Court Awards Commercial Prejudgment Interest Rates On Successful Coverage Claim

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:

  1. 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;
  2. the discretion conferred on judges by the Courts of Justice Act to award higher interest rates;
  3. 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;
  4. 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;
  5. 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;
  6. 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;
  7. 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
  8. 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.
  9. 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.

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

Manitoba Public Insurance to Issue Rebate Cheques to Policyholders

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

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.

IBC Collaboration with York Regional Police Leads to Charges

TORONTOMay 26, 2020 /CNW/ – Today, investigators with the York Regional Police Organized Crime and Intelligence Services laid charges related to organized-crime for violent  property damage, fraud and drug trafficking, as part of an ongoing joint-forces investigation into the tow truck industry, known as Project Platinum.  Insurance Bureau of Canada (IBC) is proud to assist and support this ongoing investigation.

“IBC applauds the efforts of all partners involved in this joint-forces investigation, Project Platinum, that resulted in criminal charges being laid,” said Bryan Gast, National Director, Investigative Services, IBC. “Insurance fraud is a safety issue for consumers.  Lives can be put at risk as a result of these criminal actions. Insurance fraud costs Canadians in added insurance premiums, and strains our already burdened health care, emergency services and court systems.”

This ongoing investigation has identified several organized crime groups working within the towing industry who have used violence and property damage to gain control and territory within the industry. A number of towing companies have been involved in defrauding insurance companies, using vehicles involved in collisions and staged collisions. These towing companies partnered with auto repair shops, physiotherapy clinics, as well as car and truck rental companies, to carry out this fraud.

Insurance companies, through the auto insurance industry’s dedicated Investigation Coordination and Support Service (consisting of nine Insurer Lead Investigators, each from an IBC member company), worked to mitigate the costs of this fraud, including additional costs to the consumer, and actively pursued legal action against various towing companies.

For more information on the investigation, visit York Regional Police.

IBC and its members work tirelessly to mitigate the risk and cost of insurance fraud. Insurance companies pursue legal action against towing companies that are committing fraud.

IBC wants to help consumers avoid falling victim to insurance fraud. The more people report fraud, the more fraudsters we can bring to justice.

Know Your Tow

If you’ve been in a collision:

  1. Call your insurance representative as soon as possible to report the collision. They can provide helpful, on-the-spot advice on towing options, as well as recommendations of repair and car rental companies.
  2. You have the right to decide who can tow your vehicle and to what location (unless otherwise directed by police).
  3. A permission-to-tow form must be signed, and the towing company must provide an itemized invoice before receiving payment and towing your vehicle.
  4. You are entitled to a receipt for towing services rendered, and you have the option to pay with a debit or credit card.
  5. Decline offers to store your vehicle in a compound yard unless directed by your insurance representative to do so.

Never sign a blank contract or take referrals from towing companies.

For more information, visit Know Your Tow.

If You Suspect Insurance Fraud

In addition to contacting your insurer, you may also:

About Insurance Bureau of Canada
Insurance Bureau of Canada (IBC) is the national industry association representing Canada’s private home, auto and business insurers. Its member companies make up 90% of the property and casualty (P&C) insurance market in Canada. For more than 50 years, IBC has worked with governments across the country to help make affordable home, auto and business insurance available for all Canadians. IBC supports the vision of consumers and governments trusting, valuing and supporting the private P&C insurance industry. It champions key issues and helps educate consumers on how best to protect their homes, cars, businesses and properties.

P&C insurance touches the lives of nearly every Canadian and plays a critical role in keeping businesses safe and the Canadian economy strong. It employs more than 128,000 Canadians, pays over $9 billion in taxes and has a total premium base of $59.6 billion.

For media releases and more information, visit IBC’s Media Centre at Follow us on Twitter @IBC_Ontario or like us on Facebook. If you have a question about home, auto or business insurance, contact IBC’s Consumer Information Centre at 1-844-2ask-IBC.

