| External | Internal | |
| 1995 | 5.7% | 6.4% |
| 1996 | 5.0% | 6.4% |
| 1997 | 4.8% | 6.4% |
Source: The Information Centre of Canada
Source: Insurance Bureau of Canada
External claims dropping
% of DWP allocated towards claims exposure
| External | Internal | |
| 1995 | 5.7% | 6.4% |
| 1996 | 5.0% | 6.4% |
| 1997 | 4.8% | 6.4% |
Source: The Information Centre of Canada
Source: Insurance Bureau of Canada
External claims dropping
% of DWP allocated towards claims exposure
| External | Internal | |
| 1995 | 5.7% | 6.4% |
| 1996 | 5.0% | 6.4% |
| 1997 | 4.8% | 6.4% |
Source: The Information Centre of Canada
| Net Premiums Earned | Claims Incurred | |
| 1995 | $17.6 | $12.5 |
| 1996 | $18.1 | $12.9 |
| 1997 | $18.1 | $12.8 |
Source: Insurance Bureau of Canada
External claims dropping
% of DWP allocated towards claims exposure
| External | Internal | |
| 1995 | 5.7% | 6.4% |
| 1996 | 5.0% | 6.4% |
| 1997 | 4.8% | 6.4% |
Source: The Information Centre of Canada
| Net Premiums Earned | Claims Incurred | |
| 1995 | $17.6 | $12.5 |
| 1996 | $18.1 | $12.9 |
| 1997 | $18.1 | $12.8 |
Source: Insurance Bureau of Canada
External claims dropping
% of DWP allocated towards claims exposure
| External | Internal | |
| 1995 | 5.7% | 6.4% |
| 1996 | 5.0% | 6.4% |
| 1997 | 4.8% | 6.4% |
Source: The Information Centre of Canada
The Ontario Insurance Adjusters Association’s (OIAA) new president Garth Roscoe carries himself, both in character and as a leader, as a diplomat. In presence, he is low-key, deferential and occupies the studious but sympathetic air akin to a Supreme Court judge. He answers questions with brief and to the point answers with very little reference to himself.
Early on, at the five minute mark of the interview, it becomes apparent that Garth Roscoe does not relish talking at any length about himself. What he does enjoy conversing over is the future of the OIAA — a provincial organization comprised of independent and in-house insurance adjusters.
At the top of the list of priorities facing Roscoe in the year ahead is the OIAA’s education initiatives and its upcoming conference entitled Claims ’99. Roscoe believes the adjusting profession will play a pivotal role in the reshaping of the insurance industry due to its frontline customer service interaction.
The sense of dealing with the public may form the cornerstone of Roscoe’s soft diplomatic approach. Or, perhaps, his approach may be borne after having served a lifelong career as a professional adjuster, a career direction that he describes as having had him “totally hooked from the start”.
In the beginning
In 1967, Roscoe was at the tail-end of a five-year tenure as a book-keeper for Eastview Engineering, an Ottawa industrial maintenance shop. A family friend recruited him to fill a trainee position at Underwriters Adjustment Bureau Ltd.’s (UAB) Ottawa office. After only a few days on the job, the future OIAA president was sold on the profession. “As soon as I took the job, I found adjusting to be interesting and exciting. It is a job where no two situations are ever the same.” The job also appears to have taken to Roscoe for within a brief time he worked his way up the UAB ladder to become the claims manager of the company’s Ottawa office.
It was then that Roscoe first became involved in the industry at an association level. He became active in the Ottawa Valley Adjusters Association, serving as chapter president from 1975 to 1976. To hear him put it, the issues his members prioritized in the seventies were not a far cry from the current. “The issue of telephone adjusting was just beginning to become a hot topic — adjusters were concerned than as they are today about its consequences,” he says. Another familiar issue, which was gaining prominence during the seventies was the drive to recruit women into the adjusting ranks.
It was soon after his tenure as president that Roscoe left UAB to pursue an eight year sabbatical from the industry. He had no intention of leaving adjusting for good, rather he was appointed to a government post. In 1981, Roscoe was selected to become the local registry by then-attorney general Roy McMurtry. Roscoe, who had no previous connection to McMurtry, had been given responsibility to manage the files and provision of local court services. “The drive to put me into public service was initiated by local politicians. Being appointed, I had no choice but to become involved,” he says.
Through the next eight years, he missed his true vocational calling to adjusting, “I certainly enjoyed working for the attorney general, but I definitely missed the liaison with the public, a task I relished”.
The interest would not let go
The lure of the industry did not fade, and in 1989 Roscoe re-entered the adjusting field becoming a partner at H.R. Garneau & Associates, a firm managed by the same old friend who had been his professional mentor. Getting back into the saddle was not difficult he notes, “it was like riding a bicycle, you can pick it up once again very quickly”. And, with his return to the industry, Roscoe returned to the responsibility of the associations, participating in the Ottawa Valley chapter which had by then become a member of the OIAA. In 1992, Roscoe began taking a more active and direct role in the OIAA’s dealings, sitting on the board and moving through its ranks.
Roscoe’s last major move occurred earlier this year when he left his post at H.R. Garneau and moved to Quelmec Insurance Adjusters where he now manages disaster claims filed by victims of the ice storm. His current position calls for him to liaise between insurers, policyholders and the government, a natural fit for this career diplomat.
“I’ve enjoyed the industry from day one,” he remarks, perhaps revealing one reason for his contented demeanor. “The more experiences you have, the more complex claims you can do. I have been lucky in that I always seem to get thrown into complex claims scenarios that help boost my knowledge and experience.”
Looking ahead
Which puts Roscoe in the unique position of recognizing the trends and concerns facing adjusters today. “Certainly consolidation and all of the mergers are a major concern . . . how it affects job security, how it affects the health of the smaller independent adjuster.”
Telephone adjusting is another bone of contention for Roscoe and the industry. He points out the practice has two major drawbacks, “It allows no real cost control safeguards to ensure realistic and accurate claim payments and denies the insured the personal face-to-face contact and comfort that an adjuster can offer a consumer who is undergoing a traumatic event,” he says.
