COVID-19 pandemic beyond scope of business interruption coverage, says lawyer

The battle over claims heats up between small businesses and insurance providers

The excerpted article was written by CBC Radio

COVID-19 is not the first crisis to hit Krystal Churcher’s private preschool, a business she managed to grow substantially after surviving the 2016 wildfire in Fort McMurray, Alta.

What’s different this time, compared to several years ago, is that her claim for business interruption insurance got nowhere.

Churcher’s insurance company told her the pandemic is not a “named peril,” meaning it doesn’t fall into the same category as threats typically covered by insurance, such as windstorm, fire or even a plane falling from the sky.

“What are we paying for with these insurance premiums?” said Churcher, who owns the Early Start Learning Centre in Fort McMurray. “It just makes no sense to me.”

Across the country — and indeed around the world — small business owners are grappling with denied claims which are collectively worth billions of dollars. And they’re fighting back in the courts, with lawsuits popping up in Canada, the US, Britain and other countries.

I’m sitting here with no coverage and not really any explanation as to why.– Krystal Churcher, owner of Early Start Learning Centre

In Churcher’s case, she was paying extra to have viruses included in her coverage, but since none of her seven staff members got sick from the coronavirus, that part of her policy was not triggered.

“After the fire, I increased my insurance policies as much as they would allow,” she said.

“My premiums have gone up over 300 per cent since the fire, and I’m sitting here with no coverage and not really any explanation as to why.”

Pandemic not part of insurance calculation

Every insurance policy is unique, and while here is no such thing as a one-size-fits-all contract, the principle of insurance is the same.

“The premiums of many are paying for the losses of the few,” according to the Insurance Bureau of Canada.

Tragic as the 2016 wildfires were, making up the priciest insurance claims in Canadian history, the disaster only affected people in Northern Alberta.

Insurance customers in other parts of the country were fine, so their premiums were used to help pay for losses in Fort McMurray.

How can an insurance company afford and price to pay for something that is not temporal in time and is not in a geographic scope?– Laurie LaPalme, partner in the Insurance & Reinsurance Group at Cassels Brock & Blackwell.

What’s different about a pandemic like COVID-19 is that it absolutely affects everyone from coast to coast to coast, according to Laurie LaPalme, partner at law firm Cassels, Brock and Blackwell in Toronto, whose clients include insurance companies.

That kind of universal scenario was never baked into the insurance formula.

“Always go back to the contract to see what it says,” said LaPalme.

“Most contracts exclude viruses of that nature so they are not a peril that is covered. and it’s not meant to be, because pandemics by their nature are not temporal and they are not geographically scoped. So how can an insurance company afford and price to pay for something that is not temporal in time and is not in a geographic scope?”

Battle over the fine print

Enough people disagree over the issue that firm Merchant Law has started collecting names for its class-action lawsuit against more than a dozen insurers in Canada.

A legal battle is also heating up south of the border, where politicians in several states are proposing legislation to force insurance companies to pay out business interruption claims.

American lawyer Chip Merlin, author of the book “Pay Up! Preventing a Disaster with Your Own Insurance Company,” argues insurance contracts are written in a way that is full of contradictions which aren’t always fair to small businesses.

“if you were a small business owner, as you read down they have a provision for business interruption, loss of business income, and then a specific part in bold letter that says, ‘we cover you for orders of a loss of income caused by civil authority,'” explained Merlin.

According to Merlin, many insurance companies are saying businesses must be shut down due to a direct infection by the COVID-19 virus before they will pay out on a claim.

“Most people read that and go, ‘Hey look I got coverage because a civil authority shut me down.’ But it’s in the fine print that insurance companies are coming back and making the argument saying, ‘Wait a minute! You know in order to collect for this you have to prove that a business closed by you or some property closed by you actually had the coronavirus before you’re able to collect on that.'”

Court battles, according to Merlin, will come down to the one thing that he says  “nobody ever reads or thinks about in advance.”

In other words, the fine print.

“Even if you were to try to read it, would you really understand or do you have to be somebody like me that does this for a living?” said Merlin.

The lawyer says we should get ready for a whole lot of arguments over what qualifies as a “named peril,” whether COVID-19 causes “physical damage,” and what constitutes “loss” as defined in the contract language of an insurance policy.

Potential losses could far outstrip collected premiums

The stakes are high for both insurers and the insured in this situation. For Krystal Churcher and her Alberta business, it’s the difference between being able to pay her bills, or go into heavy debt.

Her insurance company has pegged her loss at $55,000 a month. As she’s unable to collect money through an insurance claim, she’s had to apply for a federal loan instead.

“It’s just a huge bill that’s sitting there when you have insurance policies that are supposed to help you during these kind of things,” said Churcher

But for the insurance company, the financial consequences are stark too. Multiply Churcher’s scenario across the country, and the potential liabilities are so potentially big they could cripple the entire insurance industry.