SOURCE Insurance Bureau of Canada

Economical Insurance highlights community-driven initiatives in 2019 Public Accountability Statement

Economical contributed nearly $1 million towards making a difference in Canadian communities

WATERLOO, ONMay 25, 2020 /CNW/ – Economical Insurance released its 2019 Public Accountability Statement, which is online and available for download. The report outlines the ongoing corporate commitment to social responsibility initiatives implemented in 2019, including community involvement, environmental programs, employee engagement and broker support.

“As we continue to put our customers at the centre of everything we do, bringing our best every day, and understanding that we’re stronger together, we have deepened the resilience of our organization, at a time when we – and our customers – need it most,” said Rowan Saunders, President & CEO of Economical. “Our 2019 Public Accountability Statement is a reflection of our commitment to charitable giving, supporting our stakeholders, and delivering value to Canadians.”

Economical continued to deliver value to Canadians over the course of 2019 through its community-focused programs:

  • The Economical team contributed approximately $855,000 towards making a difference in Canadian communities; over $90,000 of which was to charities chosen by its valued broker partners
  • From coast to coast, employees made personal donations to 90 charities that led to matching donations from Economical, and they also generously donated almost 3,000 hours of volunteer time throughout the workweek to help not-for-profit organizations important to them and their families
  • By offering $85,000 annually for students in scholarships at select post-secondary institutions, Economical helped to equip the next generation with access to specialized education programs across Canada
  • With environmental protection and stewardship remaining a priority, Economical raised awareness of environmental sus­tainability within the company nationally, while also identifying, investigating and acting to reduce pollution, waste, and consumption of resources – resulting in year over year CO2 reductions

The 2019 Public Accountability Statement demonstrates the inherent commitment Economical has for its neighbouring communities.

For almost 150 years, Economical and its workforce have maintained a strong tradition of giving back to communities across Canada through corporate giving and volunteerism – especially to provide relief for Canadian’s when they need it most. Currently, the company is focused on balancing COVID-19 relief measures for customers with efforts designed to impact the health and resiliency of communities across Canada.

“The impact of COVID-19 cannot be overstated. We remain committed to moving the business forward while meeting the needs of our customers, broker partners, and communities.” said Rowan Saunders.

Looking forward, Economical is proud to solidify its commitment to a socially responsible future through supporting the Economical Insurance Heritage Foundation, a new charitable foundation established as part of the company’s anticipated demutualization.  The Foundation, which is expected to receive a $100 million donation from the proceeds of a successful demutualization, will honour Economical policyholders and employees – past and present – by working to have the greatest impact on Canadian communities.

About Economical Insurance
Economical Mutual Insurance Company (“Economical” or “Economical Insurance”, which includes its subsidiaries where the context so requires) is a leading property and casualty insurer in Canada, with approximately $2.6 billion in annualized gross written premiums and over $5.8 billion in assets as at March 31, 2020. Economical is a Canadian-owned and operated company that services the insurance needs of more than one million customers.

SOURCE Economical Insurance

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St. John’s couple with pricey travel insurance now stuck with vouchers for cancelled trip

The Chronicle Harold

ST. JOHN’S — With travelling a few times a year, an annual travel insurance policy once made the best sense, but Tom Gordon is re-evaluating that logic after dealing with his insurer.

Gordon contacted The Telegram after seeing the story of senior Joan Jackson, who said she was threatened with being reported to the credit bureau or taken to small claims court if she stopped her monthly payment on her MEDOC travel insurance even though she can’t go on a trip while the COVID-19 pandemic is ongoing.

Gordon and his wife pay $93.69 a month combined for their policy.

They had planned a spring trip to Cuba, which they cancelled with reimbursement in the form of vouchers for future travel from Air Transat. Those vouchers have a 24-month expiry date.

Gordon said he understands completely that MEDOC will not approve a claim if he already received Air Transat vacation vouchers, as that would be double reimbursement.

