Pandemic crisis forecast to hit insurers for $200 billion

LONDON _ The pandemic will cost the insurance industry over $200 billion, according to Lloyds of London, who estimated that its own payouts are now on a par with the Sept. 11, 2001 attacks or the combined impact of hurricanes Harvey, Maria and Irma in 2017.

Lloyds, which as an insurance market pays out to insurers affected by disasters, said it expects to pay between $3 billion and $4.3 billion to insurance companies to help them cope with the COVID-19 pandemic.

Losses could widen if lockdowns continue into the next quarter, which would push the overall cost to the insurance industry to $203 billion. Unlike the storms, for example, the pandemic’s impact is global, systemic and long term.

“Lloyd’s believes that once the scale and complexity of the social and economic impact of COVID-19 is fully understood, the overall cost to the global insurance non-life industry is likely to be far in excess of those historical events,” the London-based insurance market said.

The study undertaken by Lloyds assumed social distancing and lockdown measures through 2020, as well as the forecasts for the drop in gross domestic product globally.

“What makes COVID-19 unique is not just the devastating continuing human and social impact, but also the economic shock.” Lloyd’s Chief Executive John Neal said.  “Taking all those factors together will challenge the industry as never before, but we will keep focused on supporting our customers and continuing to pay claims over the weeks and months ahead.”

 

Economical Insurance deploys Catastrophe Response Team to assist customers with flood recovery

Economical Insurance deployed its Catastrophe Response Team to Fort McMurray to provide immediate assistance for Economical and Sonnet Insurance customers who have been impacted by flooding.

“Our team stands with the residents and business owners in the Fort McMurray community during this difficult time, and will remain on the ground until we’re sure that all the needs of our customers have been met,” Hans Reidl, Senior Vice-President, Claims at Economical Insurance.

The Economical team of adjusters are working to diligently support individuals and families, as well as business owners whose properties may have sustained physical damage because of the flooding. The team is responding quickly to work on claims that customers have already reported, and to assess any new claims that customers initiate over the next few weeks.

“We’re taking every opportunity to simplify the claims process to help reduce anxieties for our customers,” Shawn Little, Director, Technical Property and Catastrophe. “From wildfires in 2016, to flooding this spring during the ongoing COVID-19 pandemic, Economical continues to provide security for the Fort Mac community when they need us most.”

Keeping customers, employees, and the community safe during COVID-19

With the added complexity of emergency travel, and physical distancing protocols related to COVID-19, Economical is taking extra response precautions as recommended by the Public Health Agency of Canada to keep staff and customers safe amidst the ongoing COVID-19 pandemic.

Economical previously extended its long-standing partnership with Canadian Red Cross by providing an additional $100,000 donation for COVID-19 support measures. This continued support helps Red Cross responders to meet the urgent needs of people impacted by the flooding in Fort McMurray and the surrounding area of Alberta.

Canadians can donate to The Fort McMurray & Area Flood Fund which has been developed by Canadian Red Cross, to provide relief, recovery, resiliency and risk reduction activities in and beyond the region at the individual and community levels.

What information should customers collect when making a claim?

Keeping track of some important information before, during, and after experiencing a flood can make for a smoother claims process. Customers could be asked to provide any of the following information:

  1. A detailed description of the incident
  2. The type of materials damaged within the home or business
  3. Details about damaged belongings and if they need to be replaced or repaired
  4. Contact information for the contractor that will be used
  5. Whether additional living arrangements will be needed while waiting on repairs

Customers are also encouraged to address any additional questions directly with their adjuster, including questions about additional living expenses arrangements and overland water coverage.

For more information, the Insurance Bureau of Canada (IBC) has published additional public resources to assist customers to cope with spring flooding during the COVID-19 pandemic. IBC’s Consumer Information Centre can be reached at 1-844-2ASK-IBC.

Need to make a claim?

Customers of Economical who need to make a flood-related claim, should contact their broker or call Economical 24/7 to start the process: 1-800-607-2424. Customers of Sonnet can make a flood-related claim by calling 1-844-766-6384.

About Economical Insurance
Economical Mutual Insurance Company (“Economical” or “Economical Insurance”, which includes its subsidiaries such as Sonnet Insurance Company, “Sonnet” or “Sonnet Insurance”, where the context so requires) is a leading property and casualty insurer in Canada, with $2.5 billion in gross written premiums and approximately $6.0 billion in assets as at December 31, 2019. Economical is a Canadian-owned and operated company that services the insurance needs of more than one million customers.

