Risk Pie, Anybody? How To Negotiate While Reducing Risk

Risk Pie, Anybody? How To Negotiate While Reducing Risk

Article by Robert M. Jackson

Negotiation – the very essence of the word often conjures up the thought of adversarial trade-offs, however, when negotiating a purchase/sale agreement parties should turn away from opposing positions. A good negotiation takes a more integrative approach, resulting in a deal that satisfies all parties.

The pitfalls of a distributive negotiation often appear when assessing risk, and negotiating the representations and warranties of an agreement.  Often, a vendor will simply seek to limit the number and scope of representations and warranties as much as possible, while a purchaser will seek to do the opposite.  This tactic will see parties negotiating against each other in a zero-sum game in which they compete for the smallest slice of a fixed “risk pie”.  There are, however, some qualifications that vendors and purchasers can use to shrink the overall size of the pie – limiting risk for both sides simultaneously.

Knowledge and belief

By qualifying a representation or warranty with language such as, “to the best of the vendor’s knowledge and belief”, parties can often arrive at an agreement.  The vendor can be sure that they aren’t taking on risk stemming from an unknown factor, and the purchaser can be provided with enough comfort to satisfy themselves on the issue.  A knowledge and belief qualification can be further fine-tuned to shrink the total amount of risk by taking the often overlooked extra steps to further define the qualification.  For example, parties can consider a vendor’s obligation to investigate an issue, or specify the people whose knowledge is to be relied upon.

Immaterial Breaches and Upper Limits

Representations and warranties can be limited so that a breach exists only when the substance of the transaction is materially impacted.  Parties can negotiate what constitutes a material breach, and except any breaches that do not meet this threshold.  Vendors can, in turn, look to limit the amount that the purchaser can recover from a breach.  By defining the scope of what can be recovered for a breach, both parties can find themselves comfortable with the amount of risk that they are taking on.  This can shrink the total amount of risk exposure for all parties when these upper and lower limits are set in a way that insulates the purchaser from risk of a material breach, but also limits the exposure to the vendor by ruling out unlikely but significant, as well as likely but insignificant, breaches.

Time

Representations and warranties will either merge on the closing of the transaction (limiting exposure to post-closing claims), or will survive.  By explicitly specifying the length of time that a particular representation or warranty is to survive, both parties can find themselves happy with their risk exposure.  A purchaser can limit their risk with respect to an issue, and a vendor can insulate themselves from claims arising long after closing.  Such provisions can also be fine-tuned to provide comfort to the purchaser where the vendor provides security for their obligations (for example, placing a portion of the purchase price in escrow during some or all of the survival period).

With some creative negotiation and drafting, parties can minimize the likelihood of a breach, and its potential impact.  All of a sudden an unpalatable representation or warranty can become acceptable to both parties, and a deal can move forward.

If you are looking for more information on some commonly used qualifications to representations or warranties, please feel free to contact us.

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.

Easy-to-install water sensors help protect Ontario homeowners against costly water damage

Water damage is the #1 reason home owners need to make an insurance claim – and many of these claims are preventable. To help customers protect their homes, Northbridge Insurance has launched a pilot project that offers customers annual savings of up to $150 on home insurance when they purchase an Alert Labs Home Solution package, consisting of a Flowie water sensor and a Floodie companion sensor. Alert Labs sensors can be installed by homeowners in less than two minutes on municipal water meters – no tools or technical expertise required. They’re now available at a special rate for Northbridge Insurance customers, just in time for spring weather.

Designed to detect potentially damaging incidents like leaks, power outages, temperature fluctuations, and floods, Alert Labs sensors send alerts to homeowners on their computer or mobile device in real-time when something goes wrong. Each sensor is equipped with a battery back-up and works using a cellular connection not Wi-Fi, so they’ll continue to work in a power outage – right when they’re needed the most.

“Our technology tracks and analyses water consumption, and customers are notified of incidents that could point to a leak, such as continuously running water,” explained Alert Labs CEO George Tsintzouras. “This makes us different from a lot of other solutions that focus on alerting customers after a flood has taken place. Our goal is to help homeowners avoid the expense and hassle of water damage in the first place with technology that’s easy to use.”

Alert Labs sensors also allow customers to capture and analyze water consumption, which can lead to important savings when it comes to costly utility bills. How significant are the savings Alert Labs customers stand to gain? “A single toilet leak can cost up to $600 per year in wasted water,” said Alert Labs CEO George Tsintzouras.

“While we’re here for our customers when they need us, we know that no one wants to come home and deal with a water damage claim,” said Ilda Dinis, VP of Customer Experience and Marketing for Northbridge Insurance. “We’re always looking for innovative ways to help our customers protect what matters to them, and partnering with Alert Labs is a great way for us to do that.”

“We’re excited about this opportunity to partner with Northbridge Insurance and their broker network,” added Tsintzouras. “In addition to saving money and avoiding damage, reducing wasted water saves valuable natural resources – which is a benefit to all of us.”

The pilot project is currently underway, and was launched in collaboration with Northbridge Insurance broker partners that focus on areas in Ontario where the risks of water damage are especially high. Ontario homeowners can visit www.nbins.com/alertlabs to learn how they can help protect their homes from water damage – and save on insurance.