Canadian insurers have yet to put up an estimate, but the American Property Casualty Insurance Association published an alarming report in April, pegging small business losses in the United States ranging from $255 billion to $431 billion per month. 

That is substantially higher than the total pool of premiums available for commercial property risks, which that report put at only $6 billion per month.

CBC Radio

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Fort McMurray homeowners clean up as insurance questions linger after flooding

FORT MCMURRAY, Alta. – Cora Dion’s voice echoes as she films a video showing what’s left in the basement of her home in downtown Fort McMurray after several days of flood cleanup.

The couch and chair are in the garbage. The beige carpet has been ripped up. The teal-painted drywall and wood panelling has been pulled off the walls.

“Everything’s gone,” says Dion as she walks through the empty basement, which has been stripped to the concrete.  “We’ve taken so many loads to the dump. It’s insane.”

Dion is one of about 13,000 residents forced to flee the northern Alberta city in late April when ice jams caused the Athabasca and Clearwater rivers to overflow their banks and cause major flooding.

It’s the second time in the last four years that Dion and her family had to leave their home for a natural disaster. The first time was because of a destructive wildfire that caused the evacuation of the entire city.

The Dions didn’t have damage after the fire, but this time they returned home to a flooded basement and no power.

“It was like an apocalypse,” Dion said in an interview with The Canadian Press. “Everything we owned in the basement _ there was nothing to be saved.”

Dion, her husband and their two dogs, cat and a chinchilla can’t stay in their home until it’s safe. They don’t expect their insurance policy will cover the damage.

The Dions aren’t the only ones who can’t go home _ more than 3,000 people remain displaced.

Don Scott, mayor of the Regional Municipality of Wood Buffalo, said many of those homeowners either don’t have insurance or won’t have enough insurance.

“There is a huge issue in this region,” he said.

Scott estimated there’s at least $100 million in damage. He’s asked senior levels of government to help residents with a disaster recovery program.

On Friday, the Alberta government stepped up.

“We will be providing communities … $147 million to help families, businesses and communities to recover and rebuild,” said Premier Jason Kenney.

The money isn’t meant to replace insurance.

The Insurance Bureau of Canada said the flood was devastating for residents in northern Alberta.

“Overland flood insurance is relatively new in Canada,” explained Celyeste Power, the bureau’s vice-president for Western Canada. “Insurers came out with products over the last five years.”

She said 13 insurers offer overland flood coverage in Alberta, but it’s an add-on to policies.

“Half of Albertans have actually opted in,” said Power.

The option, she said, is further complicated for those who live on flood plains or in high-risk areas.

“Flood insurance there is usually much more limited or restricted because the likelihood of flood is so much higher,” she said. “The policy would be unaffordable.”

Power said a flood plain was affected in Fort McMurray so that would explain why there are so many people without insurance _ a different situation than after the fire when many homeowners had insurance.

Therese Greenwood and her husband lost their home in the fire and rebuilt it, but she said they sold the new house and moved into a rented townhouse near the Clearwater River.

They were told to leave when the flood hit. This time they felt more prepared.

“We actually had an emergency kit packed … and we spent a bit of time moving things up from the basement,” said Greenwood.

In 2016, they had 15 minutes to get out as the fire threatened the edge of their neighbourhood.

“We took one carton of yogurt and a can of club soda _ and that’s all we had to eat for about 15 hours _ so this time we made sure to take some food,” she said. “We charged up the cellphone … all the things that we didn’t think to do the first time.”

They returned after the fire to nothing.

“It looked like a moonscape. Even the barbecue burned to ash. The temperature must have been as hot as it could be.”

In the flood, they lost what was in the basement _ other than one box of Christmas decorations.

“We’re calling it our Christmas miracle,” she laughed.

Greenwood said they have to meet with their insurance agent to determine what’s next, but she noted they won’t make any major decisions until they can go home in a few months.

“At the moment, I am thinking of moving off the flood plain.”

Although she knows the flood was harder on some people, she doesn’t think it was as bad as the fire.

For Dion, the high water triggered difficult memories of the fire.

“It was actually pretty close to the anniversary,” she said. “It was very, very stressful, but at the same time we had a plan (for the flood), so that was good.”

That wasn’t the case in 2016.

Dion, whose daughters were 15 at the time, had to flee the city with her twins, four horses, three dogs and a cat. She only had a two-horse trailer so her daughters rode two of the horses on the busy highway until a kind stranger with a trailer offered to help.

“This time, I was (thinking) maybe the house won’t be fine, but we’re all fine,” she said. “I was actually afraid for my life with the fire.”

This report by The Canadian Press was first published May 10, 2020

Measuring Vehicle Speed with Radar


RadarDespite the fact that it is older technology, radar is still frequently used by police to measure vehicle speeds today. When used properly, it is an accurate method of determining how fast a vehicle is traveling. The courts also accept qualified radar evidence of speed during a trial as commonplace.

