Since hitting a high of US$1.1039 on November 7, 2008, the Canadian dollar has declined steadily and has slowly crept back to reality, trading in the 80-cent range compared to the U.S. dollar. As commodity prices decline and the economy struggles along in a recession, the loonie has been hit hard.

Most commercial liability and auto fleet policies are written for limits of Cdn$2 million or less, which is totally inadequate for Canadian companies operating within Canada, let alone those with U.S. exposures. Even in a full-blown hard market, the incremental cost to raise policy limits to $10 million or $20 million remains affordable.

The figures below clearly illustrate that a dollar isn't necessarily a dollar.

Canadian limit	U.S. Equivalent	Shortfall
$ 1,000,000	$ 792,400	$ 207,600
$ 2,000,000	$ 1,584,800	$ 415,200
$ 5,000,000	$ 3,962,000	$ 1,038,000
$ 10,000,000	$ 7,924,000	$ 2,076,000
$ 20,000,000	$ 15,848,000	$ 4,152,000
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Insurance Brokers E&O program
Premium discounts for Gold Seal performance audit We are pleased to announce the availability of the Gold Seal performance audit for clients of our Insurance Brokers E&O program. Provided by the Cookson Walker Group, Gold Seal accredited partners, this systematic and comprehensive planning tool for insurance brokers develops and recommends action plans to aid business improvement. The program was originally developed in Australia and has been implemented successfully by brokers in Canada, the U.S., New Zealand, Singapore and Hong Kong. It prioritizes actions that should be taken to achieve the "best practices" required to control operations and improve profitability and growth. Our underwriter expects that imp-lementing best practices will reduce the E&O hazard. To encourage the use of the Gold Seal system, we can offer: A 10-per-cent credit available on next renewal to defray the audit cost A further five-per-cent credit available once the recommendations have been implemented. Our program also features: Broad claims-made form Meets or exceeds regulatory requirements in all provinces Competitive terms $5-million capacity (higher limits available) Expert claim-handling capabilities Triple annual aggregate deductible Broad definition of insured Optional extended reporting period, at a predetermined premium and non-cancellable We have more than a decade of experience handling this class of business Supported by first-class, specialty Underwriters at Lloyd's Minimum premium $1,500 applies.
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New national program for insurance brokers E&O
We are pleased to announce our new program for Canadian licensed general insurance brokers. We have been handling this class of business for a decade. Our present carrier, Utica Mutual, has decided to retire from Canada, and we have successfully replaced the program with support from Underwriters at Lloyd's. Our new program features: Broad claims-made form Meets regulatory requirements in all provinces Fast quotes and competitive terms $5-million capacity (higher limits available) Expert claim handling by specialty independent adjusters with many years of experience in this class Triple annual aggregate deductible Broad definition of insured Optional extended reporting period, at a predetermined premium and non-cancellable Supported by first-class, specialty Underwriters at Lloyd's Minimum premium $1,500 applies. We offer a full range of in-house E&O capabilities supported by first class, licensed markets: Architects and engineers Our program provides broad E&O cover at competitive terms. The program features: Practice policies Design and build (including first party cover) $2-million in-house capacity (higher limits available) Cover for architectural and engineering technologists and technicians also available Supported by specialist Underwriters at Lloyd's, London Minimum premium $2,500 applies. Medical malpractice Our program provides cover for a full range of medical risks, including: Hospitals and medical clinics Nursing homes Alternative medical practitioners Executive and corporate health providers Other medical practitioners Veterinarians. The program features: $10-million in-house capacity Primary or excess cover available Competitive terms Supported by specialist Underwriters at Lloyd's, London Minimum premium $1,125 applies. Product manufacturers E&O This program provides cover for the product design or advice exposure. Cover complements the standard general liability (GL) and/or product liability policy and is especially suitable where the GL is written with a design E&O exclusion. Program features include: Cover for consequential financial loss for which a manufacturer may be legally liable for damages to a customer or other third party, third party recall and rectification costs and litigation defence costs arising from a design or advice error $2-million in-house capacity Suitable for manufacturers and suppliers Supported by specialist Underwriters at Lloyd's, London Minimum premium $3,500 applies. Environmental consultants E&O Our program is designed for: Environmental consultants Engineers practising in the environmental field who are unable to obtain appropriate cover from their regular markets Testing laboratories, including analysis of soil, liquids and chemicals Biologists Geologists Chemists Other consultants in the environmental field. The program features: Policy limits up to $2 million Cover is on a broad claims-made policy form Cover includes prior acts exposures. No environmental exclusion applies Underwritten in-house and supported by domestic licensed insurers Minimum premium $3,500 applies. Miscellaneous E&O Our program offers E&O cover for a wide range of business and professional risks, including: Adjusters Employment agencies Graphic designers Interior designers Management consultants Property managers Many other classes, too numerous to mention here. The program features: $2-million capacity (higher limits available) Supported by specialist Underwriters at Lloyd's Fast quotes and competitive terms Minimum premium $2,500. We'll accept the applications of other markets in most cases. So give us a call-even if your account isn't listed here, we'll try it on for size.
