new and evolving technology, particularly in relation to machine learning and artificial intelligence.”

Fintrac has begun a comprehensive review of its modernization effort to ensure “full and timely use” of its data.

Slip and Fall Lawsuit Against City Dismissed Based on Policy Defence

The guest post is written by ERIK MAGRAKEN

When sued for negligence and Occupier’s Liability Act claims public bodies enjoy a defense that private citizens and businesses do not, namely the policy defense.   Actions taken pursuant to a good faith policy decision can shield a public body from liability in circumstances where a private defendant would be held liable.  Reasons for judgement were published today by the BC Supreme Court, Victoria Registry, discussing and applying this principle.

In today’s case (Lowe v. Sidney (Town of)) the Plaintiff slipped and fell on black ice on a parking lot owned by the Defendant.  The Plaintiff argued the Defendant was negligent in failing to inspect and address this ice before the incident.  The Court disagreed and dismissed the claim.  In doing so Mr. Justice G.C. Weatherill made the following comments in applying the policy defence:

[23]         Public authorities do not owe a duty of care in tort if it is established that their actions were based upon a policy decision, unless the decision was made in bad faith or was so irrational as not to be a proper exercise of discretion.  However, public authorities can be liable for operational decisions provided the plaintiff proves the required elements of liability: Just v. British Columbia, [1989] 2 S.C.R. 1228 at 1245; Binette v. Salmon Arm (City), 2017 BCSC 302, aff’d 2018 BCCA 150, at paras. 10–14; Marchi v. Nelson (City of), 2020 BCCA 1 at paras. 14–16.

[24]         As a general rule, decisions concerning budgetary allotments for departments are classified as policy decisions, because they are an attempt by the public authority to strike a balance between efficiency and thrift, in the context of planning and predetermining the boundaries of its undertaking and of their actual performance.  True policy decisions will usually be dictated by financial, economic, social, and political factors or constraints: Brown v. British Columbia (Minister of Transportation and Highways), [1994] 1 S.C.R. 420 at 441; Binette at para. 12.

[25]         Operational decisions are those concerning the implementation and performance of the formulated policies and are usually made on the basis of administrative direction, expert or professional opinion, technical standards or general standards of reasonableness: Brown, at p. 441; Binette at para. 12.

[29]         The defendant submits that it is exempt from owing a duty of care to the plaintiff because its actions were in keeping with the Policy, which was put in place bona fide and in good faith based on, among other things, the availability of manpower, equipment, and budgetary constraints. 

[30]         The plaintiff submits that the classification of the Lot as a low priority area was not a bona fide policy because the Lot was along the defendant’s priority routes and could easily have been inspected with little to no extra effort.

[31]         I am satisfied on the evidence presented by the defendant that the Policy was dictated by financial, economic, and budgetary constraints.  It was a proper exercise of discretion.  Included in the Policy was the determination that the defendant’s six public parking lots were areas of low priority for snow and ice inspection and control, in the absence of a particular complaint or extreme weather event.  This was a resource allocation decision and, thus, an unassailable policy decision.

[32]         I also find the policy decision to be reasonable.  It is one thing for priority areas to be inspected and sanded.  To require as a matter of policy that those involved in the inspection of priority areas, at the same time, divert their attention to and engage in an inspection of areas considered low priority is illogical and inconsistent with reasonable resource allocation and prudent policy-making.  In my view, the Policy was bona fide.

bc injury law, Lowe v. Sidney, Mr. Justice G.C. Weatherill, Occupier’s Liability, Policy defence

Canada Life lays off 85 employees in Winnipeg, Montreal & London, Ont

Insurance giant to replace staff by outsourcing services from Winnipeg-based telemarketing company

Dana Hatherly · CBC News Manitoba

Canadian insurance giant Canada Life is laying off dozens of employees working in three provinces.

In an emailed statement to CBC, the company confirmed Tuesday it is laying off 85 employees in its Winnipeg, Montreal and London, Ont., offices.

The insurance company cited shifting demographics and changing the way it engages with customers in its decision.

Canada Life says it’s partnering with 24-7 Intouch Solutions — a multinational telemarketing company based in Winnipeg — to offer bilingual services and longer hours.

“24-7 has the tools and infrastructure to provide longer service hours for our customers,” vice-president Diane Bezdikian said in the statement.

She added the change “will provide greater flexibility in servicing our customers in both official languages.”

When asked by CBC, a company spokesperson would not say how many employees would be laid off in each of the three affected cities.

Three life insurance companies recently came together under the Canada Life banner when Great-West Life Assurance in Winnipeg, London Life Insurance and Canada Life Assurance consolidated as part of a restructuring process.