SOURCE Economical Insurance

www.economicalinsurance.com

Document everything, insurance lawyer urges Albertans returning to flooded homes

Document everything, insurance lawyer urges Albertans returning to flooded homes

‘Take lots of photos, don’t take a denial at face value, make notes’

The excerpted article was written by CBC News 

As Northern Alberta residents discover the extent of flooding damage to their homes and businesses, a Fort McMurray lawyer offers a few practical tips that could pay off later in dealings with insurance companies.

Take photos. Make lists. Understand your policy. And don’t give up if your claim is initially denied.

“They’ve just been back to the property for the last day or two and the news is pretty heartbreaking,” said Christine Burton, a Fort McMurray lawyer who has worked through insurance issues with numerous residents in recent years.

“People are dealing with the shock and impact of cleaning up,” Burton told CBC Radio’s Edmonton AM on Tuesday. “We’re telling people, ‘Please, take lots of photos, don’t take a denial at face value, make notes. Stay safe.'”

More than 14,000 people were evacuated as a result of recent river flooding in and around Fort McMurray, as well as along the Peace River.

As people progress from clean-up to rebuild, it is critical that they understand their insurance policies, even if it means hiring a lawyer to work through “subtle” policy language, said Burton.

Most policies won’t include coverage for overland flooding, when water flows over dry land before entering a property through doors or windows.

“It’s often a special endorsement you can buy. It’s very often expensive,” Burton said. The cost depends on the flood risk in the area where you live.

However, property owners whose policy includes a special endorsement for sewer backup may be able to get some money from their insurance companies.

“Take photos of your basements, the drains, the sump pump. Make notes of everything that’s happening, make lists of everything that you’ve lost.

“Fort McMurray has become a little bit of an expert, unfortunately, at insurance claims through fire —  and we’re still dealing with some of those claims,” Burton said. “Don’t take a denial at face value. You can challenge this. Understand your policy.”

Don Scott, mayor of the Regional Municipality of Wood Buffalo, has said he expects residential damages from the flooding in Fort McMurray could top $100 million.

In a statement, the Insurance Bureau of Canada said overland and sewer backup coverage are the key parts of a policy that pertain to flooding events but both of these are optional and must be added to home insurance policies.

Properties in high-flood areas may not be offered the coverage, the statement said.

“If a home has flood damage from this event but did not purchase the optional overland flood insurance or it was not available as the area is high-risk for flood, the policy would not cover the damages,” Celyeste Power, vice-president for the insurance bureau’s western region, said in the statement.

Property owners not covered by insurance may be able to access provincial disaster relief funding. Alberta Premier Jason Kenney has said the provincial disaster relief program will likely be triggered for Wood Buffalo flooding.

Under that program, the government would provide some financial support for recovery costs for critical public infrastructure and non-insured private infrastructure.

Between 2009 and 2019, insurers paid out an average $1.9 billion per year on catastrophic flooding claims, compared with an average $422 million annually in the period from 1983 until 2008, according to Insurance Bureau data.

More than $2 billion in insured losses resulted from the June 2013 flooding event in southern Alberta, which caused $6 billion in damages and displaced 100,000 people.

CBC News

13,000 people forced from homes in Fort McMurray, Fort Vermilion

Read more
Ontario will spend $17B over the next year to help battle COVID-19 pandemic

Ontario will spend $17B over the next year to help battle COVID-19 pandemic

The excerpted article was written by Colin D’Mello CTV News Toronto

TORONTO — Ontario will spend $17 billion dollars over the next year, record a $20.5 billion deficit and will set aside an unprecedented $2.5 billion dollars for emergency spending, allowing the province to battle the global COVID-19 pandemic.

The Progressive Conservative government unveiled an action plan designed to tackle the growing health and financial crisis due to the rapid spread of the novel coronavirus, including new measures for frontline health care workers, and support for businesses, seniors and families.

The new spending will also include:

  •  $3.3 billion on the health care system, including $1.2 billion on improvements
  •  $3.7 billion on support for people and jobs, including $2 billion in targeted supports, and $290 million in tax measures
  •  $10 billion in support for businesses, including $6 billion in tax deferrals affecting 100,000 businesses.

Ontario Finance Minister Rod Phillips said the new measures are necessary to deal with the “extraordinary threat” to the health and economy of the province.

“It demands an extraordinary response from all levels of government and civil society because we’re all in this together,” Phillips said.

The majority of the focus will be on Ontario’s healthcare system, which has been inundated with pandemic-related cases, with $3.3 billion in spending.

  •  $1 billion contingency fund specifically for healthcare
  •  $341 million for hospital capacity to increase assessments
  •  $243 million emergency funding for long-term care homes to contain the spread of COVID-19
  •  $100 million for public health units
  •  $170 million for community care capacity and Telehealth Ontario
  •  $62 million for health care workers in assessment centres, hospitals and community
  •  $75 million for new personal protective equipment for health care workers
  •  $80 million for ambulance and paramedic services
  •  $70 million for new infection control measures in retirement homes and emergency shelters
  •  $1.2 billion will be spent on improving services in health and long-term care homes.