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Failure to monitor client's needs costly to broker
Ontario's Superior Court has ruled that a Toronto insurance broker failed to advise a client firm that it could insure itself against a contractor's dishonesty and is liable to the client for damages. Tactics Advertising Inc sued their insurance brokers after an independent computer consultant who had keys to the office made off with all of the firm's computers and software. After the loss, they discovered that their policy with Hartford Insurance did not cover the loss Tactics was involved in consulting and advertising for new home sales. The firm, which started in 1990, grew rapidly with computers playing an important role in its operations. By the time of theft in January 1996, the core of the company's business was conducted through computers and its records were almost entirely stored on computers. The theft left Tactics without any functioning computes, including the main server and all backups. The firm virtually ceased to conduct business. The judge said that when the broker took over the Tactics account in 1995, computer and media coverage had risen from $30,000 to $160,000. Although the 1994-95 policy included employee dishonesty coverage, the broker had not explained the change or pointed out that it did not protect against acts of an independent contractor. The property section of the Hartford policy contained an exclusion relating to theft by a person in a position of trust. This exclusion had been added to the policy several years prior to the loss. The plaintiff argued that the exclusion had not been drawn to his attention, nor had other more suitable covers been offered. The plaintiff's expert witnesses gave evidence that employee dishonesty cover could have been put in place for both employees and independent contractors. The court heard evidence that the commercial insurance was quoted and handled by telephone — no broker had ever visited the client. The broker's note-keeping was incomplete, and there was no explanation on the file as to why employee dishonesty cover was not recommended or placed. Superior Court Justice Frank Roberts found the relevant law was set out by the Ontario Court of Appeal in Fine's Flowers Ltd. v. General Accident (1977) O.R. (2nd) 529. He said the broker "failed to make the appropriate inquiries of their client as to the nature of its business and the risks attenuate thereto. In the result, the defendants failed to identify the risks [and] failed to advise with respect to insurance coverage available or to advise with respect to risk management. These failures constituted negligence." The court found that a relationship giving rise a finding of negligence "arose by reason of the undertaking by the defendant agent to provide the plaintiff with insurance protection against 'foreseeable' loss or to see that he was 'adequately' covered with insurance." The court said in such circumstances "it was the duty of the defendant agent to either procure such coverage, or draw to the attention of the plaintiff his failure or inability to do so and the consequent gap in coverage. Having done neither, the defendant agent is liable in negligence, whether or not the instructions were to insure all 'insurable' risks or to see that the plaintiff was 'adequately covered with insurance.' Justice Roberts noted that Fine's was quoted in a Manitoba Supreme Court case where it was said that it was entirely appropriate to hold private insurance agents and brokers to a stringent duty to provide both information and advice to their customers. They are, after all, licensed professionals who specialize in helping clients with risk assessment and in tailoring insurance policies to fit the particular needs of their customers. The judge was not asked to rule on damages, so this question will be dealt with in a subsequent hearing. Although the plaintiffs damages could have been reduced or mitigated through prompt action, the result was that the company ultimately failed. Consequently, damages are likely to be disproportionately high. We understand that this verdict will likely be appealed.
