August 23, 2002

Financial services giant ING Group reports that its Canadian operations were a "solid performer" in the second quarter of 2002. Overall, the Amsterdam-based company reported net operating profit is down for the period ending June 30, 2002 to Cdn$3.5 billion, a drop of 2% from the same period a year earlier. Per share operational net profit also dropped 2.1%, to $1.83. But total net profit was up 4% to $4.3 billion for the period, due to cost controls and restructuring.
In Canada, which falls under the mantle of ING Americas, the group's p&c business reports operating profit of $69.9 million for the quarter, versus $56.8 million during the same period last year. This growth is largely the result of strong underwriting results, the group reports.
Other factors contributing to the Canadian operation's strong showing were a growth in customer retention with the integration of Zurich Canada's personal lines and small commercial books, and cost savings from integration of Zurich operations into ING.
Further consolidation added cost savings as several companies were brought under the mantle of ING Insurance Company of Canada.
"Our results for the first six months of this year show that we stepped up to the challenges brought on by difficult market conditions in our hemisphere," says Glenn Hilliard, chairman and CEO of ING Americas. "We are pleased with our six-month results but it is clear that the sluggish U.S. market recovery is affecting us and others in financial services so we continue to be cautious about prospects for the second half."

(courtesy of Canadian Underwriter)

(see headlines)

The company's decision to close was supposed to conserve enough capital to pay all loss claims and leave enough money to pay refunds on policies terminated early.

That has not happened. About 1,000 refund cheques for an average of $300 each have bounced. A few thousand more refunds are still left owing.

An industry-sponsored protection fund will step in, but will only pay 70 per cent of what's owing to a maximum of $700 per refund.

Nor does Markham have enough money to pay all loss claims. The protection fund will cover losses up to $250,000, but that won't be enough for a few businesses such as restaurants who had losses.

Finally, settlement of claims for statutory accident benefits for motor vehicle injuries has been hampered because Ontario legislators never fixed a problem identified when Maplex General Insurance Co. failed in 1995.

No clear mechanism is in place for dividing the cost of paying victims these benefits among all insurers in Ontario, where Markham obtained most of its sales.

"This is messy," says Alex Kennedy, president of the Property and Casualty Insurance Compensation Corp., or PACICC. "It's something, that by this time, should have been handled."

Repeatedly after Maplex failed, Kennedy warned Ontario ministers and parliamentary assistants responsible for insurance that the government would face embarrassment if a sharing mechanism was not put in place before the next insolvency.

Markham General grew rapidly in the past two years, spurred by low premiums and the endorsement that hockey commentator Don Cherry gave to Markham's largest broker, Believer Plus Insurance Brokers Ltd. of Hamilton.

But when Markham could not find additional capital to fund its growth and deal with the need to raise its low premiums, regulators nudged the insurer to close as of June 15.

The Financial Services Commission of Ontario had to go further on July 24. It went to court to enforce an orderly wind-up of the business, and name Deloitte and Touche Inc. as the liquidator.

It is too early to estimate the size of shortfall at Markham, which relied heavily on international reinsurers to support its business, said John Whitehead of Deloitte. "If the reinsurance holds good, there is a chance we will have a good deal of money to pay to policyholders and (reimburse the compensation fund), but probably not enough to supplement partial refunds of unearned premiums."

The liquidator has the money and authority to continue paying accident benefits to victims of motor vehicle injuries until mid-September. At that point, the liquidator and PACICC will need guidance from a judge on how to pass on any shortfall in future benefits to other insurers — to individual companies where the victims may also have coverage or on a fairer basis to the entire industry.

Industry executives have been critical of the Financial Services Commission for not acting sooner to avert a train wreck at Markham. They noted in April that Markham's premiums were so low that many of its dislodged policyholders could see increases of more than 20 per cent when they switched companies.

In a few cases, policyholders never received notice or read press reports to learn that their policies were about to be cancelled. "One gentleman was horrified to learn he had been driving for a month without coverage," Kennedy said in an interview.

Mutual fund returns: Most investors in well diversified Canadian equity funds have not been hit as hard as the Toronto stock market, as I wrote last Tuesday. But, due to an error loading software, I reported March figures instead of July's as intended. So here is an update.

To the end of July, not one in eight funds had dropped as much as the over-all market, which was down 36 per cent in a two-year period. The weighted average loss for investors was 10.6 per cent, and only 5.2 per cent for those invested in funds with more than $1 billion in assets.

Only a fifth of funds made money, though, compared with a half to the end of March. Large funds like CI Harbour had an average annual gain of 7.5 per cent, Trimark Canadian Endeavour 7.4 per cent, Investors Canadian Large Cap Value 5.2 per cent and Trimark Canadian 1.6 per cent.

Among global funds — the ones that many hapless investors were urged to buy with borrowed money — the results were worse by July than in the March figures. Half of funds lost more than a third of their value in a two-year period, while the average investor lost 14.7 per cent.

Results will be different again when fund holders get their end-of-August figures. The Toronto market peaked during that month two years ago.

Thanks to the Toronto Star www.thestar.com

(see headlines)

LIQUIDATOR APPOINTED FOR MARKHAM GENERAL INSURANCE

FSCO SEIZES ASSETS OF INSURER, WIND-UP ORDER ISSUED

The Financial Services Commission of Ontario (FSCO) has issued notice that the regulator will take possession of the assets of the troubled insurer, Markham General Insurance Co.

FSCO says its action against Markham had followed close monitoring of the company’s financial affairs and after having been supplied by financial records from the Board of Directors. The Superintendent took this action to protect policyholders because Markham General Insurance Co., could no longer meet its obligations.

On July 24, 2002, the Ontario Superior Court of Justice on the application of the Superintendent of Financial Services at the Financial Services Commission of Ontario, ordered Markham General Insurance Company to be wound-up under the Winding-up and Restructuring Act. Deloitte and Touche have been appointed as provisional liquidators.

INFORMATION FOR SHOPS
(provided by the Property and Casualty Insurance Compensation Corporation- PACICC)

If my insurer fails, how do I submit a claim?

When a company is declared insolvent, a liquidator “winds up” its affairs, including the processing of claims. The liquidator will write to all policyholders and claimants concerning claim procedures. Bear in mind, however, that the liquidator will need some time to examine the insolvent insurer’s records to gather the necessary information.

Does PACICC determine the value of my claim?
No. The liquidator determines the value of your claim, but PACICC will want assurance that the amount is reasonable.

What happens if I disagree with the amount offered ?
If you disagree with the amount offered and you cannot resolve the matter with the liquidator, you can try to bring an action in court; to do this you will need the court’s prior approval.

(see headlines)

INSURANCE INDUSTRY COMPENSATION PROGRAM

Questions & Answers

Which insurers are members of PACICC and who funds PACICC?

Unless they are covered by another authorized plan, all property and casualty insurers licensed in a province or territory of Canada are required to be members of PACICC. The exceptions include insurers licensed to sell only one or more of the following - automobile insurance in Manitoba, Saskatchewan or British Columbia and speciality lines of insurance such as surety, fidelity, marine or aviation. All participating P&C insurance companies pay a small levy to PACICC to cover its running costs. Should an insolvency occur, PACICC responds to valid claims and participating insurance companies are assessed for their share of the cost involved.

If my insurer fails, how do I submit a claim?

Contact your broker as soon as possible following the date of the court order declaring the company insolvent. When a company is declared insolvent, a liquidator "winds up" its affairs, including the processing of claims. The liquidator will write to all policyholders and claimants concerning claim procedures. Bear in mind, however, that the liquidator will need some time to examine the insolvent insurer's records to gather the necessary information. If you have purchased your insurance directly from the insolvent insurer without assistance from a broker, notify your insurer's head office of the claim.

Does PACICC determine the value of my claim?

No, the liquidator determines the value of your claim, but PACICC will want assurance that the amount is reasonable.

What happens if I disagree with the amount offered?

If you disagree with the amount offered and you cannot resolve the matter with the liquidator, you can try to bring an action in court; to do this, you will need the court's prior approval.

What happens if I am liable for a claim against me and the claimant doesn't accept the settlement; can I be sued for the full amount? Who will defend me?

Someone having a claim against you has the right to sue for the full amount and is likely to sue you rather than your insurer. You should direct your inquiry to the liquidator of the insolvent insurer. PACICC is involved only with payment of claims where agreement has been reached on the amounts payable.

What happens if an insurer cancels its membership in PACICC?

The companies which are members of PACICC can terminate their membership only if they cease to be licensed everywhere in Canada for the types of insurance covered by PACICC.