No jobs were cut as a result of that announcement last spring.

Will Technology Replace Insurance Agents?

The excerpted article was written by Lev Barinskiy | Forbes

Chatbots, artificial intelligence (AI) and machine learning — technology is changing the landscape of the insurance industry. There’s a new facial recognition software, created by Lapetus Solutions Inc., that analyzes how well a candidate for life insurance will age. Facial recognition technology already promises to prevent fraud and crime at ATMs and self-checkout counters. Emotion recognition technology holds the promise of preventing insurance fraud by building upon facial recognition. It could help agents recognize a person’s emotional state based on voice signals and word usage. These tools may help agents and carriers measure risk while better serving consumers but are also creating some anxiety about whether robots will soon replace insurance agents.

Some of us in the insurance business remember the days when carriers relied on an agent’s gut feeling when it came time to determine risk based on personal knowledge or predictions. Many things have changed since then. Not only do carriers have far more precise, sophisticated predictive models, but in my experience, they also no longer allow agents to deviate from set pricing.

While there isn’t much insurers can do about technology pushing price as the bottom line, they can and are using some tools to their advantage. For instance, 2017 McKinsey research suggested that automation could reduce the cost of a claims journey by as much as 30%. Technology can also prevent challenges like cybersecurity threats through accurate predictions. Chatbots are assisting customers on a 24/7 basis at many businesses, which could increase customer retention. But this all leads to the question: How can an agent compete with the new technology? Can the two co-exist in the future?

According to U.K.-based firm Autonomous Research, AI and machine learning could replace over $1 trillion of the current financial services cost structure. And let’s be clear: The savings would likely largely be attributed to displaced jobs. Why shouldn’t insurance agents worry, then, with predictions that around 2.5 million financial jobs will be gone by the year 2033?

In the heyday of the neighborhood brick-and-mortar insurance shop, agents were the face and brand of an insurance company. While agents continue to interact with clients via phone, in person and over the internet, carriers are experimenting with technology to increase direct interaction with clients. Insurance carriers are already getting insurance leads from insurtech companies like mine, Compare (a SmartFinancial.com client) and The Zebra. Many businesses are also using technology to enhance the quality of insurance jobs. In fact, according to Deloitte’s 2017 white paper, the insurance industry is lagging behind compared with banking and financial services in its adoption of automation. Only recently have I seen insurers looking to explore the benefits of robotics and AI. However, that does not mean that agents will not still be needed. Robotics and AI, more than anything, could automate transactions and processes like claims processing and document verification. (Lemonade, a SmartFinancial.com client, and Hippo are already incorporating automation.) Consumers could see more options for self-service, and over time, I believe this will create less of a need for back-office jobs. On the flip side, there will be a greater demand for agents with skills in data analytics and machine learning.

READ MORE HERE AT FORBES

Canada’s largest airlines waiving fees to change flights because of coronavirus

By Ross Marowits

THE CANADIAN PRESS

TORONTO _ Canada’s largest airlines are waiving change fees in light of concerns about the novel coronavirus.

Air Canada says a one-time change is permitted for tickets purchased from the airline between March 4 and March 31 for travel within 12 months.

It also applies to Aeroplan flight reward bookings and Air Canada Vacations has implemented flexible booking policies.

WestJet Airlines Ltd. says the one-time change fee waiver applies to new bookings made between March 5 and March 31.

Air Transat has two policies, including one that applies to Venice, a hot spot for the virus called COVID-19. All customers who booked flights on or before March 2 for travel until June 30 can change their date or destination for a trip until Oct. 31.

Other passengers travelling outside the eco budget fare class can change their travel dates, destination or hotel at no charge for bookings made between March 4 and March 31 for travel through Oct. 31.

“Although almost all of our destinations are very safe and the government of Canada’s advisories currently affect only one of our destinations located in northern Italy, we are aware that the outbreak and progression of the coronavirus may raise questions and even concerns among some travellers,” Transat said in a news release.

“The situation is evolving rapidly, and in order to reassure travellers and enable our clients to carry out their travel plans, we are offering them peace of mind by deploying a highly advantageous flexibility policy.”

Most airlines will waive the fee for changes made at least 14 days before travel. However, Transat passengers can change their booking up to 24 hours before departure.

All airlines require passengers to pay any fare difference between the original and new flights.

Sunwing says its destinations have not been impacted to date but its waiver applies to all new bookings made March 4-19 for flights until June 24.

Sunwing passengers can purchase insurance starting at $50 per person that provides full cancellation coverage up until three hours before departure for any reason.

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