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Shell insurer costs broker $460,000
A Quebec broker who placed part of a large property risk with an unlicenced insurer must pay the insurers portion of a fire loss. A serious fire destroyed the commercial property, but the insurer, based in a Caribbean island, would not pay its share of the loss. Upon investigation, it appeared that the insurer was a fraudulent shell company with many other unsatisfied claimants. The property owner sued the broker, alleging that the broker should have exercised more care in selecting insurers. Utica Mutual, the brokers E&O carrier, recently settled the dispute for about $460,000 plus defense expenses. Fraudulent offshore insurers are particularly prevalent in a hard commercial lines market. As the Canadian insurance market begins to harden, we are already seeing an increase in activity by flimsy, unregulated offshore markets.
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Insurer must pay $2.5-million punitive award
An Ontario jury has ruled that an insurance company must pay a former mushroom farmer and his tenant $2.5 million in punitive damages for "malicious" and "high-handed" conduct in its refusal to settle after his farm was destroyed by fire. This award eclipsed the previous punitive damages record set in the case of Whiten vs. Pilot Insurance Company. Frank Mazza's farm was destroyed by fire in August 1993. Hamilton Township Farmers Mutual Fire Insurance Company of Cobourg, Ontario, concluded that the fire had been set deliberately and rejected his claim. In total, the jury awarded more than $4 million, including the punitive award. Midway through the trial, Mazza had offered to settle with the insurer for $450,000. In setting such a high punitive award, the jury did not appear to feel constrained by the guidelines with respect to punitive awards set by the Supreme Court of Canada in the Whiten case. Accordingly, the insurer will likely appeal this verdict.
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Policyholder, not insurer, must pay Alberta's premium tax
A Calgary court has ruled that the policyholder, not the insurer, is responsible for Alberta's premium tax on insurance placed with an unlicensed insurer. The Alberta Treasury Branch sued a policyholder for about $850 in provincial premium tax. The court heard that the defendant placed a commercial insurance policy with Tri-Continental Exchange, an organization that is not licensed to do insurance business in Canada. The policyholder negotiated cover directly with the insurer, without the advice of an insurance broker. The Alberta Insurance Act imposes a 50-per-cent premium tax on policies placed with unlicensed insurers, and the Alberta Treasury Branch sued the policyholder for the tax due. The amount of the tax was not in dispute, but in his defence, the policyholder argued that the duty to pay such tax fell on the insurer. The court rejected the policyholder's arguments and ordered him to pay the premium tax and prejudgment interest. In addition, the policyholder will no doubt incur significant legal expenses for this trial, as well as federal excise duty on this unlicensed insurance transaction. Tri-Continental Exchange is the subject of "cease and desist" orders by insurance regulators in Ontario, Alberta and British Columbia
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Vancouver broker must pay $86,365 for marine losses
The Supreme Court of B.C. has ruled that a Vancouver insurance broker must pay damages to a shipping company for failing to place proper cover on their transportation risks. In April 1999, the broker placed a marine cover on a series of cargo shipments with underwriters at Lloyd's through a Lloyd's broker. The broker ordered world-wide cover, but the cover was placed with territorial limits, which were clearly indicated in the cover note issued by the Lloyd's broker. Unfortunately, the broker did not spot the coverage discrepancy. Three losses occurred, each outside the territorial limits of the policy. The underwriter rejected all three losses and eventually cancelled the policy. Through an associate in London, the policyholder was able to negotiate with the Lloyd's broker for payment of one of the losses. Then the policyholder sued the insurance broker for recovery of the other two losses. Neither the policyholder nor the broker added the Lloyd's broker to the action. In his defence, the broker argued that the policyholder did not keep him apprised of the meetings between the policyholder and the London broker, but the court rejected his arguments. The court noted, "It may well appear that (the Lloyd's broker) bears the greater fault for this insurance debacle but as indicated, (the plaintiff 's) action is confined to a claim against (the Vancouver broker.)" The court ruled that the broker had failed to review the cover notes and as a result, failed to take steps to correct the discrepancy, even after the first loss had been rejected by the insurer. The broker was ordered to pay damages of $86,365 plus prejudgment interest and the costs of the action.