He notes future adjusters are looking towards branching out into other fields, namely the risk management segment as claims handlers. He notes, consolidation and mergers will not render the small independents extinct, “I don’t think the small adjusters will disappear . . . national adjusters are only as strong as the weakest link in their branch chain.” As these and other adjusting issues continue to play out, Roscoe and the OIAA continue to provide network and educational support for province-wide adjusters. The association will continue with its education initiatives this year and will award its annual $500 bursaries in May to two individuals from each chapter across the province and four in Toronto. The bursaries assist adjusters continuing with their education.
Claims 99
The association is also organizing its annual conference, Claims 99, to be held February 10 at Toronto’s Convention Centre. The event will feature education seminars, over 150 exhibitors and a keynote address by former Toronto Maple Leaf great Darryl Sittler. Roscoe, a sports fan, personally selected Sittler who will discuss the individual’s role in contributing in a team environment.
The education events offer a wide spectrum of subjects covering Bill 59, stress management, Y2K claim handling, disaster planning and enhanced appraising.
All of which continues the OIAA and Roscoe’s mandate to stick to learning and stay out of politics, “we are in an unusual situation at the association in that we represent both independents and in-house adjusters. We are not political . . . we do not lobby the industry or push policies into enactment. We are cognizant of our role as an in-house and independent representative and we try our best to seek equal representation on our board and our membership from both areas.”
A leveling market (in billions)
| Net Premiums Earned | Claims Incurred | |
| 1995 | $17.6 | $12.5 |
| 1996 | $18.1 | $12.9 |
| 1997 | $18.1 | $12.8 |
Source: Insurance Bureau of Canada
External claims dropping
% of DWP allocated towards claims exposure
| External | Internal | |
| 1995 | 5.7% | 6.4% |
| 1996 | 5.0% | 6.4% |
| 1997 | 4.8% | 6.4% |
Source: The Information Centre of Canada
The Ontario Insurance Adjusters Association’s (OIAA) new president Garth Roscoe carries himself, both in character and as a leader, as a diplomat. In presence, he is low-key, deferential and occupies the studious but sympathetic air akin to a Supreme Court judge. He answers questions with brief and to the point answers with very little reference to himself.
Early on, at the five minute mark of the interview, it becomes apparent that Garth Roscoe does not relish talking at any length about himself. What he does enjoy conversing over is the future of the OIAA — a provincial organization comprised of independent and in-house insurance adjusters.
At the top of the list of priorities facing Roscoe in the year ahead is the OIAA’s education initiatives and its upcoming conference entitled Claims ’99. Roscoe believes the adjusting profession will play a pivotal role in the reshaping of the insurance industry due to its frontline customer service interaction.
The sense of dealing with the public may form the cornerstone of Roscoe’s soft diplomatic approach. Or, perhaps, his approach may be borne after having served a lifelong career as a professional adjuster, a career direction that he describes as having had him “totally hooked from the start”.
In the beginning
In 1967, Roscoe was at the tail-end of a five-year tenure as a book-keeper for Eastview Engineering, an Ottawa industrial maintenance shop. A family friend recruited him to fill a trainee position at Underwriters Adjustment Bureau Ltd.’s (UAB) Ottawa office. After only a few days on the job, the future OIAA president was sold on the profession. “As soon as I took the job, I found adjusting to be interesting and exciting. It is a job where no two situations are ever the same.” The job also appears to have taken to Roscoe for within a brief time he worked his way up the UAB ladder to become the claims manager of the company’s Ottawa office.
It was then that Roscoe first became involved in the industry at an association level. He became active in the Ottawa Valley Adjusters Association, serving as chapter president from 1975 to 1976. To hear him put it, the issues his members prioritized in the seventies were not a far cry from the current. “The issue of telephone adjusting was just beginning to become a hot topic — adjusters were concerned than as they are today about its consequences,” he says. Another familiar issue, which was gaining prominence during the seventies was the drive to recruit women into the adjusting ranks.
It was soon after his tenure as president that Roscoe left UAB to pursue an eight year sabbatical from the industry. He had no intention of leaving adjusting for good, rather he was appointed to a government post. In 1981, Roscoe was selected to become the local registry by then-attorney general Roy McMurtry. Roscoe, who had no previous connection to McMurtry, had been given responsibility to manage the files and provision of local court services. “The drive to put me into public service was initiated by local politicians. Being appointed, I had no choice but to become involved,” he says.
Through the next eight years, he missed his true vocational calling to adjusting, “I certainly enjoyed working for the attorney general, but I definitely missed the liaison with the public, a task I relished”.
The interest would not let go
The lure of the industry did not fade, and in 1989 Roscoe re-entered the adjusting field becoming a partner at H.R. Garneau & Associates, a firm managed by the same old friend who had been his professional mentor. Getting back into the saddle was not difficult he notes, “it was like riding a bicycle, you can pick it up once again very quickly”. And, with his return to the industry, Roscoe returned to the responsibility of the associations, participating in the Ottawa Valley chapter which had by then become a member of the OIAA. In 1992, Roscoe began taking a more active and direct role in the OIAA’s dealings, sitting on the board and moving through its ranks.
Roscoe’s last major move occurred earlier this year when he left his post at H.R. Garneau and moved to Quelmec Insurance Adjusters where he now manages disaster claims filed by victims of the ice storm. His current position calls for him to liaise between insurers, policyholders and the government, a natural fit for this career diplomat.
“I’ve enjoyed the industry from day one,” he remarks, perhaps revealing one reason for his contented demeanor. “The more experiences you have, the more complex claims you can do. I have been lucky in that I always seem to get thrown into complex claims scenarios that help boost my knowledge and experience.”
Looking ahead
Which puts Roscoe in the unique position of recognizing the trends and concerns facing adjusters today. “Certainly consolidation and all of the mergers are a major concern . . . how it affects job security, how it affects the health of the smaller independent adjuster.”
Telephone adjusting is another bone of contention for Roscoe and the industry. He points out the practice has two major drawbacks, “It allows no real cost control safeguards to ensure realistic and accurate claim payments and denies the insured the personal face-to-face contact and comfort that an adjuster can offer a consumer who is undergoing a traumatic event,” he says.
He notes future adjusters are looking towards branching out into other fields, namely the risk management segment as claims handlers. He notes, consolidation and mergers will not render the small independents extinct, “I don’t think the small adjusters will disappear . . . national adjusters are only as strong as the weakest link in their branch chain.” As these and other adjusting issues continue to play out, Roscoe and the OIAA continue to provide network and educational support for province-wide adjusters. The association will continue with its education initiatives this year and will award its annual $500 bursaries in May to two individuals from each chapter across the province and four in Toronto. The bursaries assist adjusters continuing with their education.
