RBC selling home-auto insurance unit to Aviva for $582 million

TORONTO – Royal Bank of Canada is selling RBC General Insurance and moving some of its employees to Aviva Canada.

The bank  will receive about $582 million from the sale of the home and auto insurance business and RBC estimates it will realize a $200-million after-tax net gain from the deal, which will close sometime between July and September.

Aviva Canada will also provide a full suite of property and casualty insurance to RBC customers, including home and auto, under a 15-year strategic agreement with the bank. Policyholders won’t be affected at this time.

About 575 RBC employees will move to Aviva and others supporting the sales process will remain with the bank.

Those that are moving to Aviva are responsible for claims, underwriting, product development, information technology and related functions.

“This partnership is a fantastic addition to Aviva Canada, diversifying our distribution alongside our highly-valued 1,500 independent brokers,” Aviva Canada chief executive Greg Somerville said in a joint statement.

The head of RBC Insurance said the deal will allow the bank to focus on and invest in areas with the greatest potential for growth, including life, health and wealth insurance.

“RBC Insurance is one of the fastest growing direct-to-consumer home and auto insurance providers in Canada and this partnership will allow us to maintain our deep client relationships, while offering a full suite of property and casualty insurance products,” said Neil Skelding, the president and CEO of RBC Insuranc


B.C. couple says home warranty insurance offers little protection

A Coquitlam couple says B.C.’s home warranty insurance has failed them and there needs to be more government oversight.

In March 2013, Tina and Ben Wilson moved into a newly constructed home on Coquitlam’s Burke Mountain. Now, almost three years later, they are still fighting with the insurance provider handling their new home warranty claim.

“You buy your dream home and it turns into a nightmare,” says Tina.

The home came with home warranty insurance. By law, all residential builders in B.C. must have third-party home warranty insurance on new homes before getting a building permit. The Wilsons say soon after they moved in, they noticed a number of deficiencies including electrical issues, drainage problems with water settling against the house and mold in the basement suite. They decided to file a new home warranty claim.

“We let them know in August about the mold in the basement suite and by November we knew we were in for a fight,” says Tina.

The Wilsons say the insurer, Aviva Insurance Company of Canada represented by National Home Warranty Group, sent a third-party investigator to look into the mold problem. Initially, the couple says they were told nothing was wrong.

“The builder, the insurer, and the third party all came in and said the ventilation system was working fine and installed to code,” says Tina. “When we pushed back and hired engineers and hired environmental specialists, they found that not only was it not functioning at all, but it wasn’t installed to code.”

The insurance company eventually accepted the findings and began the remedial work. However, the Wilsons say the experience with  home warranty insurance has been an uphill battle.

“If you are willing to fight. If you are persistent. If you don’t go away quietly, then new home warranty eventually might do something to help you a little bit,” says Tina.

The Homeowner Protection Office, which is a branch of BC Housing, monitors the performance of home warranty insurance, but it has no authority to regulate warranty providers or insurance brokers. Consumer Matters reached out to BC Housing Minister Rich Coleman, but he declined our request for an interview. Instead, we were referred to the Homeowner Protection Office.

Vice president and registrar Wendy Acheson says, “I believe most homeowners are very satisfied with the system and when you look at the number of homes being built where we don’t get any complaints [it’s] enormous. The number of complaints we get is actually 0.2 per cent of the number of homes that are being built.”

Acheson says there are a number of tools available to the homeowner should they run into trouble. A complaint can be made to the Financial Institutions Commission which regulates insurance providers. A homeowner can also institute mandatory mediation.

But realtor and homeowner advocate John Grasty says there’s little protection for the homeowner because they are forced to use a home warranty company selected by the builder.

“In my opinion what protection that is offered is worthless,” Grasty adds.

“There’s not enough political will. I don’t think enough consumers are speaking out. A lot of them can’t be bothered. It’s just too much of a huge organization to be arguing with. ”

Home inspector Ted Gilmour agrees. He says many of his clients are frustrated by the system.

“I think it’s disingenuous of the government to insist on you buying into that system that does not protect you because you have to sue the builder to get anything done is my experience.”

As for Tina and Ben, fighting with their insurance provider and the handling of their new home warranty claim has become a full-time job.

“You quickly realize going through the process, your idea of what is there is a complete misconception,” says Ben. “There’s no one literally there to help the homeowner.”

The Homeowner Protection Office says the province plans to review new home warranty insurance regulations in 2016.

Growing popularity of laneway homes raises questions about adequacy of insurance

Soaring real estate costs are pushing some Canadian cities to embrace laneway housing, touted as the future of affordable living in urban centres.

But as the properties become more popular and balloon in value, questions are beginning to arise about whether current insurance practices are sufficient.

Home insurer Square One Insurance says it has been fielding so many recent calls about laneway homes _ most of them in Vancouver _ that it’s started offering a separate product created specifically for the structures.