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Tactics Advertising case&emdash;update
We've received several inquiries about the Tactics Advertising verdict reported in the last edition of News Board. This verdict arose from the theft of computers, software and client lists by an independent consultant who had keys to the client's office. Here are some details that we omitted in our original article. It seems that the plaintiff was able to demonstrate that: The commercial insurance was quoted by telephone—no broker had ever visited the client. The broker's note-keeping was incomplete, and there was no explanation on the file as to why employee dishonesty cover was not placed. The property section of the policy contained an exclusion relating to theft by a person to whom the property had been entrusted. This exclusion had been added to the policy several years prior to the loss. The plaintiff argued that the exclusion had not been drawn to his attention, nor had other more suitable covers been offered. The plaintiff's expert witnesses gave evidence that suitable employee dishonesty cover could have been put in place for both employees and independent contractors. The consultant was convicted and sentenced, but was financially unable to make restitution. The judge was not asked to rule on damages, so this question will be dealt with in a subsequent hearing. Although the plaintiff's damages could have been reduced or mitigated through prompt action, the result was that the company ultimately failed. Consequently, damages may be disproportionately high.
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Broker must pay $379,500 for huge lump of melted chocolate
A "molten mess" of chocolate on a Trinidad dock has led to a finding for damages of $379,500 against an Ontario freight forwarder and an insurance broker. Ontario Superior Court Justice Paul Lamek found two of four defendants—the freight forwarder and the insurance broker—negligent kr failing to advise Multi-Foods Merchandisc International that extensions were available for the standard frozen- food clauses in its insurance policy. In 1994, Multi-Foods bought 227 tonnes of defective chocolate bars produced by Hershey Canada. One condition attached to purchase of the irregular-shaped or improperly mixed products was that they not be resold in North America, so Multi-Foods hired the freight forwarder to transport the cargo to Trinidad in refrigerated containers called "reefers." The chocolate arrived in Trinidad on November 4, 1994, only to remain in an open storage area until November 17. It was then released to the consignee and delivered to a non- air-conditioned warehouse, where a cursory inspection found the chocolate "in one big lump." Trinidadian inspectors declared the chocolate unfit br human consumption and ordered its destruction. On behalf of Multi-Foods, the freight forwarder had arranged standard reefer insurance with its insurance broker. The policy covered losses resulting from a breakdown of refrigeration equipment for more than 24 hours or occurring no more than five days after the cargo was off-loaded, so the insurer rejected the claim. Following an 18-day trial, Justice Lamek found that Multi-Foods had relied on the freight forwarder and the insurance broker to arrange and place appropriate insurance. Accordingly, he awarded the plaintiff damages, prejudgment interest and costs. Including defence expenses, this settlement will likely exceed $500,000.
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Phony insurer costs broker $460,000
A Quebec broker who placed part of a large property risk with an unlicensed insurer must pay the insurer's portion of a fire loss. A serious fire destroyed the commercial property, but the insurer, based in a Caribbean island, would not pay its share of the loss. Upon investigation, it appeared that the insurer was a fraudulent shell company with many other unsatisfied claimants. The property owner sued the broker, alleging that the broker should have exercised more care in selecting insurers. Utica Mutual, the broker's E&O carrier, recently settled the dispute for about $460,000 plus defence expenses. Fraudulent offshore insurers are particularly prevalent in a hard commercial lines market. As the Canadian insurance market begins to harden, we are already seeing an increase in activity by flimsy, unregulated offshore markets.
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