Canada: My House Burned Down, Now I Can Buy Two

Article by Howard Borlack

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Acting for the Applicants, Howard Borlack, Partner at McCague Borlack LLP had a favourable decision from the Ontario Divisional Court when they recently quashed an award by an Umpire arising from an appraisal pursuant to a homeowners policy and the Insurance Act. The insured’s house sustained a fire and was beyond repair. The insured and insurer could not agree on the Actual Cash Value which the insured was entitled to under its Policy. The appraisals on behalf of both the insured and the insurer were approximately the same based to a great extent on comparable houses in the area.

The insured had purchased the home 9 months before the fire and the Umpire’s award was approximately double what the insured had paid for the house.  With the value of the land that was not part of the appraisal, it was pointed out that the insured could purchase a similar house in the same neighbourhood and have enough money remaining from the award to purchase a second house. The award issued by the Umpire only provided an amount with no reasons to explain the award.

Following the release of the appraisal, the insurer applied for judicial review asking the court to quash the award and order a new appraisal with a different Umpire. The insurer submitted that the appraisal was unreasonable, the Umpire exceeded his jurisdiction in the matters he considered and the award was a windfall and not indemnity.

In quashing the award the Divisional Court relied on Supreme Court of Canada decisions that stated that in judicial review “reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process.

The Court agreed that pursuant to the policy in determining Actual Cash Value, market value must be taken into account. In this case, the award far exceeded the market value of both appraisals including the insured’s own appraisal. The Court also stated that it was unable to determine if the Umpire violated the fundamental principle of insurance law where a contract of insurance is meant to provide indemnity. It is not meant to provide a windfall.

As there were no reasons attached to the award, the Court was unable to find the amount awarded to be reasonable and in accordance with the Policy.

Although the law requires that great deference must be given to arbitration decisions in general and even more so for appraisal awards, the Divisional Court was willing to quash an award which was unreasonable and did not provide indemnity for a fire loss but a windfall for the insured.

Read the full decision.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Source: Mondaq

Why does an insurance settlement take so long?

JOANNE LAUCIUS | Ottawa Citizen

Some victims of the September 2018 tornadoes in Ottawa say they’re frustrated over how long it has taken even to get an agreement with an insurance company. Why does it take so long?

We posed this question and others to Pete Karageorgos, the Ontario director of consumer and industry relations for the Insurance Bureau of Canada, the national association that represents insurers.

Q: There have been complaints that the settlement process is long and drawn-out. Why does it take so long, particularly if a house is completely destroyed?

A: There challenges, especially if you are dealing with a home that is completely destroyed. As with any insurance claim, the challenge is proving what kind of damages did you have. What kind of kitchen cabinets did you have? What quality? What kinds of countertop? With a completely destroyed home, it’s custom build from the start. The insurance wants to restore the home to the condition before the tornado struck. Part of the challenge is determining what was there in the first place. We always promote having a home inventory. Keep receipts. You don’t have to keep them in a shoebox. Store them electronically. Send yourself an email, for example.

Q: Are there time limitations?

A: Usually you have a year to submit a claim. Sometimes it takes time to create a list of what has been lost. You might not realize you have lost your Christmas tree and decorations, for example. In terms of resolving the claim and doing the work, there is no time limit. In the case of a tornado, people are at the mercy of tradespeople and their availability. Sometimes tradespeople are too busy, or the prices are inflated because they are too busy and have to charge a premium. An insurance company is using their clients’ money to do this. It requires some oversight.

Q: Why do people have such different experiences with settling their claims?

A: You may have the same insurance company as your neighbour, but your policy may be completely different. Sometimes people spent more time researching a TV purchase than their policy and how that TV will be covered if it is damaged. When you take out or renew your insurance, review the policy. If a tornado were to happen, am I covered and by how much? There are wildfires, there are tornadoes, there are floods.

Q: What is a guaranteed replacement?