But the decision made him ask about what his protections were under the policy should it be impossible to redeem the vouchers before they expire.

“The situation of cancelled international travel owing to the pandemic spread is certainly fraught. The decision of the federal government to uphold airlines’ policy to issue vouchers rather than refunds is problematic enough. Consumers are involuntarily in the position of giving long-term interest-free loans to airlines,” Gordon told The Telegram.

When he asked the insurance provider what would happen if Air Transat goes bankrupt or either he or his spouse dies before they can use the vouchers, the answer leaves him on the hook for the $3,000 the couple spent on the trip.

“The premiums continue to be charged despite the fact that nobody can travel.” — Tom Gordon

MEDOC said the claim is closed.

“Federal advisory against travel outside the country; subsequent cancellation of Air Transat flights to Cuba. Air Transat has indicated they will issue a voucher valid for 24 months in lieu of a refund. However, we do not foresee the possibility of utilizing this voucher and need to recoup these costs. We have received full refunds from Air Canada for connecting flights that we had for travel between St. John’s and Toronto before and after the Cuba flights,” Gordon wrote on the online form explaining reasons for filing a claim.

“Regarding scenario 1 (the bankruptcy of the airline), since Air Transat has offered you the travel voucher, it is now their responsibility to honour it. As for scenario 2 (a death of either spouse), we sincerely hope that is not one you will need to face. In both cases, your insurance policy does not provide coverage for a travel voucher,” adjusting agency GlobalExcel responded to his inquiry in an email exchange.

“In short, Global Excel contends that because I now hold a theoretical voucher for travel rather than an actual ticket, I no longer have any right to claim regardless of circumstances,” Gordon told The Telegram.

“These circumstances include the cessation of operation of the airline or the death of myself or my spouse — circumstances that are clearly otherwise covered under my policy with MEDOC. … Global Excel has responded unequivocally: the money I paid for a vacation that I may never take is not insured because it now exists in the form of a voucher rather than a ticket.”

The annual travel insurance they once thought was a great idea given their age and amount of and type of travel they do is now being given more scrutiny by Gordon.

Planned vacations to New Zealand and Norway this year are unlikely to go ahead, but the monthly bill continues.

“The premiums continue to be charged despite the fact that nobody can travel,” Gordon said.

Their policy expires in September and they only took one trip so far, last October.

Given the fact that auto insurance premiums were reduced a little to reflect that people are driving less, Gordon said it would have been nice to see some leniency with travel insurance customers, especially when the annual sums can be more than $1,000 and there’s no place they can go.

In a letter emailed to customers on May 15 — the same day the original Telegram story ran — Johnson Insurance, the broker for MEDOC, reminded clients, similar to information in a statement to The Telegram that week, that thousands of MEDOC customers were helped to get back to Canada and that it continues to provide health insurance coverage for those who could not return to the country.

“The number of travel insurance claims has tripled and our teams are working around the clock to ensure that we serve all members to the standards that they deserve,” the statement said.

“For all customers we understand how this pandemic has impacted your plans. Rest assured that your trip cancellation coverage continues for trips booked prior to the travel advisory. Travel within Canada is also still covered, and your policy is still in force.

“However, we truly understand the concerns of those who are unable to travel and we are reviewing how MEDOC® can continue to provide exceptional value to all our customers now and for years to come.”

In response to the latest story, a spokeswoman for Johnson said the following: “We are not able to comment on individual claims due to privacy. As each customer’s situation is different, they should contact us directly if they have questions regarding their claim.”

Source: The Chronicle Harold

Lessons Learned By Employers From COVID-19

The excerpted article was written by Susan Crawford

As we pass the one month mark in this unprecedented pandemic, CCPartners continues to see recurring themes that impact employers’ abilities to respond nimbly to unexpected legislative changes and workplace challenges created by COVID-19.  In this instalment of The Employers’ Edge we take a look at some of these issues and provide guidance to employers on how they can better prepare for unexpected changes in their workplaces.