Claims 99
The association is also organizing its annual conference, Claims 99, to be held February 10 at Toronto’s Convention Centre. The event will feature education seminars, over 150 exhibitors and a keynote address by former Toronto Maple Leaf great Darryl Sittler. Roscoe, a sports fan, personally selected Sittler who will discuss the individual’s role in contributing in a team environment.
The education events offer a wide spectrum of subjects covering Bill 59, stress management, Y2K claim handling, disaster planning and enhanced appraising.
All of which continues the OIAA and Roscoe’s mandate to stick to learning and stay out of politics, “we are in an unusual situation at the association in that we represent both independents and in-house adjusters. We are not political . . . we do not lobby the industry or push policies into enactment. We are cognizant of our role as an in-house and independent representative and we try our best to seek equal representation on our board and our membership from both areas.”
A leveling market (in billions)
| Net Premiums Earned | Claims Incurred | |
| 1995 | $17.6 | $12.5 |
| 1996 | $18.1 | $12.9 |
| 1997 | $18.1 | $12.8 |
Source: Insurance Bureau of Canada
External claims dropping
% of DWP allocated towards claims exposure
| External | Internal | |
| 1995 | 5.7% | 6.4% |
| 1996 | 5.0% | 6.4% |
| 1997 | 4.8% | 6.4% |
Source: The Information Centre of Canada
The Ontario Insurance Adjusters Association’s (OIAA) new president Garth Roscoe carries himself, both in character and as a leader, as a diplomat. In presence, he is low-key, deferential and occupies the studious but sympathetic air akin to a Supreme Court judge. He answers questions with brief and to the point answers with very little reference to himself.
Early on, at the five minute mark of the interview, it becomes apparent that Garth Roscoe does not relish talking at any length about himself. What he does enjoy conversing over is the future of the OIAA — a provincial organization comprised of independent and in-house insurance adjusters.
At the top of the list of priorities facing Roscoe in the year ahead is the OIAA’s education initiatives and its upcoming conference entitled Claims ’99. Roscoe believes the adjusting profession will play a pivotal role in the reshaping of the insurance industry due to its frontline customer service interaction.
The sense of dealing with the public may form the cornerstone of Roscoe’s soft diplomatic approach. Or, perhaps, his approach may be borne after having served a lifelong career as a professional adjuster, a career direction that he describes as having had him “totally hooked from the start”.
In the beginning
In 1967, Roscoe was at the tail-end of a five-year tenure as a book-keeper for Eastview Engineering, an Ottawa industrial maintenance shop. A family friend recruited him to fill a trainee position at Underwriters Adjustment Bureau Ltd.’s (UAB) Ottawa office. After only a few days on the job, the future OIAA president was sold on the profession. “As soon as I took the job, I found adjusting to be interesting and exciting. It is a job where no two situations are ever the same.” The job also appears to have taken to Roscoe for within a brief time he worked his way up the UAB ladder to become the claims manager of the company’s Ottawa office.
It was then that Roscoe first became involved in the industry at an association level. He became active in the Ottawa Valley Adjusters Association, serving as chapter president from 1975 to 1976. To hear him put it, the issues his members prioritized in the seventies were not a far cry from the current. “The issue of telephone adjusting was just beginning to become a hot topic — adjusters were concerned than as they are today about its consequences,” he says. Another familiar issue, which was gaining prominence during the seventies was the drive to recruit women into the adjusting ranks.
It was soon after his tenure as president that Roscoe left UAB to pursue an eight year sabbatical from the industry. He had no intention of leaving adjusting for good, rather he was appointed to a government post. In 1981, Roscoe was selected to become the local registry by then-attorney general Roy McMurtry. Roscoe, who had no previous connection to McMurtry, had been given responsibility to manage the files and provision of local court services. “The drive to put me into public service was initiated by local politicians. Being appointed, I had no choice but to become involved,” he says.
Through the next eight years, he missed his true vocational calling to adjusting, “I certainly enjoyed working for the attorney general, but I definitely missed the liaison with the public, a task I relished”.
The interest would not let go
The lure of the industry did not fade, and in 1989 Roscoe re-entered the adjusting field becoming a partner at H.R. Garneau & Associates, a firm managed by the same old friend who had been his professional mentor. Getting back into the saddle was not difficult he notes, “it was like riding a bicycle, you can pick it up once again very quickly”. And, with his return to the industry, Roscoe returned to the responsibility of the associations, participating in the Ottawa Valley chapter which had by then become a member of the OIAA. In 1992, Roscoe began taking a more active and direct role in the OIAA’s dealings, sitting on the board and moving through its ranks.
Roscoe’s last major move occurred earlier this year when he left his post at H.R. Garneau and moved to Quelmec Insurance Adjusters where he now manages disaster claims filed by victims of the ice storm. His current position calls for him to liaise between insurers, policyholders and the government, a natural fit for this career diplomat.
“I’ve enjoyed the industry from day one,” he remarks, perhaps revealing one reason for his contented demeanor. “The more experiences you have, the more complex claims you can do. I have been lucky in that I always seem to get thrown into complex claims scenarios that help boost my knowledge and experience.”
Looking ahead
Which puts Roscoe in the unique position of recognizing the trends and concerns facing adjusters today. “Certainly consolidation and all of the mergers are a major concern . . . how it affects job security, how it affects the health of the smaller independent adjuster.”
Telephone adjusting is another bone of contention for Roscoe and the industry. He points out the practice has two major drawbacks, “It allows no real cost control safeguards to ensure realistic and accurate claim payments and denies the insured the personal face-to-face contact and comfort that an adjuster can offer a consumer who is undergoing a traumatic event,” he says.
He notes future adjusters are looking towards branching out into other fields, namely the risk management segment as claims handlers. He notes, consolidation and mergers will not render the small independents extinct, “I don’t think the small adjusters will disappear . . . national adjusters are only as strong as the weakest link in their branch chain.” As these and other adjusting issues continue to play out, Roscoe and the OIAA continue to provide network and educational support for province-wide adjusters. The association will continue with its education initiatives this year and will award its annual $500 bursaries in May to two individuals from each chapter across the province and four in Toronto. The bursaries assist adjusters continuing with their education.