A: With guaranteed replacement on a $500,000 home, at the end of the day, there may be a payout in excess of a million dollars if you include everything — although there may be a cap in your policy. Rebuilding your 1,200 square foot house with hardwood floor means you will get the house built to same standard. You may also have cash value replacement and only get the depreciated value of what was lost. For example, if your had a 50-inch TV that cost $1,000 10 years ago, it may have minimal or no cash value. A guaranteed replacement cost policy gives you a new 50-inch TV.

Q: What the difference between market value and insurance value?

A: You may own a $1 million home, but some of its value is because of its location. It may only cost $350,00 to rebuild it. You still own the property.

Q: What recourse do people have if they have a complaint about the way a claim has been handled?

A: First, try to work it out with the adjustor. If you can’t get a resolution, go the adjustor’s manager. The final assessor at the insurance company level is the complaint liaison officer or ombudsman. Every company has one. Their role is to assess and review the complaint and provide the customer with the company’s final position. They are paid by the company, but they should be impartial and review the complaint from both the customer’s and the adjustor’s perspective.
If you are still dissatisfied, you could then go to the General Insurance OmbudService (GIO), which will mediate complaints between insurance companies and their customers. It is more economical than hiring a lawyer and going to court.

If you still disagree, an insurance policy is a legal contract. Your final recourse is to go to court.
The Insurance Bureau of Canada can also offer direction. You can do so anonymously.

Q: Does the insurance industry have a code of conduct or ethics?

A: The Insurance Bureau of Canada has a code of consumer rights and responsibilities.  Individual companies have their own statements, but they are not obligated to adhere to the insurance bureau’s code.

Q: What is the government oversight of the insurance industry?

A: Governments license insurance companies and practices and finances. The financial oversight is conducted at the federal level, and the rest is through the provincial regulator, the Financial Services Commission of Ontario.

(This interview has been edited for length and clarity)

Source: Ottawa Citizen

Brokers say it’s important to check before you get in the business

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How changes to EI region boundaries could affect workers

Jordan Press, The Canadian Press

OTTAWA — A federal department is reconsidering the boundaries that determine how workers in different areas qualify for employment insurance.

Changes to the 64 EI regions, as they’re known, would send political ripples through the country as some workers benefit while others find themselves with tougher hurdles to clear to get benefits.

Documents obtained by The Canadian Press under the access-to-information law show how fraught the process can be, noting complaints that haven’t subsided after the last change five years ago.

Employment and Social Development Canada is working on a fast-tracked review of the current boundaries that help decide the number of hours workers need to put in to qualify for EI benefits and how much they can receive depending on where they live.

In general, the idea is to make benefits more generous in parts of the country where it’s harder to get work, though a quirk of the system is that it’s based on residency, not where jobs are. Two people who get laid off from the same company at the same time could have different benefit entitlements because they live on opposite sides of an EI-region boundary.

How the department determines where to draw the lines separating EI zones will be different from previous reviews, with the internal documents detailing a plan to emphasize some factors over others, including putting less reliance on unemployment rates.

If all goes according to plan, the department anticipates making recommendations by September 2020 — one year after this fall’s federal election.

“Changes in boundaries need to be made in a very thoughtful manner because any change in boundaries will involve losers and winners,” Social Development Minister Jean-Yves Duclos, who oversees the EI system, said in a recent interview.

Duclos said the objective needs to be making the EI system better and not about picking “who wins and who loses. That would be a political objective.”

Where the lines go can make a big difference in local politics. Alberta has zones centred on Edmonton and Calgary that include some suburban and surrounding rural areas but not others. After oil prices crashed, the Edmonton region was at first excluded from a 2016 boost to EI benefits, leading to complaints from people who worked in the oilpatch but had permanent addresses in the city.

The 2014 review split P.E.I. into two EI zones with boundary lines drawn in a way that benefited the lone Conservative riding in the province: The entirety of the riding of Egmont, covering the western end of the Island, fell into an EI zone where workers needed fewer hours of work to qualify for benefits.