The Value of Employment Contracts

If COVID-19 has taught employers one thing it is the value of a well-drafted employment agreement.  Millions of employees have been temporarily laid off in Canada as a result various provincial emergency response orders or declarations.  Employers have relied on provincial employment standards legislation to initiate these temporary layoffs where they have either been forced to close as a non-essential business or they simply don’t have enough work even if deemed an essential business.  And while we hope common sense will prevail among decision makers if these layoffs are challenged by employees claiming they were constructively dismissed, the legality of initiating temporary lay-offs for non-union staff without a specific contractual right to do so remains an unanswered question during this pandemic.  CCPartners continues to urge employers to consider the use of employment agreements for all non-union employees– not only to give employers the flexibility to layoff but also to minimize their legal obligations at the time of dismissal and clarify the rights and responsibilities of both the employer and the employee.  Alternatively, employers should consider adding a layoff policy to their existing employee manuals and giving notice to employees of the new policy.

The Need for Comprehensive Working at Home Policies

Many of the questions CCPartners has fielded during this pandemic relate to rights and obligations when employees are asked to work from home.  Since an employee’s home work space is an extension of their workplace, employers need to ensure employees understand the importance of working safely and their obligation to work as if they were in their physical workplace during these uncertain times.   Being able to monitor, assess and respond to remote work issues requires a well-written and comprehensive working from home policy.  Clearly communicating expectations is the best way to ensure employees can work effectively and safely from home in circumstances where an employer is either required to close or cannot provide a workplace that allows for social distancing or other public health and safety measures.

Adequacy of Sick Leave, Vacation and Benefit Plans

Employers have had to take a hard look at their benefit plans in dealing with COVID-19.  Many of our clients were without any kind of sick leave policy when COVID-19 struck and were left trying to adjust to the changing circumstances on the fly.  Attempts to be generous in the beginning by keeping all employees whole even if they were not working or working full-time soon became an expectation that employers could not continue to meet financially.  Without comprehensive policies in place many employers’ responses were inconsistent or created workplace conflicts when applied in a manner that seemed unfair.  Could an employer require employees to take paid vacation time, personal days or use lieu time if they couldn’t provide them with full-time work or they believed that employees did not have enough work to work remotely?  If employers initially paid employees who had to be off because they had been diagnosed with COVID-19 or had family members who had been diagnosed, were they required to continue to pay them as the pandemic wore on?  Many of the answers to these questions depend on the language in workplace policies.  CCPartners recommends that employers should make policy reviews a priority when the world finally “normalizes”.

Develop a Business Continuity Plan

Many workplaces did not give consideration to how they would continue to operate in the unlikely event of an emergency.  When the unlikely became reality in early March 2020 many employers were caught unprepared when they were forced by emergency orders to roll out work contingency plans.  Employers are encouraged to devote resources to developing a business continuity plan with the benefit of hindsight COVID-19 provides when we reach the other side of this pandemic.

Investing in Financial and Legal Experts

Navigating the eligibility for federal subsidy programs, the application of SUB plans or Top-ups for CERB benefits and understanding how to successfully apply for same has underscored the importance of having trusted financial and legal advisors available to assist HR Departments and small businesses maximize the programs that will help ride out this pandemic.  CCPartners has partnered with various financial experts to disseminate vital information to employers through our COVID-19 webinar series.    Continuing to rely on experts as our economy starts to reopen will be important for employers looking to minimize liability and maximize the safe and healthy return of their workforces.

Whatever the future may hold when workplaces are allowed to resume regular operations, COVID-19 has forever changed the landscape of our social and workplace interactions.   Employers would be well served to take stock of their workplace policies and practices and adjust to the “new normal” we will be experiencing when COVID-19 has finally been tamed.

Originally published 23 April, 2020

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

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