(see headlines)

8/12/2002

British Columbia's public insurer is reporting increased profits for the quarter ending June 30, 2002, largely the result of changes to its investment portfolio. The Insurance Corporation of B.C. (ICBC) saw a net profit of $39.6 million for the second quarter of this year, compared to $8.5 million profit for the same period in 2001. The result is net income for the first six months of the year of $9.2 million, versus a net loss of $30.6 million at the same point last year.
Total premiums written were up 12% to $730 million for the most recent quarter, from $651 million for the second quarter of 2001. However, insurance operations saw an underwriting loss of $67 million, against a loss of $75 million last year during the same time.
Claims costs continue to rise, the corporation reports, up to $632 million for the quarter, from $571 million in Q-2 2001. "The rising trend in claims continues to be a major concern for the Corporation," states a release. "This year has seen a continuing increase in both the frequency and severity of crashes and at the same time, car thefts have increased 14% over last year."
Gains came from the investment side, with investment income up to $129 million versus $107 million for the second quarter last year. ICBC outsourced the management of its Canadian equities portfolio, and linked that portfolio to the S&P/TSX Composite Index during this most recent quarter. "The adjustment of the portfolio to the Index resulted in the disposition of a number of holdings and was responsible for most of the exceptionally high gains on sale of investments in the quarter."
As a result, about $30 million of the gains budgeted to be achieved in the second half of 2002 have already occurred.

(Thanks to CanadianUnderwriter)

(see headlines)

IBC WORRIED ABOUT INCREASED TOW CHARGES

The Insurance Bureau of Canada (IBC) is the national trade association representing property and casualty (P&C) insurance companies in Canada. Although a voluntary association, our member companies account for nearly 90% of all private P&C insurance premiums in Canada.

IBC has serious concerns with the proposed increase in towing fees. A 53.8% increase to $200 above the current Toronto street rate of $130 would have significant impact on Ontario drivers who are already facing increased renewal premiums. The proposed rates far exceed normal inflation and will cause upward pressure on premiums.

Towing costs are incurred in about 20% of all automobile physical damage claims paid by auto insurers. There were almost 190,000 reported collision claims in the Toronto area in 2001.The average claim for towing and storage in the insurance industry now stands at approximately $450 in Ontario and is likely higher in Toronto itself. This amount is greater than the salvage value of many vehicles made before 1993.

No documentation has been provided to justify the proposes towing charge increase, other than matching the excessive $200.00 tow rate now used in Mississauga and Brampton. In our view, given that any increased costs will ultimately be borne by all auto insurance policyholders, it is essential that any increased fees be supported by real increases in operating costs by tow truck providers.

It is reported that City of Toronto staff had suggested that a 20% fee increase would be more appropriate based on increased expenses.
Any increase in towing charges cannot be considered in isolation. The City of Toronto must also review the following related issues before making any decisions in this regard:

1) CONTROL OF TOWING FEES ON ALL TOWS AND RELATED COSTS
In addition to basic towing charges, insurers are encountering excessive storage levies and fees on secondary towing which can add enormously to the total bill paid on behalf of policyholders. These related charges must also be regulated including charges for hazardous waste and administrative expenses.

2) ENFORCEMENT OF MANDATORY DROP
Under Toronto's by-law vehicles towed to a Collision Reporting Centre (CRC) must be dropped before being towed to another location. Unfortunately insurers have many examples where the vehicle has not been dropped at the CRC but has been driven straight away to a secondary location. This situation removes the opportunity for a claimant to seek proper information before deciding where his/her vehicle should be repaired. The City must strictly enforce the existing by-law in this respect.

3) BAN ON INVOLVEMENT BY PARALEGALS IN TOW TRUCK OPERATION
Insurers have discovered a number of cases where some tow truck operators are also operating as paralegals. This is a clear conflict of interest and it is essential that this practice be banned. In addition, some tow operators have been found to sell the personal information of accident victims to paralegals and others involved in accident benefit claims. These forms of kick-backs or finder's fees on the part of tow truck operators must be prohibited in order to assist in controlling the spiraling costs of accident benefits claims. Auto insurers are encountering huge increases in accident benefits payments because of such inflated or fraudulent claims. The industry paid over $1 billion in medical and rehabilitation costs in Ontario in the year 2000 alone, putting enormous pressure on auto insurance premiums for all policyholders.

4) INCREASE IN THE NUMBER OF CARS TOWED THAT SHOULD NOT BE TOWED
Insurance companies are encountering al least 5% of towed vehicles that were safe to drive away from the accident scene. Sanctions need to be in place to deter tow truck operators from needlessly towing vehicles.

5) CUSTOMER EDUCATION
Motorists involved in accidents are often not in a position to make informed choices about towing and storage arrangements. Nor is there any opportunity for ordinary market forces to come into play to regulate prices. Our customers are at the mercy of tow truck operators who are left largely unaccountable for their service. We would appreciate working with the City of Toronto to draw up a pamphlet or other educational materials to better inform motorists.

IBC has established a recent sub-committee to study current Ontario towing practices and report its findings and recommendations. A more cost-effective system which benefits consumers and is fair to all stakeholders is sorely needed.

In summary, we would like to see justification for any increased towing fees as well the establishment of maximum fees for storage, secondary towing and other fees related to vehicles that have been in accident before any change to the current fee limits are approved. As well, we urge you to address the other related issues we have raised in order to help control the insurance costs faced by all Toronto drivers.

(see headlines)

July 24, 2002

The Ontario Superior Court of Justice today issued a wind up order for Markham General Insurance Co. This move follows application earlier this week by the Financial Services Commission of Ontario (FSCO) to seize the assets of the insurer.
The court has appointed Deloitte and Touche Inc. as the provisional liquidator. Markham General was licensed to conduct business in Ontario, British Columbia and Alberta. The bulk of business written by the company was Ontario auto. The insurer ceased writing business mid-June of this year, when existing policies were also cancelled. The Property and Casualty Insurance Compensation Corp.'s (PACICC) president Alex Kennedy says claims will be considered relating to events that happened on or before the date of cancellation of Markham General policies.

from Canadian Underwriter www.canadianunderwriter.ca

(see headlines)

July 22, 2002

The Financial Services Commission of Ontario (FSCO) has issued notice that the regulator will take possession of the assets of troubled insurer, Markham General Insurance Co. The insurer recently cancelled active policies and ceased writing new business.
FSCO says its action against Markham had followed close monitoring of the company's financial affairs, and after having been supplied by financial records from the board of directors, it became apparent that the assets were insufficient to warrant the insurer remaining in business. "The superintendent took this action to protect policyholders because Markham General Insurance Co. could no longer meet its obligations." FSCO observes that policyholders will receive some protection of their interests through the insurance industry's Property and Casualty Insurance Compensation Corp. (PACICC).

from Canadian Underwriter www.canadianunderwriter.ca

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CO-OPERATORS GENERAL INSURANCE NEWS RELEASE

May 24, 2002

Higher premiums helped Co-Operators General Insurance Co. cut its losses sharpely in the first quarter, the personal and property insurer said today.

Co-Operators General said it lost $2.2 million or 18 cents a share, in the three months ended March 31, compared with a loss of $20 million, or $1.07 per share , for the year-ago period.

The company, a major auto insurer, reported generated premiums of $336 million, up from $321 million in the first quarter of 2001.

"Although far from satisfactory, these results are a welcome improvement over the devastating loss incurred during the first quarter of 2001, " said chief executive Kathy Bardswick.

Co-Operators had requested a 6.92% increase in its premiums for the last quarter of 2001 from the Ontario Financial Services Commission.

Shares of Co-Operators General closed unchanged at $2.40 on the Toronto stock market.

(see headlines)

In the wake of industry speculation on the fate of Internet-based insurer Markham General, the company has told its brokers that all existing policies will be cancelled as of 12:01 a.m. on June 15.

In a letter to brokers approved by Financial Services Commission of Ontario (FSCO) Superintendent Philip Howell, and dated April 12, the company says that notices of cancellation will be sent to all policyholders, likely in about two weeks. Cancellation credits will be calculated on a pro-rata basis, the letter states, and refunds issued following the notice to policyholders.

Rumors had been circulating in the industry that such a move might be taken, after Markham General's financial woes came to light just weeks ago. The company was suffering a capital crunch, having written large amounts of business, specifically in Ontario auto, where losses have been heavy.

The privately-held company, started in 1999, was a virtual operation, intended to use the Internet to write business more cost-effectively through independent brokers. Just weeks ago, the company admitted that it had fallen below FSCO minimum capital requirements, and instructed brokers to stop writing new business.

Brokers, who may have hoped the company would sell its book of business to another insurer, will now be scrambling to place the business elsewhere before policies are cancelled mid-June. However, the future of the company's operations has not yet been divulged.

In an interview last Friday, the date of the letter sent to brokers instructing them that existing policies would be cancelled mid-term, Markham founder Brian Johnston refused to comment on the situation.(courtesy of Canadian Underwriter)

(see headlines)

Steve Arnold
The Hamilton Spectator

More than 12,000 Hamilton residents are scrambling to find new car and business insurance after the provincial regulator asked their company to cancel all outstanding policies. Policies of Markham General Insurance Co. were sold by a number of brokers, including the much-advertised Believer Plus. Markham General was asked to go out of business by the Financial Services Commission of Ontario because its cash reserves fell below legal requirements.
Across the province, as many as 80,000 policyholders could be affected.

Industry watchers warn that other insurers may also go under, victims of a wave of turmoil in the insurance business.