Claims 99
The association is also organizing its annual conference, Claims 99, to be held February 10 at Toronto’s Convention Centre. The event will feature education seminars, over 150 exhibitors and a keynote address by former Toronto Maple Leaf great Darryl Sittler. Roscoe, a sports fan, personally selected Sittler who will discuss the individual’s role in contributing in a team environment.
The education events offer a wide spectrum of subjects covering Bill 59, stress management, Y2K claim handling, disaster planning and enhanced appraising.
All of which continues the OIAA and Roscoe’s mandate to stick to learning and stay out of politics, “we are in an unusual situation at the association in that we represent both independents and in-house adjusters. We are not political . . . we do not lobby the industry or push policies into enactment. We are cognizant of our role as an in-house and independent representative and we try our best to seek equal representation on our board and our membership from both areas.”
A leveling market (in billions)
| Net Premiums Earned | Claims Incurred | |
| 1995 | $17.6 | $12.5 |
| 1996 | $18.1 | $12.9 |
| 1997 | $18.1 | $12.8 |
Source: Insurance Bureau of Canada
External claims dropping
% of DWP allocated towards claims exposure
| External | Internal | |
| 1995 | 5.7% | 6.4% |
| 1996 | 5.0% | 6.4% |
| 1997 | 4.8% | 6.4% |
Source: The Information Centre of Canada
In the early days of environmental underwriting companies were often unaware of the full risk involved. For many companies the risks they took on and subsequent claims were not foreseen. For others, while the possibility of large claims may have been considered, the full consequences of the exposure were not.
Investigation and litigation of environmental claims and insurance coverage have become hard fought battles requiring specialised knowledge of the process involved, regulations and jurisdictions, specific coverages and understanding of the technical issues relating to environmental problems.
As with other forms of insurance, the extent of environmental coverage depends on the policy language and jurisdictional laws. However, unlike other forms of insurance, there never has been an industry “standard” environmental liability insurance policy. Environmental liability insuring agreements generally provide that the insurance company will pay:”…all sums which the insured shall become legally obligated to pay as compensatory damages because of bodily injury or property damage….” and “…reasonable and necessary cleanup costs incurred by the insured in the discharge of a legal obligation….”
As such, environmental liability insurance claims consultants are reminded of the fundamental distinction between a policy written on an “occurrence” basis and that written on a “claims made” basis.
The occurrence-based policy will only cover losses which occurred during the policy period. A claims made policy will cover any claim presented during the policy period even if the loss occurred outside the current policy period.
Therefore, every occurrence policy in force during the years of exposure can apply to the claim which may arise several years or decades after the initial exposure. Some policies may provide coverage for both occurrence and a claims made basis.
Call to Duty
As with most types of liability insurance policies, an environmental liability insurer owes its policyholder the duties to indemnify, reimburse and defend. After promising to indemnify a policyholder for “all sums” that the insured shall become legally obligated to pay, the “supplementary payments” provision of the policy may also contain a separate commitment to defend any suit against the insured.
Of particular concern to environmental insurers is the potential risk introduced by Y2K disruption. The Insurance Bureau of Canada (IBC) has circulated model Y2K exclusion clauses in this regard. However, in this soft market, it would be interesting to see how many insurers respond to the notifications under claims-made policies. I suspect that many will be driven by market conditions.
Risk management involvement
Claims consultants should have an ‘eye’ for underwriting to recommend pollution prevention activities. Pollution prevention activities not only reduce the risk of damage to the environment and property, it also benefits the insured and the insurer as the frequency and severity of losses are reduced.
To reward the insured, some insurance companies have introduced a three-tier structure in which premium reductions are tied to successive pollution reducing stages. Reducing claim costs starts with underwriting. Does your underwriting impose on your insureds an obligation to involve exposure avoidance, loss prevention and loss control as part of their own risk management program?
Insurers must be able to strike a balance between the client’s interest and their own bottom line. Many underwriters are now requesting compliance audits and assessments before granting coverage. Insurers are often at the deep end of the ‘deep pocket’ theory. In hindsight, was yesterday’s underwriting a good balance to pay today’s costs?
Cover triggers
Generally, most environmental liability insurance policies are written on a “claims made” basis. As such, a claim is triggered when both of the following events take place during the policy period:
– The insured’s knowledge of the event and the notification to the insurance company of that claim. Often when the claim is reported to the insurer, the insured had prior knowledge of the loss and has already been involved with the regulators. The insurer’s first notice of the loss may be after the insured has commenced an action for indemnification or reimbursement – late notice may prejudice the insurer.
– “Foreseeability” is another issue involved, especially if the insured is aware that activities of the company has resulted in contamination. Obviously once an environmental regulator has warned the insured to desist from an activity causing an environmental concern, and this followed through, “then foreseeability comes to the forefront,” notes Bryan Baker at a recently held IBC environmental information forum.
Discussing the various triggers can become confusing and it is often difficult to determine exactly which one applies. The U.S. Courts have devised different theories about when coverage under an insurance policy is triggered. These theories are grouped into the following categories:
– Exposure or “release” trigger – the policy in force at the time the injured person or property was exposed to the harm is the one that provides coverage;
– Manifestation or “discovery” trigger – only the policy in force at the time the harm is first “manifest” is the one that provides coverage;
– “Triple” or “continuous” trigger – the policies in force at the time of the initial exposure, during the period of continued exposure, and at the time of manifestation of physical impairment would all be required to respond and provide coverage;
– “Injury-in-fact” trigger — the policy in force at the time the claimant suffers the actual injury.
Claims management
One effective strategy for management of claims cost is to “get all of the facts upfront”. An excellent yardstick is “time equals money”. Along these lines, a seasoned claims professional recently referred in a discussion to what he calls the “faster rule” – the faster you get the facts, the faster you assess reaction to policy coverage, the faster you can get resolution.
More often than not, the insured has been involved with an environmental problem long before the insurer is brought in. The first thirty days of a loss are the most crucial. It becomes extremely difficult to gather information once the evidence or witnesses are gone.
As such, the adjuster’s course of action should include a discovery plan designed to obtain information needed to support the insurance company’s defence in the most effective manner. A well thought-out plan will cut cost and help claims management and defence lawyers focus on the significant issues of the claim.
Does the insured have an efficient claim reporting policy?