About Alert Labs: Alert Labs is an IoT technology company based in Kitchener, Ontario. Alert Labs is building affordable and reliable sensor-networks for residential and commercial property owners. Alert Labs’ simple-to-deploy sensors can be placed on water meters, sump pumps, furnaces, near toilets and other appliances to detect water leaks, floods, power issues, and other events. Customers receive real-time alerts and insightful data analytics via SMS, email, and the Alert Labs app. Visit Alert Labs at www.alertlabs.com.

About Northbridge Insurance: Northbridge Insurance is one of Canada’s leading insurance companies. Working with our broker partners, we focus on understanding the needs of our customers and on creating solutions that help make their lives a little easier when it comes to protecting their homes, cars and businesses.

Northbridge Insurance Logo is a trademark of Northbridge Financial Corporation, licensed by Northbridge Personal Insurance Corporation (insurer of Northbridge Insurance policies).

SOURCE Northbridge Insurance

Valentine’s fraud: Canadians lose $17M to online love scams

Valentine’s fraud: Canadians lose $17M to online love scams

Josh Elliott, CTVNews.ca

“Baby, I just need $1,000 to pay this fine, and then I can get out of this nightmare.”

“I don’t know what I’ll do if I can’t find the $10,000 to cover the surgery.”

“They’re going to kick me out of my house if I can’t come up with $500 more every month. Sweetie, can you save me?”

“I think it’s finally time we meet, but I can’t afford a ticket. If you send me the money, I’ll pay you back?”

If any of these situations sound familiar, you or a loved one may be the victim of a romance scam.

Police are warning lonely hearts to be wary of online-only relationships this Valentine’s Day, after Canadians lost approximately $17 million in romance scams last year.

Nearly 750 Canadians lost money to love scams in 2016, with some losing as much as $400,000 and declaring bankruptcy in pursuit of relationships engineered to leave them penniless. In most cases, the fraudsters posed as foreigners or Canadians working abroad and used high-pressure scenarios to elicit large payments from the victims.

Scammers will typically connect with victims through social media or an online dating site, and use fake photos and stories to win their trust. Eventually, after the victim has fallen in love, the scammer will say they need financial help to get out of a difficult situation.

“They’re asking the victim to help them out,” RCMP Sgt. Guy Paul Larocque told CTVNews.ca. “That emotion invested… is what makes it successful for the scammers.”

The fraudster might claim they lost their luggage at the airport, and they’ll ask for some quick cash to help them get home. “They’ll show bank account statements to show they have the money to repay the victim, it’s just they don’t have access,” Larocque said.

In other cases, the fraudster might say they need money to pay for a necessary surgery, to care for a dependent child, or to pay a fine.

Larocque says most of the money stolen through romance scams is never recovered, because victims are duped into making several payments over a long period of time. By the time they realize what has happened, there’s no reversing the transfers they’ve made.

Larocque added that these scams are often executed by professionals based in other countries, who may also be working with organized crime. “They’re doing that purposely to make it more difficult for law enforcement to be able to get to them,” he said. “It is not somebody just playing behind the computer.”

How to recognize a love scam

Larocque says emotions can often leave victims blind to their situation, until it’s too late. However, there are certain signs that potential victims and their loved ones can watch for, to spot a scam before it does any damage.

For starters, Larocque says to be wary of any relationship that is based entirely online. “You don’t truly know who’s behind the computer until you meet that person,” he said.

One should also be suspicious of anyone who professes their love before an in-person meeting.

He says scammers often claim to live in another country, or that they live near the victim but are working abroad. And, while it’s certainly possible that a long-distance love might be legitimate, Larocque says to be particularly suspicious of those who claim to be engineers, security consultants or military officers stationed overseas.

Scammers have also been known to request that the victim cash a cheque for them, then send back a portion of the funds. In these cases, the cheque is counterfeit, and the unwitting victim winds up covering the fees from the bank.

Oftentimes it is a loved one who tips off police to a romance scam, because the victim is too emotionally invested to recognize the signs, Larocque said. Family members might become wise to the situation based on some change in the victim’s behaviour, especially if they start to struggle with money, or if they ask for a loan.

“It will create tension within the family because the victim sometimes doesn’t realize that there’s a scam going on,” he said.

He recommends listening for changes in the possible victim’s relationship, and alerting police as quickly as possible if something seems off.

“Sometimes if a (money) transfer is being flagged fast enough, then it can be wired back to the account of the victim,” he said.

Anyone who believes they or a loved one has been the victim of fraud should contact the RCMP’s Canadian Anti-fraud Centre online or by phone at 1-888-495-8501.

And of course, one should always be cautious about looking for love online – especially if money is involved.

“When an offer is too good to be true, it probably is,” he said.

Be wary of saving in an RRSP at the expense of debt, financial experts say

Be wary of saving in an RRSP at the expense of debt, financial experts say

By Linda Nguyen

THE CANADIAN PRESS

TORONTO _ When Patrick French was about 18 years old, he got a hot tip about a gold mining stock.