Hardest hit by the Markham General decision is Hamilton-based Believer Plus, a company pitched in a series of radio advertisements by colourful hockey commentator Don Cherry. It has 10,000 customers who must now be placed with new insurers, most at higher premiums.

"It's a real problem, but it isn't a problem that we won't be able to overcome," said John Mitchell, of Mitchell and Abbott Group of brokers which includes Believer Plus. "This is something we may see in the industry again before the end of the year."

Markham sold policies through a network of 80 brokers across Ontario, including Mitchell's groups, Dalton Timmis Insurance of Hamilton and Tripemco Insurance of Burlington. Among them, they sold more than 12,000 of the company's low-priced auto policies targeted to good drivers.

Those policies will stay in effect until June 15. Policyholders will have to find new insurance, which shouldn't be a problem, but most will face premiums hikes of as much as 15 per cent.

They will also be reimbursed for payments made for coverage beyond June 15.

Mitchell explained that its low premiums may have been one of Markham's major problems -- the $83 million in premiums it brought in simply wasn't enough to cover claims and maintain the roughly 30 per cent of total policy value it's required to have in liquid assets. Industry sources say Believer Plus alone accounted for roughly $14 million of Markham's premiums last year.

The problem of inadequate rates was aggravated by the stock market slump, which meant the company's investments didn't make up the difference. Some industry experts are blaming provincial regulators and politicians for not changing Ontario's mandatory insurance to help curb the soaring cost of medical treatments for minor injuries, and to speed up approval of rate increases.

Trouble became a crisis, however, in the wake of the Sept. 11 terrorist attacks when insurance companies were hammered by a double blow -- the firms that insure insurance companies against major losses suddenly cut the amounts they would cover and drastically increased the fees they charged.

It works like this. If an insurance company writes a policy for $1 million, it only covers the first $100,000 of the loss and buys re-insurance to cover the balance.

Since Sept. 11 however, premiums for that secondary coverage have tripled and the maximum amounts covered have been slashed.

The damage all those factors did to the balance sheets and bottom lines of insurance firms means more could soon follow Markham out of the business, Mitchell said.

"I don't believe we've seen the end of this sort of thing," he said. "We may see something like this again before the end of the year."

Rowena McDougall, spokesperson for the Financial Services Commission of Ontario, said Markham General is voluntarily cancelling all its business, auto and home insurance policies after a quarterly report filed in February showed it didn't have the required amount of cash on hand.

"Markham came to us and we started working with them as soon as we realized there was a problem," she said. "We consider this a very successful resolution of the problem."

McDougall said after the cash shortfall was discovered, the company was asked to stop writing new policies and was given one month to find new capital. When that search failed, it was asked to shut down.

Until Believer's current policy holders are placed with new coverage, Mitchell said listeners won't be hearing any more of Cherry's commercials. But they will be back, selling policies from a new insurance company.

"We have to take care of our current clientele. We can't even think about writing any new business," he said.

Markham General says it still has enough money to make pro rata refunds for policies cancelled mid-term and to pay claims for wrecks and injuries.

Ken Watson, an interim manager parachuted in by the insurer's principal financial backer, said Dailey Capital Management Inc. of South Port, Conn., will stick around to keep things going until policies are cancelled. It's also possible the company will be revived.

"We are trying to resurrect the business in terms of recapitalizing it," said Watson.

Thousands of other drivers were already being moved around after Zurich Insurance sold its personal lines business in Canada to ING Group NV, and clients of CGU Insurance Co. of Canada were transferred to its sister Pilot Insurance Co.

You can contact Steve Arnold at sarnold@hamiltonspectator.com or at 905-526-3496.
(article courtesy Hamilton Sepctator)

www.thehamiltonspectator.com

(see headlines)

April 19, 2002

An initiative by the Ontario government and the Insurance Bureau of Canada (IBC) to get uninsured vehicles off the road has been delayed by a few roadblocks, the IBC says. Most notably, the change in leadership of the Conservative government, and the strike by Ontario's public employees, have put the project on the backburner.

Nonetheless, the IBC is encouraging members to prepare for the project's implementation after it is put through in legislation. Through the program, the provincial Ministry of Transportation (MTO) will electronically confirm the coverage of private passenger vehicles at the time of license plate renewal. This will be done using information stored by the IBC.
The IBC recently completed its second beta test of Critical Coverage Reporting (CCR), with 500 users, including brokers, agents and insurers, sending time-sensitive changes to mandatory insurance coverage to the IBC.

The IBC plans to continue pursuing the formalization of the project through legislation with new Ontario Transportation Minister Norman Sterling and will provide a revised rollout schedule at a later date.

(see headlines)

Road safety, reducing fatal and serious injury auto accidents, and the rising costs of health care in Canada are important priorities facing the property and casualty insurance industry.

Putting safe vehicles back on the road following repairs is also a top priority. In fact, Canadian P&C insurers have put a number of programs in place to audit the repair of vehicles. These programs may vary from company to company, but common practices are followed.

Some of the most common practices include:

1. Electronic photo imaging - The collision repair facility immediately sends photographs of the damage to the insurance companies, along with a completed estimate, listing the parts and labor required for repair.

2. Random re-inspections - These inspections are carried out by insurance companies. During the re-inspection process, a vehicle is often checked both before and after the repair, and all old parts must be accounted for. Also the parts replaced are verified by a review of the original invoice.

3. Voluntary branding - The Ontario Ministry of Transportation (MTO) plans to introduce a mandatory branding program some time in 2002. Many companies are already branding vehicles that have incurred severe structural damage. The branding program is designed to keep unsafe vehicles off the road.

One of two brands is shown on the vehicle ownership - "irreparable" and "salvage." A vehicle branded "irreparable" can be used as a source for parts or scrap only. The vehicle's structural damage is too extensive to repair safely for road use. A vehicle branded "salvage" can be safely repaired but cannot be used on the road until it passes a very rigid structural inspection approved by MTO. If the vehicle passes the inspection, it is branded "rebuilt" and approved for road use.

4. Preferred or Direct Repair Programs - While consumers have the right to take their vehicle to any shop, many take advantage of the insurance company's "preferred" or "direct repair program (DRP)". Insurance companies guarantee the workmanship for as long as the customers owns the vehicle if repaired at a preferred or direct repair shop. Additionally, preferred or direct repair shops must have a good reputation for quality repairs, and must be properly equipped to repair structurally damaged vehicles.

5. Audit programs - Insurance companies are equipped with various electronic audit programs featuring triggers that are able to select files for review.

The Canadian P&C insurance industry continues to work with the Collision Industry Standards Council of Ontario (CISCO), which has developed an accreditation and self-management program for collision repair facilities. The insurance industry supports the proposed standards, which include a compliance monitoring and enforcement component. For more information, visit The Collision Industry Action Group web site at www.ciia.com .

Consumers can also obtain more information by calling the Insurance Bureau of Canada's Consumer Information Centre at 1-800-387-2880.
(see headlines)

Supreme Court of Canada Ruling May Mean Millions in Refunded Auto Deductibles

March 18, 2002

Consumers who had their cars written off, but paid the deductible on their policy, may be in for a refund.
Lawyers in Toronto, Calgary and Vancouver have filed a number of lawsuits against car insurance companies in courts in Ontario and Alberta. As many as two million Canadians in six provinces and the three territories who have written off their cars in the last 10 years could be eligible for refunds of their insurance deductibles ranging from $250 to $50,000 as a result of a recent Supreme Court of Canada ruling.
The lawsuits involve insurance deductibles withheld by the companies for cars totalled in collisions. Anyone in Canada whose car was written off and who paid a deductible could be affected.
On March 8, 2002, the Supreme Court of Canada refused to hear an appeal by the Co-Operators General Insurance Company, meaning an Ontario Court of Appeal decision that policy holders whose cars are written off should get the full value of their vehicle, and that no deductible should be applied.
"The court ruling states that people must be paid the actual cash value
of their car, not the actual cash value less the deductible," says Kirk Baert of the Koskie Minsky law firm.
Bill McNally of McNally Cuming Allchurch stated that "the Supreme Court of Canada has decided that they do not want to tinker with the Ontario decision. It means that for all intents and purposes, it's the law of the land.
"It doesn't seem like a lot of money, but when you consider there are thousands of people involved, it amounts to a lot of money", McNally said.
David Klein of Klein Lyons said that "about 100,000 people total their cars annually in the affected provinces, so many people may have a claim." Affected policyholders should call to find out if the insurance company they deal with has been sued.

(with thanks to www.autoserviceworld.com)

More information from National Post

More information from McGowan Elliot & Kim

(see headlines)

Low earnings resulted in increased prices at most insurance companies, with a premium revenue increase of 8 percent. At the same time a 12 percent surge in insurance claims all but wiped out the revenue hike.

"The new data are troubling because they show that the industry's financial health did not improve at the end of the year," says Paul Kovacs, IBC's chief economist.

"Insurers have been losing money in Atlantic Canada for 9 of the last 12 years -- including the last six consecutive years. Results are also poor in Ontario and Alberta," adds Kovacs. By contrast, the Quebec insurance market is by far the healthiest in Canada.