At the IBC environmental forum Baker offered the following advice to insurers facing environmental claims: “…as a practice, I insist . . . all new loss situations be investigated under a reservation of rights letter, and that the letter sets out to the insured the preliminary areas of coverage, including reference to policy terms, conditions, provisions and exclusions which might be an issue.”
According to Baker the investigation should achieve the following objectives:
– Develop sufficient facts to decide whether any contractual obligation exists;
– Determine whether the loss is within the scope of the insuring agreement;
– Rely on the provisions of a reservation of rights letter or non-waiver agreement;
– Consider the limit of liability under the policy;
– Investigate the pollution history of the insured;
– Interview past and present employees of the insured;
– Study the policy underwriting history;
– Retain experts when necessary.
Much of what makes a good environmental liability claims consultant comes from their ability to conduct a thorough and timely investigation and the knowledge of how to come up with the goods today to resolve a loss several years later. There is growing evidence that good management of environmental liability insurance claims can help an insurer to di stinguish itself from the competition and gain a consumer advantage. Basically, the claims management should be pro-active and not reactive.
long-term nature of the business
A fellow claims consultant recently highlighted a case where a pollution loss had occurred in July 1985 and was not reported until June 1990 with the final settlement in October 1998. During the long period that an insured event occurrence has remained latent or has continued, an insured may have purchased many different insurance policies from different insurers, each having different coverage provisions, limits of liability, exclusions and period of insurance. Or, the insured may have been uninsured at the time of the loss event.
To adequately prepare for an environmental liability insurance claim, the consultant must thoroughly learn the facts of the case, formulate a theory of the case, and understand all of the relevant policies applying to the coverage. There is no substitute for detailed hard work when investigating an environmental liability claim.
The views expressed in this article are of the author alone.-
Consolidation and cost cutting became the corporate buzzwords of the 1980s and 1990s, with operators from insurance to retail-chains through to the aviation industry embracing downsizing and cheaper marketing and delivery systems. The aviation business emerged from this process, particularly on the large commercial airline side, with a concentration of ownership at the manufacturing level and an increased number of airline operators working on code sharing agreements to maximize flight capacity and routes. The result of this has been an approximate 25% decline in the aviation premium base over recent years — insured losses, however, trended upward over the same period.Of particular concern to insurers is the market move from the limited liability exposure set out by the Warsaw Convention articles to unlimited liability agreements. Increased flight capacity, traffic, and exposures resulting from code share agreements, has boosted this anxiety. Furthermore, insurers report that there has been a surge in the value of single loss events, with the latest Swissair Flight 111 disaster presenting the first US$100 million-plus compensation lawsuits against the aircraft manufacturer and the airline. Insurers say it is time for the bleeding to stop.The tragic loss of Swissair Flight 111 off the coast of Peggy’s Cove, Nova Scotia last September — which claimed the lives of all 229 onboard — is ranked among the 20 worst aviation fatality disasters. The insured cost resulting from the disaster is expected to eventually be around US$700 million to US$800 million, with the hull insurance at US$126.5 million. The disaster is likely to be the single most costly aviation loss to hit insurers.
Although the cause of the Swissair crash has not been fully established, investigators are sure that an intense heat build-up near the cockpit led to the crash. Shortly before the crash, the aircraft’s pilots reported “smoke in the cockpit” and attempted to make an emergency landing at Halifax Airport on what initially had been a lower “pan, pan, pan” emergency call. The plane never made the landing.
The scare of “smoke in the cockpit” has since seen several aircraft around the world, including cases in Canada, commit emergency landings, none of which resulted in fatalities. Some argue that the “scare factor” with the fate of Swissair Flight 111 still fresh in memories led to an ultra cautious approach by pilots which increased the number of “smoke in the cockpit” emergency landings. In fact, 1997 and 1998 are regarded among the safest flying years since 1970, according to statistics compiled by the Aviation Safety Network.
Losses are rising
Insurers say, however, that the use of broad, short-term statistics can be misleading. Most believe that there has been an increase in airline accidents and damages over the past two years, even though they may not have resulted in high fatalities. And, insurers expect the loss numbers and incident of aircraft accidents will likely escalate with increased traffic volumes and carrier loads. Of particular alarm to insurers are the increased insured loss values arising from single events. Technology has dramatically boosted the value of aircraft while the industry move away from the Warsaw Convention compensation limits has opened the door to unlimited liability exposures. It is now not uncommon for a commercial airline jet’s hull to carry US$250 million insurance and up to US$2 billion in liability cover, notes Keith Selby at Swiss Re London, and the current chairman of the Aviation Insurance Offices Association (AIOA).
Liability concerns
Two issues have focused the insurance industry’s attention on the recent Swissair crash. It is the first fatal accident where several families of passengers that died have initiated US$100 million-plus lawsuits against the airline and aircraft manufacturer. Shortly before going to press, a lawsuit amounting to $2 billion was filed by a Swiss family in New York against Swissair, McDonnell Douglas, Boeing Co. and the the carrier’s U.S. partner, Delta Air Lines Inc. The case of the lawsuit is that the airline is continuing to fly unsafe aircraft.
The second issue is the attention the crash has drawn to safety design of aircraft. Shortly after the Swissair crash, Jake LaMotta, former middleweight boxing champion, filed a combined compensation and punitive lawsuit totaling US$125 million for the loss of his son. LaMotta’s lawyers released a statement saying that the suit is designed to call attention to airworthiness concerns raised over recent years by the Federal Aviation Administration (FAA) concerning wiring problems in MD-11 aircraft, produced by McDonnell Douglas Corp which in turn is owned by Boeing Co.
Furthermore, a report was recently released by Edward Block, a U.S. safety consultant, saying that the crash of Swissair Flight 111 was an accident waiting to happen. He has compiled a list of electrical problems on MD-11 aircraft, Canadian Press reports.
Shortly after the Swissair Flight 111 crash, another Swissair MD-11 jet leaving Japan had to turn back due to a “smoke in the cockpit” alarm — no casualties were suffered although a technical problem was uncovered. Furthermore, preliminary investigations into the Swissair Flight 111 crash suggest that a malfunction resulted from possible “arcing” of electricity between wire bundles located near the cockpit. Should it prove to be so, then the finger could well be pointed at “Kapton” a wire insulation product manufactured by DuPont and widely used in commercial airline jets. Boeing has indicated that Kapton is being replaced with the release of new aircraft, although no safety notice has as yet been issued to airliners to have it replaced in currently in service aircraft. Notably, The U.S. navy has banned the use of Kapton insulation in its carrier aircraft.
