By Jordan Press
THE CANADIAN PRESS
OTTAWA _ The federal government is in talks with business and labour groups to figure out the future of billions in emergency aid, Prime Minister Justin Trudeau said one day after a warning that current spending was sustainable for only so long.
Emergency federal aid to date is approaching $152 billion in direct spending, which has pushed the deficit to an estimated $260 billion this fiscal year.
Parliament’s spending watchdog told a Senate committee Tuesday that current spending levels would limit the government’s ability to provide needed stimulus money during a recovery.
Budget officer Yves Giroux also said emergency programs had to sunset or else the country could be looking at tax levels not seen for generations.
Speaking outside his Ottawa residence Wednesday, Trudeau said some of the aid programs will have to be phased out.
Others, he said, would need to continue or be tweaked to aid in a recovery.
“We are still very much in the emergency phase, in the crisis phase of this, even as we’re seeing careful reopenings,” Trudeau said in response to a reporter’s question.
“We will, however, look very carefully at how we end certain programs, how we modify others in order to get our economy going again to where it was before (the pandemic) or even better.”
In his opening remarks, Trudeau seemingly previewed his thinking on the issue. He said fewer people would need help through the Canada Emergency Response Benefit as businesses reopen and workers are rehired, possibly with help from a federal wage subsidy.
The most recent CERB figures show more than $41 billion in benefits to 8.25 million people, pushing further beyond its $35-billion budget.
The first cohort of CERB recipients will max out their benefits the first week of July, raising questions about what to do with those who still don’t have a job, or those who can’t qualify for employment insurance.
“The focus of the next phase of the CERB has to be about those individuals and also create incentives to work for those individuals where some job may be available for them,” said Parisa Mahboubi, a senior policy analyst with the C.D. Howe Institute.
“The way that the CERB is designed may discourage them from accepting the job or looking for any job.”
A group of experts convened by the think tank recommended the government consider extending CERB eligibility beyond the July cutoff, but turn it into an income-tested benefit for those who go back to work.
Treasury Board President Jean-Yves Duclos told a midday press conference the CERB would likely lead to another support measure because something new will be needed to create a smoother recovery phase. What that might look like, he didn’t say.
Having greater transparency about support programs would help Canadians determine if money is being spent well, and maintain the credibility of aid programs while deterring fraud, said Toby Sanger, director of Canadians for Tax Fairness.
“You would just have better designed programs,” he said. “There could be better third-party judging of how well these programs have worked or haven’t worked.”
He cited a request from his group and others for public details on companies that receive federal support, such as through the $73-billion wage subsidy program.
Federal figures showed there have now been 181,883 unique applicants approved for the wage subsidy, which covers 75 per cent of wages up to a maximum of $847 per week for each eligible employee.
The total value of benefits paid stands at $7.9 billion.
Trudeau urged companies to sign up for the wage subsidy during his opening statement, echoing his request for landlords to use a commercial rent assistance program that opened for applications this week.
That program offers forgivable loans to cover half of monthly rents in April, May and June, as long as landlords drop rents by at least 75 per cent over the same period for eligible small businesses.
Giroux estimated the net federal cost of the program at $520 million this fiscal year. The budget officer’s report released Wednesday morning put caveats on that estimate, owing to the lack of clear precedent for this kind of program.
His report said that means the assumptions about industry eligibility and uptake by landlords “rely heavily on judgment.”
OTTAWA _ NDP Leader Jagmeet Singh says he wants to see the RCMP investigate conditions in long-term care homes in Ontario following allegations in a report of neglect and abuse in five homes being helped by the military.
Singh says he has written to Public Safety Minister Bill Blair saying the Canadian Forces’ report on the conditions they found should be referred to the RCMP and, should cases be found of corporate criminal neglect, that criminal charges should be laid.
He called the allegations “appalling” and said Ottawa must take swift actions to address the situation.
He is also calling on Prime Minister Justin Trudeau to bring the long-term care system under the Canada Health Act, blaming many of the problems in these centres on the for-profit model under which many seniors’ homes in Canada operate.
The military report, prepared after troops were sent into five homes overwhelmed by COVID-19 outbreaks, details “horrific” allegations of insect infestations, aggressive resident feeding that caused choking, bleeding infections, and residents crying for help for hours.