"The industry was caught last year between a rock and a hard place. Governments have not yet given the industry authority to manage and control its healthcare expenses and medical claims. Such costs have been on the rise by 14 percent annually for more than a decade. Add to that falling interest rates and volatile equity markets, and the result is lower earnings."

"Four consecutive years of weak profits are nature's way of saying that more adjustments lie ahead for insurers and their customers," Kovacs says. "For insurers, the priority needs to be material improvement in underwriting performance and profitability." IBC believes the 17 percent growth in industry direct written premiums over the past four quarters is evidence that the adjustment has begun.

Copyright 2002 by CollisionWeek. All rights reserved. No part of this publication may be reproduced or transmitted by any means without permission in writing from the publisher.

(see headlines)

March 8, 2002

The victory of one policyholder in a case involving auto insurance deductibles could give rise to large numbers of Canadians seeking similar action against insurers. A Supreme Court of Canada ruling yesterday denies Co-operators General the right to appeal a lower court judgement forcing the insurer to return the deductible on a vehicle destroyed in a car crash. Although that decision alone means the company will have to pay an Ontario man, Gary McNaughton, $1,000, insurers fear the decision will cause an onslaught of similar cases now.
The case involved McNaughton Automotive, which owned a fleet of vehicles insured by a commercial policy, one of which was damaged in a collision. Co-operators paid McNaughton $8,100 minus a $1,000 deductible, took the vehicle and sold it off for $1,900. McNaughton filed a class action lawsuit on behalf of all Co-operators auto policyholders in Ontario, Alberta and the Maritimes.
The Ontario Court of Appeal had ruled that the insurer should have waived the deductible in light of having sold the vehicle. This decision would apply only to Ontario cases. The Supreme Court's decision not to hear an appeal means that policyholders going back years can join in similar suits to recapture their deductibles in similar situations.
"For some automobile insurers, particularly direct writers, if classes [for lawsuits] were successfully certified, the potential payout to the class in addition to lawyers fees could amount to millions of dollars," writes lawyer Bill Blakeney in a recent edition of Canadian Underwriter, referring to the McNaughton case. He says that as a result of the Ontario decision "the property/casualty industry faces one of the largest potential class actions in history".

from Canadian Underwriter www.canadianunderwriter.ca

More recent information from Canadian Underwriter

(see headlines)

February 22, 2002

The Supreme Court of Canada has restored a jury award of $1 million in punitive damages made against Pilot Insurance Co. The Whiten v. Pilot case has been closely watched by insurers due to the magnitude of the punitive award.
A legal source serving the insurance industry says the Supreme Court's ruling has set a new precedent in the application of punitive awards in Canada. Insurers will have to increase their contingency reserves to deal with such costs, he adds, with future punitive court awards expected to rise in both number and value.
Daphne and Keith Whiten initially sued Pilot for $125,000 in punitive damages after the insurer refused a claim for the loss of their house due to fire. The insurer alleged that the couple had destroyed their own home with the intent of committing insurance fraud. A jury then awarded the Whiten couple an amount of $1 million in punitive damages. This outcome was appealed by Pilot, with the result that the Ontario Appeal Court reduced the damages to $100,000 in 1999. In response, the Whitens cross-appealed the Ontario court decision, resulting in the latest $1 million outcome. In addition to the $1 million in punitive damages, the Whitens also received $320,000 in court costs and $345,000 for the loss of their house.
In a statement released after the Supreme Court ruling, Pilot's president Stuart Kistruck says that, while the company recognizes the decision of the court, it is also disappointed with the fact that the punitive award was raised back to the level previously determined by a trial jury. "To maintain the integrity of the insurance business for both policyholders and the industry, it is the duty of every insurer to verify claims made. We believed in this case [Whiten] that there was sufficient initial evidence to take the position that we did. We fear that the court's decision on this case may have ramifications on future cases of insurer/policyholder resolutions that will have a very negative effect on what is a very smooth functioning insurance system in Canada, for all sides."
from Canadian Underwriter Magazine

(see headlines)

February 20, 2002

British Columbia's public insurer is reporting a loss of $251 million last year, but is predicting a close to break-even 2002. This compares with a net income of $139 million in 2000 for the Insurance Corporation of B.C. (ICBC).
In fact, 2000 saw income of $357 million, but $219 million of this was paid back to motorists as a dividend in early 2001.
A good piece of the loss in 2001 is due to a financial hit on the corporation's investment in a real estate venture in Surrey, B.C., with another $40 million due to restructuring costs as ICBC reduced its staff by almost 1,000. More than two-thirds of those staff members opted for voluntary severance packages.
The other increased cost was due to rising claims, which went up $105 million in 2001 as compared with 2000. Total claims rose 1.1 million, up almost 8% over the year prior, although little of the increase was in accident injury claims, which have hit other provinces hard. At the same time, positive claims development from prior years' claims tailed out in 2001. While in 2000 the company saw income of $266 million, in 2001 it made a negative adjustment of $2 million for prior year's claims.
Investment income also dropped last year, to $454 million, as compared with $626 million the year prior.
ICBC did introduce rate increases last year, averaging 7.4%, and expects those increases to show up in the bottom-line for 2002 and 2003. Added to that are the staff cuts and building closures, which the corporation expects to bring efficiencies in the coming year.

from Canadian Underwriter Magazine

(see headlines)

The Supreme Court of Canada struck a blow for all insurance consumers yesterday by sending a $1-million message to insurance companies that act in bad faith. The country's top court reversed an earlier ruling and awarded $1 million in punitive damages to a Haliburton couple who had been falsely accused by their insurance company of burning down their home.
It's the largest award for punitive damages in Canada and is seen as a victory for any Canadian who holds an insurance policy.

It's also a victory for Hamilton lawyer Bob Munroe, who argued part of the case and helped convince the Supreme Court that there should be no cap on punitive damages when a company blatantly and maliciously abuses its power.

"It's a terrific victory for insurance consumers because it gives policy holders protection against those rare instances when powerful insurance companies don't live up to their obligations under the insurance contract," said Munroe, a civil litigation specialist who was acting on behalf of the Ontario Trial Lawyers Association.

"This decision is not something that is bad news for the insurance industry because the court is very clear in this decision that the type of conduct that is being punished is extreme conduct," he added.

"Secondly, they set out very carefully the factors that should be taken into account to ensure that the award is not out of proportion."

The case centred on the issues of good faith, the special relationship that exists between an insurance company and a policy holder, and what should be an appropriate penalty when a company acts in an "exceptionally reprehensible" manner, as the Supreme Court described it.

It began in January 1994 when Daphne and Keith Whiten were forced to scramble out of their burning house into a frigid -18 C night wearing only their pyjamas. Their three cats perished in the fire and Keith, barefoot and freezing, ended up in hospital with frostbite.

The Pilot Insurance Co., which insured their home, decided the fire was arson and set about trying to prove its case as it denied the Whitens' claims.

The Whitens eventually sued Pilot for their losses and asked the court to assess punitive damages against the company. At the original trial, Pilot admitted the jury could reasonably conclude that the company either withheld information or provided misleading information to its experts.

Disgusted by the company's conduct, the jury awarded the Whitens $345,000 for their losses and another $1 million in punitive damages.

But the Ontario Court of Appeal later reduced the punitive portion to $100,000.

That decision was then appealed to the Supreme Court, which decided 6-1 to uphold the original $1 million award.

"The jury decided a powerful message of denunciation, retribution and deterrence had to be sent to (Pilot) and they sent it," the Supreme Court said.

"Insurance contracts are sold by the insurance industry and purchased by members of the public for peace of mind. The more devastating the loss, the more the insured may be at the financial mercy of the insurer and the more difficult it may be to challenge a wrongful refusal to pay the claim."

The legal principle of good faith requires the insurer to put the policy holder's interests on par with its own interests. Neither side is supposed to seek an unfair advantage in living up to the contract.

When policyholders have to call on insurance, they are already in a vulnerable position through the loss of health, employment or property.

Because of this special need for good faith between the insurer and a policyholder, it's all the more serious when there are problems of bad faith.

"The obligation of good faith dealing means that the (Whitens') peace of mind should have been (Pilot's) objective," said the Supreme Court, "and (their) vulnerability ought not to have been aggravated as a negotiating tactic.

"It is this relationship of reliance and vulnerability that was outrageously exploited by (Pilot) in this case."

Pilot released a statement yesterday expressing disappointment with the decision, but said it will pay the damages immediately.

The Supreme Court also rejected an argument by the Insurance Council of Canada that there should be a cap on punitive damage awards. The council suggested large awards would hurt consumers by driving up insurance premiums.

Whiten v. Pilot Insurance Co.
www.lexum.umontreal.ca/csc-scc/en/rec/html/whiten.en.html

You can contact Steve Buist, of the Hamilton Spectator who wrote this story at sbuist@hamiltonspectator.com or at 905-526-3226.