National safety plan
In April last year the U.S. government launched an air safety drive in response to predictions of increased traffic. The U.S. government, faced with 66% growth projection in passenger numbers over the next ten years, plans to cut airline deaths by 80% over the same period. Research indicates that air passenger numbers are likely to rise from the current 600 million a year to over a billion. The U.S. plan includes more stringent aircraft check procedures as well as compulsory fitting of safety equipment on aircraft.
Insurers say, however, that the safety spotlight also has to be directed at the airport and air traffic control authorities. Increased traffic is placing severe pressure on ground support services, which is not only presenting a safety threat but rising insured losses. At the time the U.S. air safety plan was unveiled, the U.K. Civil Aviation Authority issued a report stating that near misses between aircraft in-flight is currently double the rate of incidences five years ago — the U.K.’s air traffic control system is regarded as one of the safest in the world. Furthermore, from an insured cost perspective, the scraps and dings inflicted on landed aircraft, known among insurers as “parking lot losses”, have risen substantially with the cost of new aircraft. The number of parking lot mishaps is also said to have risen with the increased strain on the infrastructure of airports.
Price response
At this stage, according to Selby, the aviation insurance market is seriously under-priced and due for correction. The picture is particularly bad on the airline side, although the market’s excessive competition is feeding into general aviation business. Selby expects that recent aircraft design safety concerns will eventually shift up on the priority list of insurers. “However, subject to current market conditions, I don’t think there will be much sway by insurers on the market until we see signs of an underwriting correction.”
The bigger issue which insurers need to absorb is the unlimited liability practices being applied. The U.S. has always produced higher liability costs, however, that situation is likely to change with the new liability applications. “It is now not uncommon for telephone-number long lawsuits to come up with some of the high-media profiled incidences. However, the amounts filed for shouldn’t be taken to indicate what the final settlements are likely to be, they eventually tend to fall back to economic reality.”
The risk on airline business is largely determined by the routes being flown and the passenger mix, says Selby. For instance, the high number of U.S. citizens who were aboard Swissair Flight 111 has boosted insured loss expectations. What has become an additional complication in rating the risk is the code share agreements between the different airlines. Basically, a third-party insurer could end up suffering losses due to their client’s exposure resulting from a code share arrangement.
Y2K exposure
With the clock ticking closer to the next millennium, potential Y2K related exposures have become the most pressing issue for insurers, says Selby. The aviation industry’s heavy reliance on computer-driven systems, from support infrastructure to the actual aircraft, increases the risk of failure. “We’re currently conducting research among clients to determine the extent that they are compliant.” However, Selby notes insurers reacted quickly in applying defined Y2K exclusions on aviation business. “Aviation is one of the first markets to come up with a structured approach to exclusions.”
Richard Etridge, the aviation manager for Employers Re, based in Munich, confirms that insurers are applying the agreed-to IATA (International Air Transportation Association) Y2K exclusions. “Every policy I have seen includes the IATA year 2000 clause, which we plan to stand by.” Furthermore, Etridge believes that both insurers and the airlines are effectively acting to prevent Y2K risks.
Harold Clark, president of U.S. Aviation Underwriters, the largest American aviation insurance pool, says Y2K is likely to produce some economic losses, “however, I don’t believe this a safety issue, there is nothing to suggest that aircraft safety could be affected by Y2K”.
Looking ahead
Etridge supports the view that rates are unlikely to move upward in the near term. ‘We operate in a market, like most markets, which is being driven by an over supply of capacity. Losses, particularly on the liability side, have risen over the past two years with award values having doubled over the past ten years. We hope that the market will react.”
Clark points out that premium levels have fallen below what historic loss data suggests to be healthy — leaving no room for increased exposure costs (such as on the liability front). After a period of several years of price reductions, the market will eventually have to react and strengthen rates, he says.
The recently held Employers Reinsurance Corporation seminar on Y2K risks delivered some serious food for thought. The most startling of the information revealed was delivered by the first three speakers who provided a broad outline of the technology disruption likely to impact not only on financial services but on the global economy as a whole.
Caspers Jones, a world-renowned Y2K commentator and chairman of the Burlington, MA-based Software Productivity Research Institute, suggests that up to three-quarters of enterprise in the U.S. could run into disruption problems when the countdown hits the big 2000 date.
Of the total industry sectors, including urban government operations, roughly 60% are currently lagging in preparation for Y2K. On a more positive note, Jones says the banks followed by insurance companies are the most prepared to deal with the problem followed by telephone companies and the airlines. What is less impressive is that, although the U.S. is far from ready to deal with Y2K risk, its European brothers are even less prepared. According to Jones, 15% of U.S. businesses might not fix the problem on time while members of the European Monetary Union could have up to 25% of problems not being fixed in time.
Both the U.S. banking and insurance industries face a 50% probability of disruption of services due to Y2K problem bugs, notes Jones. Local government is tagged as the laggard of U.S. enterprises with up to an 85% possibility of disruption to services, ranging from tax miscalculations, marriage and birth records misplaced to bond rates being downgraded.
In a similar vein of thought, Dr. Edward Yardeni, chief economist of Deutche Bank Securities, believes that while most computer systems will be fixed on time, there are likely to be cases where some “strategic” systems won’t, which could spark global financial chaos. In his presentation, Yardeni compared Y2K with the energy crises of the early 1970s. “Information is just as vital as oil for running our economies.” Is the outlook on the potential disruption resulting from Y2K too pessimistic, are people over-reacting, he asked the audience. Responding to his own question, Yardeni says, “in my opinion, it might be too optimistic to believe that the information gridlock won’t be even more damaging, sending us further back in time when the level of gross domestic product that our information systems supported was even lower. Therefore, I predict that, in the U.S., real GDP could fall 5% from peak to trough over a 12 to 24-month period starting late in 1999.”