Daniel Mirkovic, the company’s president and chief executive, says in the past, laneway homes or coach houses were often $50,000 conversions of detached parking garages created by homeowners to house their adult children.

“Now, because of the high price of real estate, the whole concept of laneway housing has changed,” Mirkovic said. “When you’re looking at a laneway home that the owners have invested $200,000 or $300,000 dollars to build, that’s a very significant investment.”

Converting a back alley parking garage into a residential structure is one way for homeowners to offset the cost of pricey real estate by generating rental income. However, not all Canadian cities allow for laneway homes to be built.

Vancouver is a notable exception. The city has issued over 1,000 permits for laneway homes since 2009. In Calgary, city officials are launching a pilot project that will allow laneway homes to be developed along one of the city’s streets.

As square footage in Canada’s hottest real estate markets becomes pricier and developers look for new ways to squeeze housing into tight spaces, laneway homes are likely to grow in popularity. That could force insurers to rethink their policies.

Currently, most insurance companies _ including Aviva Canada, Intact Financial and TD Insurance _ cover laneway homes under the same policy as the main property and don’t offer a separate insurance policy for the structures.

Mirkovic says that could be problematic in certain circumstances _ for example, if a natural disaster occurs that affects both the main structure and the laneway home. In the aftermath of such incidents, building replacement costs may soar due to a phenomenon referred to as “post-event inflation.”

In that situation, Mirkovic says, “the demand to build new homes or rebuild homes has gone up dramatically because there are thousands of people who need to rebuild their homes, and the supply is low. There’s only a certain amount of building supplies readily available; only a certain amount of contractors who can build homes.”

A home that cost $300,000 to build could cost $500,000 to rebuild. Typically, the insurance policy would cover the difference _ but in the case of a laneway home, it might not, Mirkovic says.

“If you’re insuring something as a detached structure you only get coverage up to the limit specified, which might be up to $300,000, but if it actually costs $400,000, you’re out of pocket for the extra,” Mirkovic said.

There could be drawbacks, however, such as two deductibles instead of one. In some instances, premiums may be higher as well, Mirkovic said.

Mike Shepel recently opted for Square One’s laneway housing package to insure a rental property he purchased in Vancouver. Knowing that replacement costs are guaranteed to be covered in the event of a disaster such as an earthquake provides him with security, Shepel said.

The physician said he plans to use the same product to insure his second rental property _ another laneway home _ as well.

“They’re really cute little places,” Shepel said. “It’s a unique way to get more homes into the community ? It really does feel like a small, little comfy cottage, where you feel more independent.”


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Home remodeling? 9 things to know about insurance coverage


As the weather improves, many homeowners start planning major remodeling or renovation projects. According to Statistic Brain, in the next two years 26% of homeowners plan a bathroom renovation or addition and 22% plan a kitchen renovation or addition.

However you choose to remodel, keep this in mind: The homeowner, the general contractor and the subcontractors—plumbers and electricians, for example—all need insurance coverage.

Review your homeowners insurance

Contact your home insurance carrier or broker to confirm whether your policy covers your home and property while it’s being remodeled. For example, if you have to move your furniture out of the rooms that are undergoing renovations, consider getting a storage container to put in your driveway. I rented a 40-foot unit when I added a second floor to my single-story ranch and filled it with furniture and everything from my attic.

Your homeowners policy should cover the contents in the container, but confirm the coverage with your broker. If you don’t have room for a container on site and you put your belongings in an offsite storage unit, you may need a separate policy.

If you’re planning to do the work yourself, your first call should be to your broker. Some remodeling projects if not undertaken correctly may void your homeowners policy.

Make sure the contractor is licensed and bondedAfter you’ve selected a general contractor (GC) but before you sign a contract for the project, be sure that the GC is licensed and has a surety bond. If the GC can’t finish the job for some reason—illness or bankruptcy, for example—the surety bond will cover any financial losses the homeowner incurs in getting the job finished. Your contract with the GC also should agree that all the work will be done according to current building codes and all permits will be obtained.The GC is responsible for property damage, injuries on the job site and negligence in workmanship, which should be covered by the GC’s general liability and worker’s compensation insurance. Ask to see the certificates and check that the coverage will be in effect the entire time that work is being done.“This is the biggest mistake homeowners make,” says Alex Totino, president of ABC General Contractors, Stamford, Conn. “Only one out of 20 homeowners has ever asked to see my insurance certificate. Most are focused only on the price of the job.”Confirm the contractor’s liability coverage

Many contractors have general liability (GL) insurance designed specifically for remodelers, which covers the GC for accidental injury to someone other than a worker or himself (many GCs are small businesses, operated by their individual owners with a few workers). For example, a delivery driver may trip over the GC’s materials and be hurt in your driveway. The GC is responsible for that injury, not you.