(see headlines)

AUTO INSURANCE RATES UP AGAIN IN FOURTH QUARTER 2002
Average increase approved is 5.17%

February 8, 2002

Ontario's private passenger auto insurance rates rose again during the quarter ending December 31, 2001
The rate applications approved during the fourth quarter of 2001 indicate an average increase of 5.17 per cent when weighted by market share for those insurers with rate changes. This compares to an average increase of 4.92 per cent for rate applications approved in the quarter ending September 30, 2001. Insurers with a total of 64.5% of the total market share applied for changes to their premiums charged.
On a year over year basis, based on the renewal effective date of rate changes, rates for private passenger automobile insurance for the total market have increased by 7.85 per cent.
Some approved rates and the insurer's market share:

For more information please see : Ontario Insurance Rate Increases

(see headlines)

ING and Zurich form Canadian alliance in asset swap deal

December 1st, 2001

ING Canada and Zurich North America Canada have concluded a deal through which the Dutch financial services company will acquire the latter's property and casualty personal lines insurance book. In turn, Zurich will renew the large commercial and corporate risks previously underwritten by ING. No value has been attached to the deal, and it appears the arrangements agreed to are a form of "asset swap" type transaction. A joint statement released by the two companies describes the deal as a "strategic alliance" boosting their combined Canadian p&c marketshare to 15%.

Both ING and Zurich will market all of the insurance products available between the two companies via their broker distribution networks. ING will, however, retain its commercial business not falling into the category of "large risks". It is expected that the deal will increase ING's insurance premiums by $460 million to a total for 2002 of about $2.8 billion – pegging the group's share of the insurance market at around 12%. Zurich expects its annual premiums for 2002 will rise to approximately $550 million. The deal will also boost Zurich's stake of the Canadian large commercial/corporate risk market to around 21%.

Around 1,000 Zurich employees involved with personal lines business will now become part of ING's work force, the companies say in a statement. Zurich will retain its life business in Canada as well as World Travel Protection, a wholly-owned subsidiary. Neither company has revealed whether the deal will result in cost-cutting measures. "The strategic alliance and its expanded distribution network will allow us to improve the scale of our activities and offer a more compelling value proposition to insurance brokers," says ING president Claude Dussault. Zurich president Barry Gilway adds, "we [Zurich Canada] have a leadership position in the large commercial and corporate business, and we play a pivotal role on behalf of international corporate customers operating in Canada".

Thanks to Canadian Underwriter

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Auto Repair Perspective: Work For, Not Against

By John Norris, executive director of the Hamilton District Autobody Repair Association

The world of repair shops and front-line collision damage appraisers is very different to that of the corporate insurance industry. A closer understanding of the challenges faced by both sides is clearly needed. In fact, with both bodyshops and insurers facing extremely tight operating margins in the highly competitive auto repair market, it can only make sense that both the body shop owner and insurer should work together rather than against each other.

Insurers who pay for repair and refinish of collision damaged vehicles expect a seamless claims process. Insurers talk about a quality claims experience for their clients, with the expectation that the client will be so pleased with the claims and repair process that he/she will be eager to reinsure with their company.

Collision shop owner/managers repair vehicles for their customers -- the car owner. The insurer however, pays the bills. The shop owner wants a happy customer too. After all, a happy customer means a life-long client who often helps form decisions for others on what shop to use. Over 70% of a repair shop's business is derived from referrals. Good recommendations of a shop to a potential customer from brokers, suppliers, friends and relatives is the largest source of income, so they too want a seamless repair with no hassles or delays.

So, if everyone wants the same end result, namely a happy client and a seamless repair process, then why do shops call me and vent their frustrations on how they are unable to achieve that end due to purported "roadblocks" put in their way by insurers? And, why do insurers call me and complain that repair shop are not co-operating?

Despite upbeat speeches at conferences and wonderfully warm public ads to win new clients, both collision repair shops and insurers often alienate customers in the claims handling aspect of vehicle repairs. The following is a list of the top ten complaints received by my office. I have also provided my thoughts on what can be done to solve these issues:

Am I getting OEM parts right? With the continuing negative publicity of aftermarket part lawsuits, an increasing number of customers are asking for original manufacturers' parts. In addition to which, shop owners do not like aftermarket products as they often fit poorly and take an average 33% longer to install, resulting in vehicle return delays. On the other hand, insurers like aftermarket parts because they are cheaper. But, remember, this means longer delivery cycles resulting in a dissatisfied customer and higher rental car costs.

What do you mean it will take seven days for an appraiser to show up? Customers are often referred to bodyshops by relatives, dealerships and brokers. However, when dealing with an insurance company representative, they are told that if they go to the shop of their choice rather than the insurer-preferred shop, then they will have to wait for an appraiser to evaluate the damage before the repairs can be made. This is not a good way to build customer loyalty nor bring about time efficiency.

You want the rental car back in seven days too? Insurers have every reason to want to restrict car rental costs. However, badgering the client will not help achieve that end. Please recognize that the repair shop does not have staff waiting to pounce on the repair and start the moment the damaged car arrives. Neither are those parts that are needed (or even worse, back-ordered) going to be there when the car rolls in. Rather, improved communications between repair shop, customer and the insurer would help. A new twist is to link the rental into the shops promised repair date. Some shops will recognize the extra costs an insurer bears and will cover them if a delivery delay is the shop's fault

We will not guarantee the work at that shop. It is the repair shop that guarantees the work, not the insurer. Many shops find these comments by insurers, intent on sending clients to their own contracted shops, as demeaning and untrue. It is, however, fair to advise your customer of specifics of the warranty at the shop that they wish to use.

The insurer wants to remove my car to one of their own shops. Well, there goes the cycle time, cost control and customer satisfaction rating. By the time the insurer pays for the extra tow, the double estimate fees, the double "tear down costs" and possible additional parts fees -- the repair costs have escalated tremendously. Insurers would be smarter to leave the car where it is.

The shop told me my car would be ready in two weeks. Shops must do a better job of keeping their commitments to delivery time, and, if there are changes, then let the broker/insurer and customer know in advance. Repair shops would win "extra brownie points" with insurers and customers if they guaranteed their commitment to delivery time. Some shops may even offer to cover rental costs if they are at fault in not keeping to delivery times.

The insurer is sending someone to the shop to replace the windshield. The non-trades certified mobile glass installer (who may have been a laid-off steelworker last week) arrives at a repair shop to use the power, heat, space, and move cars around and at the end, perhaps safely install a windshield after the car is almost completed and delicately painted. The shop does not get to bill anyone, the customer or the insurer, for the work as the glass company directs its bills the insurer. Who is liable when the customer is ejected from the car along with the improperly installed windshield in the next accident? You bet, the shop owner. After the ABC newsmagazine show 20/20 ran a segment that quoted an installer saying that half of the windshields installed in the U.S. were done improperly, the calls to shops escalated on this issue. Make sure that the glass installer is either trade-certified or has taken an approved training course. Insurers and repair shops can lose significant amounts of money if these recommendations are not followed -- look at the litigation tort awards running into several millions of dollars occurring south of the border.

The insurer wants to put a used airbag in my car. Insurers should not use them. All major car manufacturers recommend against used airbags. News stories persist of used airbag suppliers being linked to using stolen goods. This is a liability that neither the repair shop or the insurer needs. One insurer advised me that they will offer their insurance company's lifetime warranty on installed used airbags as long as a qualified technician installed it -- the problem is that the company in question could not find a technician to accept the liability.

Why is the insurer telling me to void my new car warranty. How many clients are thrilled to be told by their insurer that their new car warranty is to be terminated for an insurer's warranty? The expression on their faces is shock. Insurers should re-think their attempts to void OEM warranties. This is particularly true with leased cars where the insurer demands aftermarket parts be installed with an insurer's warranty. Once the car goes off-lease, is the insurer going to pay the $1500 penalty that one client was assessed by his dealer because non-OEM parts were used?

My paint cost me $400 to buy, but the insurer will only pay $350. The cost of paint to shops has gone up over 70% in the last ten years. Putting an arbitrary "cap" on the insured cost is unrealistic. A double-wheeled, 4x4 crew cab takes a lot more paint than a Neon, yet insurers cap the same price. Have the appraisers at your insurance company take some basic auto refinishing training. The end result will be a more skilled employee, and ultimately a more satisfied customer. Is that not what we all want?

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CLAIMING FOR DAMAGE TO YOUR AUTOMOBILE

In Ontario, you claim for damage to your vehicle from your own insurance company. What you recover will depend on several things:

in the case of a car accident, whether you were at fault or partially at fault;

what optional insurance coverage you carry for your vehicle;

what the actual cash value of your vehicle was at the time of the accident.

This information sheet describes terms such as actual cash value, and describes how your right to claim varies with your coverage.

Claiming with mandatory coverage only

In Ontario, your mandatory coverage includes Direct Compensation-Property Damage, which means that if your vehicle is damaged in an accident, you may recover directly from your own insurance company - to the extent that you are not at fault - for the damage to your vehicle, its contents and loss of use, less any deductible you arranged with your insurance company. For example, if you were 75% at fault for the accident - and therefore 25% not at fault - your company will pay 25% of your loss, less any deductible under Direct Compensation-Property Damage.