The government will also spend $3.7 billion dollars to help the hundreds of thousands of people affected by the pandemic – from families forced to stay at home in self-isolation, to those who have lost their jobs as a result of the economic shock.

Families will get a one-time payment of $200 per child up to the age of 12, to help parents keep their children engaged during an extended time away from school or daycare.

The $340 million initiative would be available on Apr. 6 through an online portal where parents could apply.

The government will also spend $3 million dollar per day to offer free emergency daycare for frontline healthcare workers and first responders.

Meanwhile, the government said student loan repayments, under OSAP, would be suspended for six months during the COVID-19 crisis.

As businesses face a major financial hit due to forced COVID-19 closures, the government will spend $6 billion in tax deferrals this fiscal year giving owners up to five months – Aug. 31, 2020 – to pay their provincial taxes.

The government says the exemptions would apply to: Employer Health tax; Tobacco tax; Fuel tax; Gas tax; Beer, Wine and Spirits tax; Mining tax; Insurance Premium tax; International Fuel Tax and the Race Tracks tax.

The government expects to help roughly 100,000 businesses with the program and projected that businesses would collectively save $25 million in interest and penalties.

Economic impact

COVID-19 is expected to carve out $5.8 billion dollars from the province’s revenue stream in 2020-21, largely due to drops in personal income and corporate tax revenue, and due to the closure of casinos operated by the Ontario Lottery and Gaming corporation.

To ensure the province can withstand the economic blow, the Progressive Conservative government – which has been focused on fiscal prudence and restraint – will record a massive $20.5-billion deficit in the year 2020-2021.

The massive deficit figure is comparable to the financial crisis of 2008 when the government, under then-Premier Dalton McGuinty, spent $24-billion dollars to stabilize the economy.

While the government acknowledges that the COVID-19 outbreak has “significantly impacted” Ontario’s economy – which the government said recorded strong growth before the pandemic – the fiscal document states that the economy should turn around in the second half of 2020.

“Pent up demand for goods and services along with and improving labour market would add momentum, supporting stronger consumer spending,” the fiscal document reads. “However, some sectors will take longer to recover.”

In his remarks to the Ontario legislature on Wednesday, Phillips called COVID-19 a generation defining moment that requires a non-partisan approach to financial stability.

“And we are confident that every dollar we invest through this action plan that saves a life or saves a job is a dollar well spent.”

What To Do When You Receive a Force Majeure Claim Based On The  Novel Coronavirus

What To Do When You Receive a Force Majeure Claim Based On The Novel Coronavirus

The excerpted article was written by Thomas J. Timmins and Howard XIN Articling student

Gowling WLG

Start with the Clause

A force majeure clause is a common inclusion to contracts for protecting parties from impairment caused by extraordinary or extreme events. These extraordinary events are often referred to as “acts of God”. When a force majeure clause has been included in a contract and force majeure events actually do occur, the expectation is that the party or parties facing impairment as a result of the proscribed force majeure event–a hurricane, war, flooding, political unrest, epidemic, etc.–will be relieved of all or some portion of its delivery obligations under the relevant contract and from all or some portion of liability for damages arising from delay or default occurring in the performance of its contractual obligations.

In drafting these provisions, companies will often use language that defines what will or will not constitute a force majeure event, often by listing specific examples which qualify as such–hurricanes, war, volcanic eruptions, strikes, lockouts, etc. Occasionally, in the rush to get the deal done, not a great deal of thought is given to the breadth or inclusions expressed in the clause and a “boilerplate” is used.

If there is no force majeure clause, courts will still consider defences by the impaired party based on foreseeability of the impairing event. Whether there is a force majeure clause or not, the burden of proof rests on the party seeking to rely upon the force majeure provision. In any case, the key starting point is with the force majeure clause itself. What does it say? Do the events which one party alleges to have occurred actually qualify under the terms of the clause? If so, did those qualifying events actually lead to the delay or the breach in question?

Force Majeure Case Law in Canada

For the past half-century, the leading case on force majeure in Canada has been Atlantic Paper Stock Ltd. v St. Anne Nackawic Pulp & Paper Co. This was a 1975 Supreme Court decision concerning a minimum annual supply of paper pulp over a 10-year period, which allegedly became subject to extraordinary events including acts of God and substantial decline in the market for such paper pulp. In this decision, Justice Dickson established that, “An act of God clause or force majeure clause … generally operates to discharge a contracting party when a supervening, sometimes supernatural, event, beyond control of either party, makes performance impossible. The common thread is that of the unexpected, something beyond reasonable human foresight and skill” (emphasis added). Since then, no Canadian Supreme Court cases have revisited the matter in depth. However, despite the lack of Supreme Court precedents, there have been various lower-court cases affirming Atlantic Paper and exploring the interpretation of force majeure clauses.