The problem was he was a student with no money, but he still wanted to cash in on the “can’t miss” opportunity for his RRSP.

So, he took out a $4,000 loan.

“I broke some fundamental rules for what was promised to be a brilliant idea,” said French, director of retirement and financial planning at investment firm Edward Jones.

“Within 12 months, the stock was effectively worthless. It was one of those things where at the time, it was a very expensive lesson invaluable really.”

Not only did French lose his investment, he lost his RRSP contribution room. He also now had more debt.

Today, French tells clients more often than not, it’s a bad idea to incur debt, or ignore debt, to invest in an RRSP.

“You have to believe that you can consistently earn a higher rate of return than you can by paying down the debt,” he said.

“That’s why regardless of your age, paying down your debt is always a good financial strategy.”

As the March 1 deadline looms for RRSP contributions this year, many Canadians will be thinking about how much they want or are able to contribute to their retirement savings.

French says there’s bad debt and good debt.

An example of bad debt is credit card debt, which often carries an interest rate of 20 per cent. Mortgage debt, on the other hand, could be considered good debt, if interest rates continue to stay at current historic lows.

As a general rule, it’s a good idea to tackle bad debt first because any tax savings you may receive from an RRSP contribution will likely not exceed the interest costs a credit card company charges.

Financial adviser Sara Zollo believes in a slightly different school of thought. She encourages her clients not to neglect their retirement savings just because they have debt.

“One of the biggest mistakes you can do is ignore your savings and just pay down the debt,” said Zollo, who works at Sun Life Financial Canada.

“It is a good idea to do a combination of both and to look at each individual situation and decide what ratio goes to debt repayment and what ratio goes to savings.”

Even putting aside as little as $20 a month is enough to help kick-start an RRSP.

“I can’t tell you how many times clients are surprised with how much money they have put away by the end of the year,” she said.

Zollo says putting money away in an RRSP may also be advantageous for those in a high income tax bracket because it creates a deduction on the amount of taxes that are owed.

“If you can minimize taxes paid down today, you have more money today,” she said. “With the refund, you can put that towards your debt, and then you’ve done both saved in your RRSP and paid down some of your debt.”

But like with any major financial decision, Zollo says it’s best to consult with a professional first.

“A written annual financial plan can look at budgeting, tax planning, retirement planning, kid’s education planning, protecting your savings and proper insurance,” she said.

Lack of Timely Notice Derails ICBC Unidentified Motorist Lawsuit

Today’s guest post comes from B.C. injury claims lawyer Erik Magraken

Reasons for judgement were released today by the BC Supreme Court, Vancouver Registry, dismissing a wrongful death allegation seeking damages from ICBC on behalf of an unidentified motorist.

In today’s case (Parmar Estate v. British Columbia) the Plaintiff estate sued numerous defendants alleging they were at fault for a fatal collision.  ICBC was named as a nominal defendant on the allegation that an unidentified motorist was responsible for the collision.  ICBC succeeded in having the claim against them dismissed for failure of the Plaintiff giving them notice of the allegation within 6 months of the collision.  In dismissing the claim against ICBC Madam Justice Gropper provided the following reasons:

[15]         I do not accept the plaintiffs’ interpretation of s. 24 of the Act. Their reliance on the Jamt decision is misplaced, particularly, as noted in that decision, ICBC was named as a nominal defendant at the commencement of this action.

[16]         Here, it is clear that ICBC did not receive notice of the allegations against an unknown driver within six months of the accident. The notice of civil claim can serve as notice to ICBC under s. 24(2). Even so, the notice of civil claim was not filed until two years after the accident and was not served until three years after the accident.

[17]         The plaintiffs provide no explanation for the lack of notice or for the failure to serve the notice of claim for a year following its filing. As noted in the chronology, the accident was not reported to ICBC until March or April 2014. There is no basis upon which I can conclude that the notice was given to ICBC “as soon as reasonably practicable”. The lack of notice is fatal to the plaintiffs’ claim.

[18]         I am satisfied that the action against ICBC raises no genuine triable issue and must be dismissed.

This year, Family Day in BC is on Monday, February 13, 2015.

This year, Family Day in BC is on Monday, February 13, 2015.

This year, Family Day in BC is on Monday, February 13, 2015.

BC Government is partnering with the BC Recreation and Parks Association to bring family friendly events to communities across BC. There are also lots of independent events taking place all over BC like skiing, festivals and entertainment. You can find events in your area here.

The ILScorp offices will be closed Monday, Feb. 13 as we take some time to enjoy the long weekend. We’ll be back Tuesday morning, ready to take your calls, answer your questions and register you for online insurance programs. You can reach us from 8 a.m. – 5  p.m. Pacific Time.

You can also register for our insurance training programs online, anytime, at ILScorp.com

And for subscribers to the ILSTV insurance industry newsletter, your daily dose of Canadian insurance news returns to your inbox on Wednesday, Feb 15th.

Stay up to date by liking us on Facebook or following @ilstv for insurance news and more on twitter.

*ILScorp’s office will be open on Monday, Feb. 20, which is a statutory holiday in many other provinces.*

Have a great long weekend, everyone!

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