Under a Direct Compensation-Property Damage claim, you can, to the extent you're not at fault, recover for damage to the vehicle, the cost of a temporary rental vehicle (transportation replacement coverage) and for damaged personal contents carried in the car. Contents carried for sale or delivery are not covered.

If your accident is with a car from outside Ontario, Direct Compensation-Property Damage does not apply unless the insurer of the out-of-province car has signed an agreement with Ontario to settle claims under the Direct Compensation-Property Damage rules. If an agreement does not exist, you will have to sue the out-of-province vehicle owner and the driver to recover your loss. Your insurance company will know if the out-of-province insurance company has signed an agreement.

If your accident is with a vehicle that is uninsured, you claim under the mandatory uninsured motorist coverage of your policy. If you claim under this coverage, you must be able to identify the other vehicle involved in the accident, and you will be covered for damage to your vehicle and contents up to $25,000, less the first $300 of the loss.

Claiming with mandatory plus optional coverage

If you purchased optional Collision coverage you may recover from your insurance company for damage to your vehicle caused by collision or upset, regardless of fault, less the deductible you chose at the time you purchased the coverage. Coverage for transportation replacement is not normally covered under the Collision coverage.

If your vehicle is hit while parked and the responsible party does not remain at the accident scene and cannot be identified, you will be reimbursed for the repair costs only if your policy includes Collision coverage.

Comprehensive coverage is the other popular optional coverage for loss or damage to your vehicle. It covers losses that are not covered by collision, such as theft, vandalism or fire. Your agent or broker can advise you on the full range of optional coverages.

Making a claim

To find out if you have particular coverage for a specific automobile, check your certificate of automobile insurance to see if it lists a premium paid for that coverage, or shows that the coverage is provided at no cost. Your policy itself explains many details about your insurance, your rights, and how your company and you can work together. If you do not have a copy of your policy, ask your insurance agent, broker or company for one.

If you have a motor vehicle accident and are making a claim, your company will want a written notice within seven days describing the accident and the damage to the vehicle and property. Do not remove evidence of damage or repair the car before your company has had a chance to inspect the vehicle, verify the damage and estimate the cost of repairs.

Insurance companies often make payments to both you and the garage or shop where the car is repaired; you should not have to pre-pay. Be sure you and your insurance company agree in advance about what repairs will be made and who will pay for them. As far as replacement parts are concerned, the company is within its rights to repair an insured car using parts the same age and condition as the car itself. Car owners are responsible for repair costs that improve the vehicle beyond its pre-accident state.

Deductible

You can expect to pay your full deductible unless the accident was not your fault or was only partially your fault. For example, where an accident is 25% your fault, you will be covered by Direct Compensation-Property Damage for the 75% that you were not at fault.

Since Collision coverage will apply only to the remaining 25%, you are responsible for 25% of the deductible.

Actual cash value

Insurance companies set the value of most vehicles at the time of the accident. They call this actual cash value (ACV) and base the amount largely on the average retail selling price of cars in your region of the same age, make, model and condition.

Companies use actual cash value to decide whether to treat your car as a total loss or whether to repair it. The amount you receive if your car is a total loss (actual cash value, less deductible, with the company assuming ownership of the car) may not be what you consider the real value. One place to look for comparable values is the Red Book used to determine sales tax on used cars. Your community library will have a current copy and you should use it to check the retail cost column.

Fault Determination Rules

Insurance companies must use the Fault Determination Rules from the Insurance Act in assessing the percentage of fault after an accident. If you disagree with the way your company has assessed the degree of fault, you can argue the decision in court; the Act specifies that the court can adjust fault according to ordinary rules of law.

What happens to your insurance premium when you make a claim?

If the accident is determined not to be your fault, your insurance rating should not be affected. If you are found at fault for any percentage of the accident, your premium may increase

What are Collision Reporting Centres?

Some jurisdictions have Collision Reporting Centres. If you are involved in a minor accident in one of these jurisdictions and there are no injuries, the police require that drivers attend one of these reporting centre with their vehicles. At the reporting centre, the drivers complete accident reports and in some cases, all the important information is sent to the insurance companies involved in order to start the adjusting of the claim.

(see headlines)

Motorists' Rights

It's your car - It's your choice!

• CHOOSING A COLLISION AND REFINISH CENTRE

As the owner of a motor vehicle damaged in an accident, you have the right to choose the shop where you wish to have your vehicle repaired.

• DO I NEED MORE THAN ONE ESTIMATE?

No. Do not waste your time or that of several shops getting estimates. Select a repair facility that you feel comfortable with, then notify your agent or insurance company, or ask the shop to make the call on your behalf. Your Insurance adjuster may have to inspect the damage, This can be done at an insurance drive-in claim centre or at the shop you have chosen.

• NOTIFY YOUR INSURANCE COMPANY

Before authourizing any repairs, notify your insurance company or agent, and tell them where the damaged vehicle can be inspected.

• IS THE WORK GUARANTEED?

Most collision and repair centres guarantee their collision work to some degree, which may not include the paint job. Ask to see a copy of the shop's guarantee and have any information you do not understand clarified.

• QUALIFIED COLLISION AND REFINISH CENTRES

Look for signs that indicate repair technician training and certification. Membership in professional trade associations and the Better Business Bureau indicate the shop is keeping up with the latest repair procedures.

• KNOW YOUR SHOP

Make sure the shop you choose:

• Maintains a reliable, professional reputation.
• Is properly equipped and organized to meet today's more technical repairing needs.
• Has technicians that are thoroughly trained and certified.

• INSPECT THE REPAIRS

Check the appearance of the repaired area.

• Examine the paint for color match, texture and overspray.
• Take a test drive to check mechanical repairs.
• Check that the vehicle is clean.
• If you are not satisfied, mention your concerns right away. As the owner of a motor vehicle damaged in an accident, you have the right to choose the shop where you wish to have your vehicle repaired. This is the LAW!

Examine the paint for color match, texture and overspray.

• Take a test drive to check mechanical repairs.
• Check that the vehicle is clean.
• If you are not satisfied, mention you concerns right away.

IBC Says Auto Insurance Costs Continue Upward Spiral

Tuesday, July 17, 2001, Collisionweek Magazine

The Insurance Bureau of Canada (IBC) yesterday released its most recent Atlantic region figures for 1999 and 2000, confirming the steadily worsening losses being incurred on automobile insurance.

"Our actuarial estimates confirm the trends we've seen in recent years are continuing," said Don Forgeron, regional vice-president of the IBC. "Costs continue to increase significantly, all of which will soon negatively impact motorists in every province in the region."

In 2000, losses incurred by the auto insurance industry in Atlantic Canada were about $190 million. In 1999, the industry increased its original loss estimate to $150 million from $100 million. Analysts predict a continued rise in costs unless changes are made to the current auto insurance products offered.

"For several years, the average cost per claim rose while the frequency of claims and accidents fell," said Mr. Forgeron. "In recent years, the frequency of claims has started to rise again, creating the worst possible scenario, a higher average cost per claim and more of them."

Research shows that the types of claims with the greatest increase in cost are soft tissue injuries such as neck strains and sprains. Most the claims that are paid in these cases do not compensate the victim for what has been lost, but rather for pain and suffering. Research is now underway to help the industry determine the reasons why costs continue to rise, confirm the types of injuries that are contributing most to the current high costs, and look at the distribution of these costs. The bureau is also surveying public opinion to find out the level of understanding of industry issues and the tolerance for changes to auto insurance products.

"As consumers feel the effects of these rising costs over the next six to 18 months, government and industry leaders will be called upon to respond," added Mr. Forgeron. "In addition to meeting with government officials to ensure that they fully understand the problem, we're working to provide a range of solutions."

The bureau is working with governments to develop various options to reform the current auto insurance product so that costs remain stable and accident victims can be fairly compensated and in a way that is consistent with the views of Atlantic Canadians. Consumers can contact the bureau's consumer information center in Halifax if they have questions about their home or car insurance. The center can be reached at (902) 429-2730 or toll-free at 1-800-565-7189.

The Insurance Bureau of Canada is the national trade association of the private property and casualty insurance industry. It represents about 200 companies that provide more than 90 per cent of the non-government home, car and business insurance sold in Canada.

Copyright 2001 by CollisionWeek. All rights reserved. No part of this publication may be reproduced or transmitted by any means without permission in writing from the publisher.

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SERVICE DETERMINES PROFITABILITY

May 2001

Speakers of an insurer/collision discussion panel hosted by the industry's international education body I-Car at its recent Canadian national conference were provided with the stark theme of dealing with "reality". On a particularly "realistic note" was the thick tension in the air of the predominantly auto bodyshop audience of which individuals at the various "refreshment breaks" expressed their view that insurance had become a "dirty word". However, the panel speakers from within the auto repair industry concurred that many of the financial problems experienced by bodyshop owners has less to do with relations with the insurance industry, and more to do with excessive competition and lack of national quality standards. Many of the speakers from both insurance and repair industry ranks agreed that the reality of the future depends on the implementation of a national accreditation program for repair shops - thereby setting quality service standards as well as appropriate fee/payment structures.