Allegations also included failure to isolate COVID-19-positive patients from the rest of the home and a host of hygiene issues involving everything from contaminated catheters to dangerous pressure ulcers.
The Ontario Superior Court of Justice recently held that an insurer who wrongfully denied a US$121 million claim must pay prejudgment interest based on the actual cost of borrowing, and not the rates stipulated in the Courts of Justice Act.
The case, MDS Inc v Factory Mutual Insurance Company, arose out of a leak at a nuclear reactor in Chalk River, Ontario. The business of MDS Inc. involved purchasing the radioisotopes produced at that reactor and processing them for eventual sale. When the reactor shut down for fifteen months following the leak, MDS turned to its insurer to cover its business interruption losses. The Court held in favour of the insured on all coverage issues, finding that all the exclusions and exceptions at issue should be interpreted in MDS’s favour. While a lot of digital ink has been spilled on the Court’s handling of those coverage issues, the Court’s decision regarding prejudgment interest has received relatively little attention.
MDS argued that, to be fairly compensated for its loss, it should be entitled to prejudgment interest based on the actual cost of borrowing from the date of loss to judgment (around five to six per cent), not the simple interest rate contained in the Courts of Justice Act. MDS maintained that had the insurer paid the loss promptly, it would not have had to borrow the funds in the amount of the policy limits. Further, it argued that it would be unfair for the insurer to realize a profit from its refusal to pay. On the other hand, the insurer’s position was that the Court should not award the actual cost of borrowing because “there is not a single insurance case in Canada” where that was done.
Finding for the insured, the Court took into account the following points in support:
- the history of the concept of prejudgment interest and case law on the issue, such as the concept that prejudgment interest is compensatory, not punitive;
- the discretion conferred on judges by the Courts of Justice Act to award higher interest rates;
- the relationship between the insurer and its insured, particularly given that the insurer was MDS’s long-time insurer, so it knew that the supply of isotopes from the reactor constituted a substantial proportion of MDS’s income, and thus it knew that MDS was seriously vulnerable and could not mitigate its damages;
- the insurer’s conduct, including its decision to deny the claim before the parties knew all the facts, and its refusal to change its coverage position in light of the developing evidence. While the insurer’s denial letter stated that it would consider any additional information that might affect coverage, the Court held that this assertion rang “hollow in light of the history. The battle lines were drawn early before the facts were known”. According to the Court, the denial letter read more like a pleading than an adjuster’s letter;
- the claim for commercial interest was reasonably foreseeable, because MDS put the insurer on notice from the date the proof of loss was filed that MDS was seeking “all losses, damages and expenses flowing from the Insurer’s refusal to pay in accordance with the Policy” as well as pre and post judgment interest “as appropriate”. Moreover, it was reasonably foreseeable that MDS would have to borrow at market rates to compensate for its losses;
- MDS filed undisputed expert evidence that estimated the insured’s actual cost to borrow the funds it would have received but for the insurer’s denial, and the insurer’s profits it earned because it failed to pay MDS;
- the Court stated that paying commercial rates was a Pareto-efficient result where both parties benefited, because the insured’s $12 million prejudgment interest award was less than the $17 million in profits the insurer realized from its delayed payment; and
- that the risk of being liable to pay commercial interest would prompt insurers to work quickly to resolve claims, which supports the public policy consideration of encouraging early and fair settlement by insurers.
- Counsel and adjusters would be wise to carefully consider this case in any future insurance coverage dispute, as it sets out a number of factors that a Court could consider in deciding whether to award commercial interest rates. In particular, the Court focused on the conduct of the insurer in coming to its decision, such as early denials, pleading-like adjusters’ letters and refusals to change a coverage position, which are not uncommon. An insured seeking commercial interest would have to ensure that it could present evidence on the insured’s cost of borrowing and the insurer’s profit on the unpaid funds, which will allow the Court to weigh the benefits to both sides if commercial interest were awarded.
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Manitoba Public Insurance (MPI) is returning up to $110 million to provide financial relief to its policyholders, Crown Services Minister Jeff Wharton announced.