Tory cabinet minister Gail Shea nevertheless fell to a Liberal challenger the next year. Changing the boundaries so P.E.I. is again one region — as the Liberals once pledged to do — could be problematic for rookie Liberal MP Bobby Morrissey, who holds the Egmont seat, where residents would suddenly lose their advantage.

“It’s extremely unfair, but the dilemma — and I can understand this from my colleague Bobby Morrissey’s point of view — is if you go to one system, then there will be a loss to P.E.I.,” said Wayne Easter, a long-time Island Liberal MP. His riding of Malpeque is partly in the EI zone with more generous benefits, partly in the zone centred on Charlottetown that has less generous benefits.

Any time he goes to an event, people in his own party like to point out the Liberals committed to reverse the changes and tell him that if “it isn’t changed, I’m not going to be able to support you.”

Federal officials, Easter said, must ensure there is a “better understanding of how and why” any changes are made.

The last two-year review wrapped in 2018 without any changes, and provided a set of lessons the department plans to apply this time around. A presentation to the department’s top official noted the unemployment rate should be considered separately from other factors when deciding the borders of an EI region.

The documents say that other labour-market factors — such as the kinds of industries, local demographics and the number of seasonal jobs — would provide a better understanding of the differences between neighbouring regions with similar unemployment rates.

Officials discussed using unemployment rates in the review by looking at long-term trends rather than at a single point in time.

The department said the current review started in October 2018, but there is no requirement at the end for the Canada Employment Insurance Commission, which is responsible for the boundary review, to make any changes.

Can an insurance company do banking better? Manulife Financial Corp. is upping its game

PERSONAL FINANCE COLUMNIST

Two words you never thought you’d say in imagining a brighter future for chequing and savings accounts: Manulife Bank.

A non-factor for years, the banking division of insurance giant Manulife Financial Corp. is upping its game. On Monday, Manulife Bank introduced a package of services designed to claim a share of a market for daily banking that is crowded with big banks, alternative banks, credit unions and upstart financial technology companies.

Manulife’s strategy: Appeal to millennials and other digitally savvy people with a four-part bundle of banking services wrapped in an app for smartphones that helps with saving and budgeting. Manulife’s goal: Compete against the country’s banking heavyweights more than the alternative players. “We’re here to be the best alternative to the big banks,” said Rick Lunny, chief executive of Manulife Bank.

The All-in Banking Package from Manulife Bank is slick enough that it should be studied by other banks looking at how to adapt their accounts for the digital age. The question is whether there’s enough there to offset the so-so economics for customers who believe in paying the least in fees while getting the most interest.

The core of All-in is an unlimited transaction account (e-transfers included) that costs $10 a month, compared to $14 to $16 for similar big bank accounts and zero at an increasing number of alternative online banks. The All-in account goes down to zero in fees in a month where you add $100 or more to a savings account that comes as part of the package.

That savings account pays 1.2 per cent, a disappointment. Several alternative online banks that have savings accounts are paying 2.25 per cent or more to go with their no-fee chequing accounts. Examples: Alterna Bank, Motive Financial and Motusbank, which opened for business in April.

The third part of the All-in package is a no-fee cash-back credit card paying rewards of 2 per cent on groceries and 1 per cent on other expenses. This reward rate is not at all bad, although anyone wanting a no-fee cash-back card should check out the Rogers World Elite MasterCard.

The fourth part of the All-in package is travel interruption insurance offered by Manulife. Finally, as a sweetener, Manulife is offering people who sign up for All-in one year of Amazon Prime, which otherwise costs $79. Amazon Prime offers free delivery of Amazon orders plus access to TV shows and movies.

All-in is most interesting when you look at the way financial technology is deployed to help customers manage their money so they’re able to save more.