In World Land Ltd. v Daon Development Corp., the court accepted the use of basket clauses to define the scope of force majeure applicability. In this case, a land development company was accused of failing to commence construction on the land by a specific date. In the agreement, the force majeure clause included in its definition of force majeure events, the very broad and inclusive language, “…or any other causes…beyond the control of the vendors or the purchasers”. The company had relied on this language and announced that the development would be delayed on the grounds of not having received a development permit, which it claimed was beyond its control. The court accepted the applicability of the basket clause. However, to the detriment of the land development company, it chose to interpret the language plainly and held that it had been within the company’s control to obtain the permit on time. In other words, the party alleging that force majeure events occurred was not entitled to sit idle.

Subsequently, Atcor Ltd. v Continental Energy Marketing Ltd. seemed to have revised the criteria for what constitutes a force majeure event. In this decision, a gas supplier successfully relied on force majeure when it failed to deliver gas because of various technical pipeline issues suffered by a third party pipeline owner. Here, the Alberta Court of Appeal rejected the idea that a force majeure event had to make performance impossible. Instead, “a real and substantial problem” that makes contractual performance commercially unfeasible was held to be the standard—i.e. a significantly lower threshold than the impossibility of performance standard posited in Atlantic Paper, cited above.  Despite the apparent departure in Atcor, the impossibility standard set in Atlantic Paper has continued to be followed in recent cases. Thus, from a practical viewpoint, unless you have expressly contracted otherwise, ‘impossibility of performance’ should be viewed as the basic standard when reviewing force majeure circumstances.

As if to emphasize this point, in the 2011 British Columbia Supreme Court decision Domtar Inc. v Univar Canada Ltd., there was a focus on language of the force majeure provision. The facts were that a supplier could not source and supply caustic soda on commercially acceptable terms and, therefore, alleged that an event of force majeure had occurred and that it should be exempted from its contractual supply obligations. The force majeure event, in this case, was not being able to purchase raw materials at a commercially acceptable price because of an unprecedented rise in price of caustic soda. The argument was ultimately unsuccessful. The B.C. court found that the force majeure clause in the relevant contract did not include or contemplate economic or market conditions, and agreed with earlier findings from the English courts that, “the fact that a contract has become expensive to perform, even dramatically more expensive, is not a ground to relieve a party on the grounds of force majeure.

Domtar Inc. suggests that “economic” force majeure would be extremely difficult, if not impossible, to justify. It also emphases the point which we made above—start by reading the force majeure clause in your contract.

Considering the Novel Coronavirus

It is not uncommon for force majeure clauses to include specific references to terms such as “plague” or “epidemic” when describing force majeure events. In light of global health emergencies that have surfaced in the last few decades, we have found that these types of clauses have included increasingly specific event references such as “public health emergencies” and “communicable disease outbreaks”. However, whether these specific wording inclusions will be of use to the party alleging that a force majeure event which can be relied upon as relieving it from its contractual obligations has occurred remains uncertain.

The Canadian case law surrounding force majeure provisions based on global health concerns is limited. For example, most mentions of the 2003 SARS outbreak or the 2015 Ebola pandemic pertain to cases of domestic occupational health and safety and refugee protection. Reported cases that refer to these specific health crises as triggers of force majeure are few. There is one 2005 decision issued by the Canadian Radio-television and Telecommunications Commission (CRTC) concerning rate adjustment plans in the Telecom industry that linked SARS to a force majeure event. In the decision, Bell Canada, TELUS, and several other telecom companies submitted that the 2003 SARS outbreak in Toronto fell within the scope of the following force majeure clause:

“No penalty shall apply in a month where failure to meet the standard is caused, in that month, by fire, strikes, default or failure of other carrier, floods, epidemics, war, civil commotions, acts of God, acts of public authorities or other events beyond the reasonable control of the Company which cannot reasonably be foreseen or provided against.”

In this case, Canadian telecom carriers sought to rely upon the force majeure wording above, arguing that factual circumstances, including the necessity to quarantine of a number of Bell Canada employees, and the specific mention of “epidemics” in the force majeure clause, lessened their respective quality of service obligations. (In many force majeure clauses, epidemics are not specifically included in the clause and left to be read-in under the sweeping category “other events beyond the reasonable control of the Company”.) In the end, the CRTC held that the approach to be adopted in order to determine whether or not SARS-related events were sufficient to trigger force majeure clause protections was a case-by-case one.

READ FULL ARTICLE HERE AT GOWLING WLG

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