One of the biggest problems in the auto collision repair industry is the number of operators which currently stands at around 8,000 shops countrywide, with little distinction made between the "bodyshop" and the "collision center", says Guy Bessette, executive vice president of Fix Auto "We have to move away from short-term thinking, the decisions we make today will decide the future." With over 8,000 shops nationwide, it becomes extremely difficult for insurers to set appropriate fees for what ultimately their customers, namely policyholders, receive in service. "In some cases, insurers are paying 'bodyshop prices' for 'collision center service', and that's because the [repair] industry doesn't have a shop accreditation and quality measurement standard. We need a system to tell insurers what is happening within the shops." Bessette is hopeful that, through industry initiatives underway, some form of a national shop accreditation program will be introduced by the end of this year.

First contact

The average auto claim takes around 13 days to settle, which beyond the initial policyholder/broker or insurer contact, the consumer spends the majority of this time dealing with the repair shop, observes Sam Malatesta, vice president of marketing and insurance relations at CARSTAR Automotive Canada. "Regardless of how the customer came to the repair shop, research [by CARSTAR] shows that ultimately the consumer holds the insurer responsible for service quality."

As such, Malatesta points out that the "quality of service" factor has significant bearing on the relationship between the collision industry and insurers. Repair shops set the quality, and insurance companies rely on their claims handling partners to ensure that the chain of service, and therefore client retention, is not broken, he adds. "Service [standards] are a concern to insurance companies...we have to help insurers remain profitable, without the insurance industry we don't live."

Bessette backs this argument, pointing out that, "we're afraid to talk about profit in this industry". If the collision repair industry hopes to achieve desired returns on business, it has to cultivate partnerships, and creating greater transparency of the nature of the business.

Attracting talent

A significant challenge facing the auto collision industry in improving service quality is attracting new professional talent, Bessette says. The 8,000 odd shops within the industry employ about 38,000 people, of which roughly 23,000 are qualified technicians who earn on average around $35,000 per annum income. "Is this how we are going to attract new incumbents into the business?" Ultimately, he notes, the quality of the "partnership chain" between the collision industry and that of insurance relies on a two-way street: "We really need support from insurers to pay top-dollar for top-quality."

Malatesta point out, "our inability to attract good talent into the [collision repair] industry is a real problem we are facing today - that's because we are not providing good leadership". Although there are "positive signs of change underway", he stresses the need for rapid improvement in management quality if the existing players in the collision repair industry plan on surviving in the new order of cost-efficiency. "It really comes down to four basic principals: price, quality, value and service. Service determines profitability."

Dennis Belmore of parts distributor UAP NAPA, believes that the growth in "national franchises" within the collision industry is an efficient answer to determining quality and training standards. "We have introduced standards throughout [our] franchise program." In addition to improving the quality of workmanship, the national franchise also offers insurers the cost-control advantage of the "buying power of network value".

Insurance perspective

Raymond Girard of CGU Canada points out that the insurance industry has undergone dramatic consolidation, largely as a result of the drive for cost-efficiency. These same forces are now impacting the collision repair industry, he notes, which will likely led to a consolidation of the number of operators, with the survivors being those that attain the cost efficiencies of size. "Back in 1987, the specialists were predicting that in a few short years there would only be about 50 insurance companies left in Canada. Today, we still have 137 companies operating in the market, which says a lot about the 'specialists'. However, it is important to note that the top 10 insurance companies now control about 60% of the market."

From an insurer perspective, Girard says the collision repair industry has to look at tightening up the turnaround time of the repair process. We are seeing signs of a "more creative approach" by some repair operators in addressing these efficiency issues, "but this creative approach to service is not widespread". Girard notes that the insurance industry is aware that its claim service partners are in the business to "make money", but ultimately the cost-pressures exerted from the "top of the chain" being the customer, will have to filter throughout the process. 'I agree that we need workmanship standards [in the collision repair industry], but is also important to recognize that those operators who are creative in their approach to service will be the winners."

Luciene Pare of ING, acknowledges the current uncertainty griping the auto collision repair industry. The insurance industry has undergone dramatic change over recent years, he observes, and this period brought about a sense of uncertainty within the marketplace. No one can really predict the "reality" of the future direction of the market, he adds, but reality does exist in the reliance of both industries in building quality partnerships.

By Sean van Zyl, Editor, Canadian Underwriter

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DIMINISHED VALUE-A CONTROVERSIAL ISSUE !

First of all, what is "diminished value" or that which is sometimes called "accelerated depreciation". Diminished value is the reduction in the true value of a vehicle after it has been damaged. Suppose your car has an ACV value of $16,000 and you are involved in an accident that requires repairs of $10,000. The car is repaired and looks "as good as new". Unfortunately, because of the repairs the vehicle may not be worth the $16,000 to sell or trade. This further reduction is the value following the accident is the diminished value.

In Ontario, whether you trade a car in to a dealer or sell it privately you must declare if the car has been in a serious accident and has had repairs made. As an example, let us suppose that there are two identical cars for sale. They both are the same year, have identical mileage , same features, etc. One of these vehicles has been in an accident and the other similar vehicle has not been dent! If you were buying one of these vehicles would you be prepared to pay the same price for the one that sustained damages as compared to the other ? Not likely. This reduced value is the issue.

An article in the Toronto Star last September recalled some background into this issue and commenced a barrage of questions to broker and insurers. The Ontario auto policy (OAPC 1) limits coverage under the Loss or Damage section to direct damage. However the Direct compensation section states " We will pay the cost of damage to the automobile…." Both sections limit coverage to the actual cash value of the vehicle at the time of the accident. But the actual cash value may have been reduced as a result of the accident. The Toronto Star article, in following the above differences, suggest that any payment for diminished value will only apply to the extent that you are not at fault, i.e.- Direct Compensation.

Insurers are not prepared to accept claims for diminished value. Part of the reason is trying to determine what a fair indemnity settlement would be. If the owner of the repaired vehicle continues to drive the vehicle "until the wheels fall off", then there would be no diminished value. Similarly, if the vehicle were to be sold two years after being repaired the diminished value would be less than immediately after being repaired. With our current proscription period for physical damages, insurers could deny the claim if presented after one year.

In the USA, the insurance departments of 33 states and the District of Columbia have adopted legislation that allows insurers to write policies that exclude diminished value. But this has back-fired to some degree. If a person bought a policy or had a vehicle repaired before the diminished value exclusion, it has been interpreted that insurance companies in effect acknowledged that diminished-value coverage had previously been an element of previous policies and prior claims !

There is no answer to these scenarios and as a broker you might want to get the opinion of your insurers as to their opinion and stance on a possible diminished value claim. Better to be prepared for your client's questions and understand the situation, than to be caught in the dark.

Thanks to the Insurance Brokers Association of Hamilton newsletter and author James. E. Bonnay, Insurance Consultant Phone 905-333-1727 Fax 905-333-0683 jebonnay@spectranet.ca

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Georgia Orders All Insurers to Pay Diminished Value

January 9, 2002

In the Georgia case of State Farm v. Mabry, the state's Supreme Court held that diminished value is a valid concern and that State Farm is indeed responsible to pay their policyholders for the financial loss associated with the diminished value of their repaired automobile.

In the late November ruling, the court agreed with two State Farm policyholders who contended that wrecked cars are worth less on the open market, no matter how well they are repaired, and that State Farm was liable to pay the difference.

After the court's decision, Insurance Commissioner John Oxendine, said that he would direct all auto insurers --- not just State Farm --- to reimburse policyholders for the diminished value of cars damaged in collisions.

The Office of Commissioner of Insurance then issued Directive NO. 01-P&C-1 to all insurers doing business in the state of Georgia to "adjust claims accordingly, including assessment and payment of diminution of value relative to physical damage."

The directive further stated that insurers failing to comply will face disciplinary actions. Left to be determined, however, is exactly how insurance companies would calculate the diminished values.

Copyright 2001 by CollisionWeek. All rights reserved. No part of this publication may be reproduced or transmitted by any means without permission in writing from the publisher.

Fast Lane to the Future

The past decade has been a time of transition for the collision repair industry, marked by a shrinking market and consolidation. Now the industry is seeking new alliances with the insurance industry in the drive to improve efficiency and increase customer satisfaction. As both industries head into the next decade, the pressure and the potential for success is increasingly dependent on the strength of those alliances.

The journey of the automobile has come a long way. In 1769 Nicholas Joseph Cugnot and M. Brezin constructed the first recorded vehicle to move under its own power. This event sparked an awesome series of developments over the next several centuries, but evolution was slow. In fact, it was in 1893 when Henry Ford had his first engine running, but not until 1896 before he built and sold his first automobile. And the Model-T only recently celebrated its 90th anniversary. There was a time when few people owned a car and most dreamed of just driving one. But the automobile made the transition from an elite group of owners to what is now a practical necessity for the masses. It was Ford's pioneering spirit that made the automobile an affordable acquisition for the average person, by improving the efficiencies and changing the economics of the manufacturing business. The adoption by society of the automobile forced adjacent industries to emerge and respond to these newly created consumer demands - among them being collision repair and insurance.