Mr. Lunny said the bank partnered with five fintech companies to develop features such as the one that lets you set how much money you want in your chequing account and then sweeps any excess into savings at the end of each day. Other functions show how close you are to saving enough each month to eliminate the $10 account fee and how close you are to your credit-card limit. There’s also what Manulife calls an intelligent virtual assistant, which can answer questions about banking and offer tips on budgeting, saving and such.

The most obvious big bank competition to All-in comes from the online banks Tangerine, owned by Bank of Nova Scotia, and Simplii Financial, owned by Canadian Imperial Bank of Commerce. Both offer no-fee chequing with unlimited transactions and savings accounts with rates of 1.2 per cent.

On fintech specifically, some of the most noteworthy competition to All-in comes from the budgeting apps at a pair of big banks, Toronto-Dominion Bank and Royal Bank of Canada.

Manulife designed All-in to work most effectively on smartphones and expects the bulk of its customers to access their account that way rather than desktop computers. It’s a sign of how much importance the bank is putting on young adult customers as opposed to an older, wealthier demographic targeted by the bank’s Advantage Account.

Mr. Lunny said the bank hopes to attract millennials with the All-in package, then sell them mortgages and investments as they get older and more established. “We feel millennials are our future,” he said.

For millennials, the All-in package scores well on mobile-friendly technology and convenience – four products in one. But having to save $100 a month to make the $10 account fee vanish? That’s old school, and not in a good way.

FSRA to oversee insurance, mortgage and deposit taking institutions in Ontario

WEALTH MANAGEMENT REPORTER

A new independent financial regulator is up and running in Ontario to oversee insurance, mortgage and deposit taking institutions.

The Financial Services Regulatory Authority of Ontario (FSRA) assumed regulatory duties on June 8, replacing both the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corp. of Ontario (DICO).

The new regulator – led by financial services veteran Mark White – will oversee Ontario’s financial services providers, excluding securities, which are regulated by the Ontario Securities Commission.

In particular, the FSRA will regulate Ontario’s insurance sector, pension plans, loan and trust corporations, credit unions and caisses populaires, mortgage brokers and service providers that invoice auto insurers for statutory accident benefit claims.

Mr. White assumed the role of CEO of FSRA in May, 2018, and has spent the past year helping in the transition of FSCO and DICO. He brings almost 20 years experience in the regulatory, financial and legal sectors. Prior to joining FSRA, he was vice-president and head enterprise risk at Bank of Montreal. Mr. White also held the position of assistant superintendent and head of regulation sector at Canada’s bank and insurance regulator, the Office of the Superintendent of Financial Institutions (OSFI).

“Our mandate is quite broad but it centres around making sure there is financial safety, financial fairness and financial choice for people in Ontario,” Mr. White said in an interview.

Part of that transition means FSRA inherited 1,100 pieces of guidance from former regulators. Mr White said they will spend the next year looking at how they can pare back that number by either “eliminating, combining or refreshing” the regulations.

“We will look at how the regulation can work more effectively for the public, the industry and the regulator,” he adds.

Key priorities for the FSRA include, among others, the provincial government’s focus on reforming auto insurance to increasing access and affordability for drivers, and to establishing title protection for financial planners and financial advisers.

“Our government recognizes that making Ontario open for business means making sure financial services are efficient, responsive to consumers and businesses – FSRA will play a vital role in helping businesses grow while protecting consumers,” Finance Minister Vic Fedeli said in a statement.

Several main concerns posted on the regulator’s website on Monday afternoon address questions on whether the “age-old distinctions” between personal auto insurance and commercial insurance are still relevant; ensuring company pension assets held in trust are managed under fiduciary standards; and the concern around new products and services coming to market daily and how quickly should regulatory approval be given.

Mr. White said these are issues they plan to examine over the next year.

The Ministry of Finance will continue to administer FSCO’s Dispute Resolution Services until June 30, 2020. During the transitional period, all open cases will continue; however no new proceedings will commence.

As of July 1, 2020, any remaining cases will be extinguished, with parties able to start a new proceeding with the licence appeal tribunal.

Source: The Globe and Mail

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