Generally, the GC’s liability policy excludes coverage for tools and equipment. The GC and the subcontractors should speak with their brokers about the best way to cover equipment and tools, which can easily be damaged, lost or stolen. In one case the GC’s employee left an expensive, new hammer in the wall between the studs and covered it up with dry wall. No one knew what happened to the hammer until three years later when the GC worked on a project for the same homeowner and found the hammer. (Yes, it happened on one of my remodeling projects.)

Buy a builder’s risk policy
Generally, building materials and equipment belonging to the GC or subcontractors aren’t protected from theft by your homeowners policy. Ask your broker whether you should buy a builder’s risk policy for the length of time that the construction is ongoing. This policy would cover any of the construction equipment or materials that are left on your property before they’re installed. With the high cost of copper, thieves target construction sites, looking for copper plumbing pipe, for example.The contractor’s GL policy also covers damage to your existing property, but not any new work the contractor does. You may be enclosing a deck to add a new room, for instance, and the new electrical system malfunctions after the electrician installs it, causing fire damage to both the existing house and new space. In that situation, the GC’s liability policy covers damage to your old home, but not the new addition, even though the GC is liable for damage to the addition as well.A builder’s risk policy covers situations like this one, and makes sure that the project is completed. The GC or the homeowner can purchase the policy; however, the named insureds usually include the homeowner, the homeowner’s mortgage company, the general contractor, the subcontractors and the lender if the project is being financed. Be prepared: Determining the proper coverage and policy may require several conversations with brokers and carriers as well as lenders.
Insure commercial vehicles and equipment
Most GCs and subcontractors drive commercial vehicles that are designed to carry their equipment, materials and tools. They also may have dump trucks or other vehicles they use to bring supplies to the site and haul away debris. These vehicles require special insurance coverage, primarily for tools and equipment stored in the trucks, and state law may require that only someone with a commercial driver’s license can operate them.The insurance policy should cover vehicles when they’re stored at a construction site as well as on the contractor’s premises. My contractor left his truck with tools and paint in my driveway for several days because it was more efficient to have his workers come directly to the job site. The truck was always locked and my property is fairly secure, but theft and vandalism are known risks. The contractor’s commercial vehicle insurance policy covered this situation.
Confirm subcontractors’ insurance
You also should confirm that the subcontractors carry workers’ compensation coverage of their own or are covered by the GC’s policy. If a subcontractor is injured on the job at your site, you don’t want to be liable for the injuries.Each subcontractor should carry its own liability insurance, and many policies are designed specifically for the kind of work the subcontractor does and the risks from that work. The GC should require the sub to name the GC as an additional insured on the sub’s policy. This allows the GC to speak with the sub’s insurance company directly in case of a claim. As the homeowner, you should ask the GC about the subcontractors’ insurance coverage and ask to see coverage certificates if you have any doubts.Totino says that even when homeowners ask about his insurance, they fail to ask about insurance for the subcontractors. Totino makes it a practice to include current insurance certificates from his subcontractors along with his own to show the homeowner. If for some reason the subcontractor doesn’t have its own insurance, Totino arranges to provide the necessary coverage.Even though the GC may have worked with the subs for a long time on many jobs, accidents can happen. The GC’s contract with the sub should include a “hold harmless” clause that protects the GC from having to pay for damage caused by the sub’s mistake or carelessness. The contract also should include an indemnification clause, in which the subcontractor acknowledges that it will be responsible for any damage it causes.
Determine adequacy of policy limits 
Adequate insurance coverage includes the limits of the policy, not only whether there is a policy in place. General liability limits vary, but most general contractors carry a $1 million limit. Depending on where you’re located, and the size of the project, this amount may not be enough.As the homeowner you should review your policy limits as well. Are the limits for bodily injury and property damage high enough to cover the risks from your remodeling project? Do you and the GC each need an umbrella policy? It’s not uncommon for injured workers to file claims against the homeowner and the GC.
Confirm completed operations coverage 
Completed operations coverage provides insurance for things that can go wrong after a job is done. For example, in my second floor addition, the plumber installed a bathroom without insulating pipes located in an outside wall and above a garage. When the pipes froze the next winter, the contractor had to open walls, repair frozen, burst pipes, add insulation, and repair and repaint the walls. The contractor also installed a heater in the garage to mitigate the risk of future frozen pipes.
Consult your broker
There are so many variables to insurance coverage for home remodeling projects, some mandated by state law, that you and the GC should consult your brokers before starting the project. The GC can also consult the local remodeling association to get the best advice on what insurance he needs and is available for his business.As the homeowner, remember to speak with your insurer about increased coverage for the value of your property after it’s been remodeled. A two-story colonial is worth much more than a single-story ranch-style house.As for surviving the project itself? Maintain your sense of humor and expect things to go wrong. But as long as you have faith in your contractor—and adequate insurance coverage—it will turn out fine.Do you have your own stories of remodeling insurance claims or coverage issues? Please share your advice and anecdotes with us in the comments section.
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