When I was trained to use radar to measure traffic speed it was a one day long course. We were taught the basic theory of operation including an explanation of the Doppler Effect which is the basis for the device. A written test followed to insure we understood what had been taught. Finally, we all went to the side of the road where we were given a chance to make some measurements under the watchful eye of an experienced officer.

I typically started my traffic enforcement shift by testing my radar and recording the results of the test in my notebook. These tests vary a little depending on the manufacturer and type of radar in use, but it usually consists of a power on self test or an internal test initiated by pushing a button, a phase where all indicators and display segments were lit simultaneously to show they were functioning and a tuning fork test.

Tuning forks substituted for the moving vehicle. The fork was struck to make it vibrate and then held in front of the radar antenna. This would produce a specific reading on the radar display.

If and only if all of these tests were passed was the radar considered ready for use. If there was a failure the unit was taken out of service and sent for repair.

During some 28 years of operating traffic radar I can only recall one instance when the radar failed to operate correctly and it was immediately apparent to me.

A typical investigation involving radar to measure vehicle speed begins not with the instrument, but with the officer’s eyes. A visual observation of the target is made and a speed estimation developed. Some officers become quite accurate in making this estimation after years of practice with the instrument.

Following the estimate, a measurement of the vehicle speed is made with the radar. The officer compares the estimate with the measurement to insure that the two reasonably coincide. If they do, the offending driver is stopped and ticketed. If they don’t, further observation and measurement is required.

Should the visual estimate and radar measurement never reasonably compare, a ticket based on the radar evidence cannot be written.

A radar beam is similar to a flashlight beam. It begins relatively narrow but widens as you move away from the antenna. Ideally, only the target vehicle should be in the radar beam at the time of the speed measurement, but this is not always possible. In this case, careful observation and measurement may still result in an accurate measurement and confidence in which vehicle is producing the speed reading.

Radar measurements also suffer from what is known as cosine error. If the vehicle being measured is moving directly toward the antenna, a true speed will be detected. If the vehicle is moving at an angle to the beam, a lower than true speed will be read depending on the cosine of the angle.

The benefit goes to the driver with stationary radar operations.

The cosine error is critical with moving radar as it affects the patrol vehicle speed reading which is used to calculate the violator’s speed from the closing rate of speed. The officer must compare the patrol vehicle speed to the speedometer when making a measurement. If the two are not the same, a higher than true speed will be displayed.

If all of this adds up, the speed investigation is complete and the officer can decide on what, if any, action to take.

The final step in my daily patrol after parking in the detachment lot was to test the radar again and record the results in my notebook.

Cst. Tim Schewe (Ret.) runs DriveSmartBC, a community web site about traffic safety in British Columbia. For 25 years he was an officer with the Royal Canadian Mounted Police, including five years on general duty, 20 in traffic and 10 as a collision analyst responsible for conducting technical investigations of collisions. He retired from policing in 2006 but continues to be active in traffic safety through the DriveSmartBC web site, teaching seminars and contributing content to newspapers and web sites.

CRA claiming $4.4B from CDN companies & individuals suspected of offshore tax evasion

The excerpted article was written by Christopher Nardi | National Post

OTTAWA – The federal government is claiming $4.4 billion from Canadians and corporations suspected of cheating the taxman by hiding their money in offshore tax havens.

“The gross number is $4.4 billion at this moment. It’s many years ahead of schedule, but it remains the gross number,” said Ted Gallivan, assistant commissioner of international, large business and investigations branch at the Canada Revenue Agency.

Gallivan was responding to a question from Bloc Québécois MP Julie Vignola during a virtual meeting of the House of Commons Committee on Government Operations and Estimates on Monday.

Vignola asked both CRA and the Minister of National Revenue Diane Lebouthillier to detail the results of over $1 billion in investments by the Liberal government to fight tax fraud and offshore tax evasion since 2015.

How many Canadian companies and individuals does that $4.4 billion involve? And how far back do those claims go? And what were the CRA’s claims targets that the agency is now “many years ahead of schedule” on?

Gallivan wasn’t asked to answer any of those questions by MPs, and the assistant commissioner was not available for an interview in the hours following the meeting.

But that $4.4 billion is far from won for Canada’s tax agency. Tax evasion cases, particularly when they involve wealthy individuals and corporations, often lead to notoriously long and difficult court fights for the CRA.

And that’s no different today, said Gallivan, who emphasized many times that $4.4 billion remains the gross amount, not the amount ultimately recouped by the agency.

“We still have a lot of cases that are in front of the courts, over 3,000 of them in fact. A lot of these inquiries will be resolved by the courts, but as of now, the gross amount is $4.4 billion,” Gallivan explained to MPs.


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