Harris Miller, president of the Arlington, VA-based Information Technology Association of America (ITAA) reminded the seminar audience that it is insurers and bankers who need to push companies to ensure that they will be Y2K complaint by the crucial date. Furthermore, he suggests that, from an insurance perspective in dealing with the potential risk of Y2K, insurers should make greater use of Y2K certifying, similar to the standards applied by the International Standards Organization (ISO). The ITAA currently provides Y2K certifying although Miller admits that no insurance companies are using utilizing these services to measure the Y2K compliance ability of their clients.
The Canadian aviation insurance market is relatively small in the global picture, notes Mike Wills, manager of marine and aviation at Royal & SunAlliance. The Canadian industry’s total aviation net premiums amounted to Cdn$83.8 million for 1997 compared with the previous year’s total of $89.5 million.
However, despite its modest size, the Canadian market has been subject to the same intense competition as the European and U.S. markets, says Wills. In fact, based on the low premium volume, little if none of the underwriting of the business is handled from within Canada. The bulk of Canada’s aviation business falls into the general aviation category (including aircraft with 40 or less seats) which is now experiencing the pinch of increased losses. “A lot of companies are pulling out of the business because they don’t believe they will ever make in money out of it,” he comments.
Fixed-wing aircraft are generally more profitable risks, Wills observes, with helicopters having produced the highest losses over recent years. “The risk issues here are perhaps a little different than the U.S. in that helicopters and small aircraft are frequently used as the only access to some of the more remote areas.” The losses emerging on helicopters are mainly due to the fact that they are employed as “commercial workhorses” and subject to tough operating conditions. “It’s not really an issue of safety being questioned, all the checks and inspections can be made and losses will still arise,” Wills notes.
A broker working with one of the larger Canadian aviation accounts agrees that rates have been cut to the skin and bone. “From a client point of view, the current soft cycle is good, however, if you are an underwriter, it’s not so good.”
The broker says the majority of losses relate to aircraft on the ground, with parking lot damages producing some hefty price tags. “Unlike auto insurance where most claims relate to minor accidents and repairs, a little ding to one of the big jetliners can cost $75,000.”
The change occurring in traditional business roles, and to some extent the outright turmoil this is causing in certain quarters of the property and casualty insurance industry, continues to hold centre stage at professional gatherings.
Preparing for the future, dealing with new technology, merger mania and how to strike strategic alliances have been served up as the main intellectual courses for what has seemed to be an endless stream of industry seminars and debates over the past year. No doubt they will continue to head up the menu in the year ahead.
Unfortunately, these forums have come to provide a repeated message with little in terms of reaching a conclusive action plan. In a sense there is a temptation to almost see these gatherings as being “marital guidance groups” in dealing with an imminent and traumatic partnership split-up.
However, in my musings, it occurred to me that possibly there is no single action plan to deal with change, that in fact, the term “change” does not represent a single event (such as bank invasion into the p&c market) and therefore cannot provide a simple off-the-rack solution. Suddenly, excited with this simplified but effective spin of thought, it also struck me that change is not just a once-off event but a process that has been, and will always be, a driving force promoting economic and business advancement, including the growth of the p&c market.
With this in mind, I became embroiled in the usual discussion of “dealing with change, where are we going” with a senior insurance executive at a recent industry seminar. Through this debate, he likened the current shake-up of the industry to a bowl of salad tossed up and the ingredients left to fall back with little order or relation to the placement of the other greenery. The point of the analogy being that traditional relationships are breaking apart and the borderlines between the business areas erased. An obvious outcome of this is that the “name tags” of the different parties, whether they be independent adjusters or brokers versus internal services and alliances between market entities, or reinsurance versus primary company business, are being thrown out with the discarded seminar name tags.
Recent “big is better” merger deals and alliances established between underwriters and distribution networks such as the ING/Equisure and General Accident/Vector investments over recent months are prime examples of these changing values.
It would be foolhardy for me to suggest that these developments are not significant and relevant to the future direction of the p&c market. However, I do contest the view that change has been sprung on the market, that the current shift taking place is too much to deal with, that the industry is about to face its “Armageddon”.
Change has shaped the industry for decades, whether this has come in the form of adapted legislation or market opportunities having opened the door to new players and created new business roles.
However, what was once new has to eventually become traditional, all of which forms part of an ongoing cycle of development as new opportunities and business practices evolve. As such, I do not believe that any one particular party within the industry is at the point of facing extinction, but rather, that the players will adapt to the changing environment when, and through whatever means is required at the time. However, the players who will adapt successfully will be those that stay in tune with market developments and avoid the temptation of burying their heads in the sand.
The real risk is complacency. Relying on traditional rights and assuming a guaranteed position at the table is a quick way of ending up on the “endangered species” list – this encompasses all segments of the business, from independent adjusters and brokers through to underwriters and the professional associations. But, whatever shape and form p&c finally takes through the current rationalization cycle, it will, I am confident, become one more chapter out of many still to come in the great book of insurance in Canada.
To celebrate their acquisition of P.D. Brunt & Company Ltd., adjusters Sobel Adamsons Clements Ltd. recently held a one-day workshop, at Toronto’s The Albany Club, hosted by law enforcement consultant Glenn Foster. A former homicide detective and author of “How Can I Ge Through To You”, Foster is an expert on the art of investigation and interrogation techniques and shared his findings and interviewing strategies with workshop participants.
Zurich Canada has reached the quality standard level of ISO 9001 certification for the company’s Risk Engineering and Technical Risk Management (TRM) departments. Says vice-president Paul Miller, “Certification says to the world that we rank with the best of our peers in all industries. Among insurance companies we are the only one to pursue this certification on a global scale. We’re very proud.” The initiative was started in January 1998. Over the course of the process, Zurich had to prove it meets high standards in a number of specialized areas in order to qualify. Zurich’s Risk Engineering unit provides risk assessment services for both underwriters and policyholders for international and large national industry customers. Technical Risk Management provides similar services for small and mid-sized commercial customers with local, regional, national or NAFTA operations.
The Insurance Communicators Association held a breakfast meeting recently inviting the Insurance Council of Canada’s MaryLou O’Reilly to address members on the relationship between the industry and Canadian consumers. O’Reilly suggested the industry must commit itself to listening to consumers, noting that the Insurance Council of Canada is making efforts to raise awareness about the industry and its responsibility to Canadians. She also shed light on an ICC document, “I Never Read My Policy Until the River Started Rising”, which details research on Canadian knowledge of the industry. According to the figures, 72% of Canadian admit knowing little or not very much about p&c insurance. Also, half of Canadians don’t understand the meaning of insurance claims, deductibles or premiums, 32% of policyholders have never read their car insurance policy, and 40% of consumers don’t understand home insurance. On the positive side, the study found that Canadians have an understanding of basic aspects of insurance but fundamental misconceptions exist about how companies price, how insurance is structured and regulated and how to make an informed decision.