“Many Manitobans have been financially impacted by this crisis,” said Wharton. “MPI is proactively providing relief when it is needed most by issuing rebates to its customers as an alternative to future reduced premiums.”
Rebates will be based on what policyholders paid last year and expected to be around 11 per cent, or between $140 to $160, per average policyholder, the minister noted, adding policyholders can expect a rebate cheque at the end of May to early June.
This surplus is the result of fewer claims during this COVID period, coupled with strong year-end financial results. As a public insurance model, MPI operates on a break-even basis and is required to maintain its reserves at a level set by legislation. Today’s rebate is possible because MPI’s reserves are exceptionally strong, allowing excess capital to be returned to ratepayers while ensuring its reserves are fully funded.
“This money is expected to provide financial assistance to Manitobans during this unprecedented crisis,” said Ben Graham, president and CEO, MPI. “We have made significant improvements in our operations to deliver value to Manitobans resulting in stronger financial results.
“With a healthy reserve fund, MPI is in a strong financial situation to move forward with these rebate cheques to support our customers. This rebate to our customers will not adversely impact the corporation’s financial outcomes moving forward. It feels right to give back to our customers when they need it the most.”
Details of the rebates will be made in the coming weeks and further details will be available at mpi.mb.ca.
In addition to rebating excess capital from the last financial year, MPI notes that as of mid-April, collision claims are down 48 per cent compared to the same month a year ago. MPI estimates that public health orders directing the public to stay at home and for non-essential businesses to cease direct interaction with the public have resulted in approximately $29 million in fewer basic claims being incurred between March 15 and April 15, 2020.
Under existing legislation, MPI is able to return approximately $50 million to its ratepayers and will require the approval of the Public Utilities Board (PUB) for the additional $60 million. MPI will apply to the PUB in the coming days in respect of the incremental $60 million in order to be able to return these amounts to Manitoba ratepayers. If PUB approval is obtained in the next few weeks, the entire $110 million will be returned as part of the rebate cheques mailed to Manitobans.
Based on current projections, MPI is confident that due to the extension of public health orders and the provincial state of emergency extending until May 18, related savings to the corporation will continue into the foreseeable future.
To help Manitobans impacted by COVID-19, we’ll be mailing policyholders’ rebate cheques in May.
MONTREAL _ Air Canada is hoping to raise more than $1 billion in share and debt offerings to bolster its cash position amid the financial devastation of the COVID-19 pandemic.
The airline says it has launched a public offering for about $500 million worth of Class A and Class B voting shares.
It has also started a private placement of unsecured convertible notes _ a debt security that allows the owner to convert it into a shares _ for a total of US$400 million, or about C$550 million.
The stock and debt offerings include an over-allotment allowing the underwriters to buy an additional 15 per cent of the shares or convertible notes.
Air Canada says the net proceeds will bolster its cash position and provide it greater “flexibility” to manage the impact of the health crisis.
The airline said on May 4 that it had $6.5 billion in unrestricted liquidity after drawing about $1 billion in March from its revolving credit facilities.
The carrier lost more than $1 billion last quarter and grounded the vast majority of its fleet as travel demand stays at near rock-bottom levels while fixed costs persist, including aircraft leases, insurance and maintenance and hangar fees.
Completion of the offerings will be subject to various conditions, including approval from the Toronto Stock Exchange.
TD Securities Inc., J.P. Morgan Securities Canada Inc. and Citigroup Glob
The excerpted article was written by Corey Mintz
Buying insurance is placing a bet you’d rather not have to collect on. It’s hoping for the best but planning for the worst. We pay monthly fees to a company just in case something terrible happens. If it does, the company agrees to cover our financial loss. Then COVID-19 hit, and something terrible happened to all of us.
In the past two months, the issue of insurance has come up repeatedly for restaurateurs, who pay for a specific type called business interruption. It can cover closure due to such events as municipal construction, burst water pipes, and riots. I spoke with two restaurateurs who have successfully claimed coverage after broken pipes forced their closure, in one case for five days and in the other for four months (although she is still waiting on a cheque). Neither has attempted to file a claim based on the pandemic. Most believe, or have been told, that the widespread shutdown of restaurants is not covered under interruption insurance.