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The irony of the situation should not escape you as the reader of an insurance journal. Insurers continually lament about the cost of internal fraud through insureds, yet as an industry we are quick to turn the blind eye to possible exposures in our own ranks. No industry is safe from fraud, where there is money to be made, it can be safely assumed that someone has worked out a scheme to illegally avail themselves from the cash pool – whether that might be the petty-cash or the offshore tax-sheltered account.
Internal fraud is, by its nature, a dweller of dark places, not unlike Lord Denning’s allegorical “Blind man in a dark room looking for a black hat which isn’t there”. And, given its’ propensity to be hushed up, it often escapes proper monitoring. Naturally the true cost of internal fraud, and its impact on the economy and financial performance of companies is lost in this polite “let’s pretend it’s not there if we can’t see it” approach.
Insurers are often denounced for “playing the game” with consumer driven fraud, which is further frustrated by the leniency of conviction sentences meted out. As such, I am continually amazed at the winging and gutless approach taken by some insurers to their own homebred fraudsters. For instance, why is there no study in industry of the impact of internal fraud on premium? We know that internal, computer-driven fraud accounts for at least eleven times as much as bank theft as well as armed robbery, and insurance operators are just as exposed to the “cash risk” of the banking and retail sectors. How are the crooked underwriters, brokers and adjusters being dealt with in general?
The cover up
The first rule appears to be that the entire distasteful matter should be hushed up lest the company’s management is seen as lax in their operational practices. The second rule seems to be that no bad reference will be given when the culprit tries for another job in the industry for — as a human resource vice president once told me, “one can’t go around ruining people’s careers on a whim”. My response, at least in mind, was “well then, why even fire the individual in the first place?”
Over the last six years Underwriters Fraud Control (UFC) has been called on to investigate numerous allegations of company internal fraud, and surprisingly, found that approximately 87% of these reviews proved that the suspect was innocent and sometimes a victim themselves.
What motivates such unfounded charges in the first place? In my experience, it is usually some form of internal politics, petty jealousy or simply a ruse to cover the tracks of the accuser’s own wrongdoing.
With this in mind, we never set out to prove fraud but to prove innocence: if fraud is there, it will show itself soon enough, as even the most “cunning” of fraudulent schemes are not really complex when reduced to their basics.
Cases in point
In truth, we have seen it all in the last few years: there was the company that settled out of court with an accuser motivated by personal ambition who, seeking to ruin another’s career, was eventually undone and forced to collect a fat settlement with a “no admission of ‘liability” stipulation. There is the case of a U.S. company which, basing a decision solely on innuendo, fired a senior claims person and then, when sued for wrongful dismissal, hired UFC to find cause — we couldn’t. There was also the claims manager who, with twelve personal claims of a dubious nature, received a promotion and the branch manager, having aided one of his adjusters to defraud the company of several million of dollars, received the accolade of being named the “Employee of the Year”.
Essentially, internal fraud falls into two distinct categories: the “one-time” unsophisticated hit where, for example, an adjuster might write a cheque to a relative or two, or the more complex schemes involving adjusters, vendors, lawyers, medical practitioners, health care professionals or a combination thereof. While the thought of such schemes usually causes forensic accountants to go into paroxysms of fee-induced delight, the real key to uncovering these schemes is close file examination, careful interviewing and clear and speedy communication in delivering the outcome of an investigation.
Fraud actions
What is an insurer best advised to do when internal fraud is suspected? My suggestions are fourfold.
Firstly, limit the involvement of parties not necessary to the process, thus reducing the potential of “internal politics” disrupting the investigation as well as the potential of information leaks.
Secondly, report the loss as soon as you have reasonable suspicion to your bond insurers and LISTEN to their advice. At the same time, retain senior counsel of appropriate experience to protect privilege and your own rights of recovery.
Thirdly, do NOT balk at bringing charges once the fraud has been admitted or taken to a sufficient level of proof. Again, do not trade off a promise of no prosecution for an admission.
Finally, once the claim has been settled and the courts have done their work, do not be afraid to let the industry know that yes, we did get defrauded, but we have recovered the loss, persecuted the guilty party and closed the “gap” that enabled the fraud to take place in the first instance. In such a manner, it is my sincere belief that your company will earn the respect of others. It will also provide viable notice to employees and consumers alike that you are vigilant and aggressive in the pursuit of fraud.
Announcements in Coming Events are run free of charge as a service to the industry. Items should be submitted by the first of the month prior to the month in which the announcement is to appear.
Insurance Institute of Ontario: Special Centennial Showcase Luncheon. More for information, call 416-362-8586. Royal York Hotel, Toronto, ON. Jan. 20.
Ontario Risk & Insurance Management Society: Monthly Business Meeting and Breakfast. Contact Marlene Jones at 416-215-4288. Toronto Marriott Eaton Centre Hotel, Toronto, ON. Jan. 27.
The Toronto Society of Fellows: New Fellows Night and Fellow of Distinction Award Presentation. For additional information, call Peter Hanycz at 416-290-4202. The Albany Club, Toronto, ON. Jan. 27.
Institute for International Research: Stop Fraud ’99 Conference. For information, call 1-800-461-2398. The Sheraton Centre, Toronto, ON. Feb. 1-3.
Canadian Insurance Claims Managers’ Association & Canadian Independent Adjusters’ Association Joint Conference. For more information call CIAA at 416-621-6222. Delta Chelsea Hotel, Toronto, ON. Feb. 9.
Ontario Insurance Adjusters Association: Claims 1999 Conference. Contact OIAA at 905-542-0576 for information. Metropolitan Toronto Convention Centre, Toronto, ON. Feb. 10.
Speakers Club of the Insurance Institute of Ontario: Club Speaking Championship. Contact Rejeanne Dorion at 416-350-4137. 18 King Street East, Suite 800, Toronto, ON. Feb. 15.
Blue Goose Luncheon: Initiation. For information, call 416-665-1311. Royal York Hotel, Toronto, ON. Feb. 15.