Then I spoke with Hemant Bhagwani. The founder of the Amaya restaurant chain, plus a few other dining concepts, he has 29 restaurants in Ontario and more than 600 employees.
Bhagwani is availing himself of the Canada Emergency Wage Subsidy, which covers 75 per cent of payroll and requires employers to take care of the rest. Most of his restaurants are shuttered. A couple are doing takeout. And while he says some of his landlords are being reasonable (and currently exploring the possibility of the Canada Emergency Commercial Rent Assistance for small businesses), the total rent for these properties is about $700,000 a month.
“In 22 years of business, I have not taken a single penny from the insurance companies,” Bhagwani told me on April 24, just as the federal government was announcing the CECRA. “They keep increasing their premiums every year. So this is the time for them to support us a little bit. And they’re just washing their hands.”
“Government is doing so much,” said Bhagwani, as we both paused to listen to the prime minister’s live address. “Landlords are trying their best to help us. The only people who are not coming out are the insurance companies. I feel it’s very wrong. I’m ready to take them to court.”
On May 5, Bhagwani followed through, filing a claim for damages against his insurer, Allianz Global Risk, for $500,000 in combined revenues, $200,000 in punitive damages, and 90-days’ worth of payroll expenses.
“I think he’s wise to bring the action,” says Lawrence Swartz, a professor at Osgoode Hall Law School.
“It’s very rare that people claim insurance. Typically, you pay the premiums, and you don’t make a claim,” says Swartz, who has worked extensively in the financial and insurance sectors. “The reason you buy insurance is to get the coverage for these types of situations. Your typical person who is a restaurateur should think that an interruption includes a pandemic.”
A spokesperson for Allianz told TVO.org via email that the company is “unable to comment on individual claims settlements or pending legal matters” and that, as a result of the pandemic, it “has been notified of a large volume of claims from businesses around the world which we evaluate on a case by case basis to determine coverage.” They added, “We will certainly honor COVID-19-related claims where they are part of our policies and cover is clear. However, many businesses will not have purchased cover that will enable them to claim on their insurance for COVID-19 pandemic losses.”
Swartz can’t speak to the specific merits of Bhagwani’s case without examining his policy. But, in general, he sees the court leaning in favour of the restaurateur.
“If the company wanted to exclude a pandemic, they have to say so in the insurance contract. And if they didn’t, the presumption I think, by the courts, would be that the restaurant should be covered,” he says. “Because courts tend to interpret exclusions narrowly, they give somewhat of a benefit of the doubt to the purchaser of the insurance policy. And they tend to interpret coverage broadly.”
Another factor on Bhagwani’s side, Swartz says, is a legal principle that tends to apply in the case of insurance contracts. Known as contra proferentem, it means that, when the intention is ambiguous, the preferred meaning is the one that works in favour of the party that didn’t draft the contract.
Whatever happens with Bhagwani, Swartz sees this lawsuit as a good example for others in the industry to follow. “Every restaurant should presume that they have coverage,” he says. “This is a situation where they need help. And that’s what insurance is for. It’s for unforeseen disasters.”
Swartz urges owners to contact their lawyer or insurance broker, to look at their contracts to see whether the policy specifically excludes a pandemic, and to ask for claim forms.
“Restaurant owners should be in touch with their insurers and brokers. They should be asserting their rights,” he says. “They should assume that they have coverage, and they should proceed as if they do. It should be on the insurers to explain to them that they don’t if they don’t and to be very specific in why they don’t. Insurance companies shouldn’t be trying to wiggle out of their responsibilities.”
If a court rules in favour of Bhagwani, other suits will likely follow. What would that mean for the insurance industry? The business is predicated on the odds that disasters don’t usually happen every day and to everyone at once. If every restaurant in Canada claims interruption insurance, and the courts support them, could this bankrupt insurers?
“The insurance industry, going into this, was fairly strong,” explains Swartz. Insurance companies are sometimes part of big conglomerates that back them up, and they cede part of their risk to reinsurance companies. “So insurers have insurance themselves.”
However, that doesn’t mean that they’re bulletproof.
“This is a cataclysmic even,” Swartz says. “It wouldn’t be impossible for a number of insurance companies to go bankrupt.”
Corey Mintz is a Toronto-based food writer.