The repair industry today

Today, collision repair is an approximately US$25 billion a year industry in North America. A 1999 KPMG study revealed that $2.8 billion of that resides in Canada, where there are over 8000 collision repair centers. Of these, over 50% record annual revenues less than $200,000 per year, which translates into fixing about two cars per week. Reports indicate that in 1996 the Canadian collision repair industry was $3.8 billion in size. Even though frequency increased in 2000, vehicle technology, strict driving laws, and better road safety measures have contributed to decreasing the total amount of repairable vehicles in Canada in the past decade.

A recent McMaster University study of the industry in terms of "the product/service industry life cycle" shows the path leading up to this current state (See Chart 1). Based on this model, a product and/or a service industry experiences four distinct stages in the span of its life, starting with the introductory stage of market entry and high pricing, where the product has yet to be adopted by the masses. In the decline stage, products are typically priced as low as possible and product usage has penetrated a strong majority of the population. For the service industry, the maturity stage is characterized by an increase in consumer demands, strategic alliances, a focus on improving efficiencies for all stakeholders, and consolidation. It is in this phase of the business that problems that have plagued an industry for even decades start to be solved. This prompts new and unpredictable competitors to emerge. Clearly, collision repair is a mature industry that has been shrinking in the past decade. The time is now here for the formation of alliances, consolidation (which is definitely beginning to characterize the industry) and a focus on efficiency and customer service.

Forming alliances

The sources of revenue for the industry can be divided into three categories - insurance companies (58%), vehicle owners directly (38%) and other sources accounting for the remaining 4%

The auto insurance business is mature and growing. It is an internationally competitive environment, there is a focus on distribution effectiveness, and client retention is critical for the financial model to prosper. The top ten auto insurers in Canada have over 60% share of the market due mainly to consolidation efforts over the past several years.

Some strategic vendor partnerships are emerging. The goal of these partnerships is primarily to improve the value proposition to the consumer through excellent customer service and a quality repair. Through proper execution, partnerships will also lead to improved efficiencies and improved profitability to all stakeholders, including business partners and employees.

As for the consumer, they only realize the value of their insurance premium at the time of a claim. Unfortunately, they are typically "cranky" as a result of the incident that resulted in a claim. They are looking for fast, friendly service that will help them "restore their lives to order". Because they are confused about insurance and often do not know what to do at the time of the claim, they are desperately looking for someone they trust to guide them through the claim. Whether or not they should report the claim is one of their most frequently asked questions. High deductibles have resulted in more vehicle owners paying the collision center directly for the repairs, and this likely leads to an increase in average severity for insurers. When a $1200 appraisal is presented to a customer with a $1000 deductible, chances are that they will pay for it directly.

Common ground

The relationship between insurers and repairers has improved significantly over the past decade. The respective industries demonstrated their leadership and mutual commitment to the consumer by being early adopters of appraisal technology for the ultimate benefit of the consumer.

Cycle time, customer satisfaction indexing, and cost containment are three critical areas that measure success. The true measure of any strategic partnership is based on improving shareholder value. But, there are four overall trends emerging that will drive both the collision repair and insurance industries into the future. Firstly, a new employee profile in the collision repair center will evolve. Currently, these employees are among the most skilled trades people, working in a fast-paced environment where knowledge in engineering and technology has become a prerequisite before anyone starts a repair. Enrollment within the industry has decreased and this has caused some short term issues for shops. Long term, if this issue is not resolved it will become a crisis for the insurer and the repairer alike.

Secondly, the economics of the insurance industry must improve. The industry is by and large, inefficient. There is little consistency from one insurer repair program to the next, making it difficult for the collision repair center to standardize work instructions and operating procedures. Improving the operational model and the efficiencies of the collision repair center will lead to improvement in profitability for both the insurer and the repairer. A faster cycle time is a major consumer demand.

Thirdly, a "consumer focus" is increasingly needed to improve the image of the collision repair industry. The Canadian Collision Industry Forum (CCIF) is a collaborative approach where repairers, insurers and other sectors of the supply chain have come together to proactively address issues facing the industry in Canada. Industry image is a critical area of focus as a result of the poor perception the consumer has had for the collision repair industry in the past. The image of the industry will improve.

Lastly, a collaborative business model must be applied in order for the business to advance. The business model that determines future success must address specifically the needs of all stakeholders, starting with the consumer. The insurer's needs must be met, along with the business partner's needs. Insurer business partners include brokers, independent adjusters/appraisers, repairers, glass companies, car rental companies, etc., as well as the adjacent industries that service those business partners. Insurer and business partner employees are an integral part of the business model's success. Insurance company marketing, underwriting and claims departments will align their objectives to reflect the significant role of the entire claims experience in building the insurer's brand in the future. In addition, repairers and rental companies will align their objectives to meet the needs of their shared customer. Throughout this time of change in both the insurance and collision repair industries, one business fundamental remains constant - meet the consumer's demands.

By Sam Malatesta, vice president marketing & insurance relations at CARSTAR Automotive Canada. Article from Canadian Underwriter

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ALLSTATE WANTS SHOP DISCOUNT

Company declines comment-says agreements confidential

March 26, 2001

Allstate Canada Insurance needs more savings. Evidently not content with the $14 million profit it made on $470 million (year 1999) in premiums, the company is approaching shops in Ontario and New Brunswick and strongly recommending discounts from the retail prices of parts with the anticipation that if the shop wants to continue being part of the Allstate "PRO" preferred shop program, they must sign a new agreement.

Complaints from Allstate's preferred shops about the company's aggressive behaviour led to the Hamilton District Autobody Repair Association's (HARA) inquiries.

HARA asked Allstate to comment on concerns from shops over an unannounced Allstate claims policy. HARA noted that shops are being asked to provide Allstate with a 10% discount from list price on domestic parts and a further 5% discount on foreign parts.

Allstate was also asked about complaints from Allstate PRO preferred shops who complained that they were being told that if a customer refuses to allow the shop to repair the vehicle, that the discounted parts must stay on the estimate that the customer receives in order for the customer to take the estimate with the lowered pricing to another shop.

In response to a request for confirmation or denial, Allstate responded with a curt "Agreements we have with any of our vendors are confidential" and that customers are free to choose any facility to complete repairs.

"Our fear is that this new policy of obligating shop discounts to cut Allstate's costs will simply mean that shops will just "cost shift", meaning shops will find other ways on the invoice in order to recapture any losses they incur on this program" says John Norris of the Association.

Asking for supplier discounts has become popular after companies such as Daimler Chrysler, facing massive losses, started demanding discounts from suppliers. This appears to be the first time, however, where a major company is demanding supplier discounts while still being profitable.

Allstate Canada also made the news recently when the company successfully went to court against the City of Toronto in an attempt to force Collision Reporting Centres in the City to allow insurance companies working in the buildings to recommend "preferred" shops to consumers. Under the City by-law that Allstate Canada Insurance and other insurers successfully defeated, the insurers could not recommend "preferred" shops, but must offer all shops for repair opportunities that met an industry accreditation standard for equipment, compliance and licensing. Toronto City Council has voted to appeal that court decision.

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To All Ontario Insurers,

Special Bulletin: Toronto towing By-law capped tow rates.

Apply to all motor vehicle accidents no matter where the vehicle is towed.

January 22, 2001

Schedule 6 to The City of Toronto By-law No. 574-2000 states:

1. This section applies to the towing, removal or conveyance of motor vehicles with a gross weight of 6,000 pounds or less from the scene of a motor vehicle accident.
2. Where an owner or driver is hired to perform services to which this section applies:

(a) subject to clause

(b) of this subsection, no owner or driver shall charge or request a fee exceeding $130.00 for such services; (b) despite clause (a) of this subsection, where a motor vehicle is towed, removed or conveyed from the scene of an accident on the Queen Elizabeth Way, the Fredrick G. Gardiner Expressway, the Don Valley Parkway, Highway No. 400, Highway No. 401, Highway No. 4 Don Valley Parkway, Highway No. 400, Highway No. 401, Highway No. 404, Highway No. 427, or Highway No. 407, no owner or driver shall charge or request a fee exceeding $150.00 for such services;

The Toronto Police Service and The Toronto Municipal Licensing and Standards Division have confirmed that this section applies to all motor vehicle accident scene tows within the City of Toronto, whether or not they are towed to a Collision Reporting Centre as the first tow. As a result, you should not be charged more than the capped rates for your accident scene towing in Toronto. Please make sure that your staff are aware of this and that you are not overpaying for your towing.

Bob Gutwein, Vice President Sales and Operation

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eAutoclaims, Royal & SunAlliance Sign 5-Year Claims Management Contract

eAutoclaims has signed a 5-year contract with Insurance Company Royal & SunAlliance. The contract makes EACC the core service provider for Royal & SunAlliance's new Guaranteed Repair Solution (GRS).

Royal & SunAlliance is launching the new Internet-based auto claims management system this month. The new program will begin service in New York and North Carolina first. The Program is scheduled to go nationwide over the coming months. eAutoclaims has incorporated other service providers into the application, such as rental car providers like Alamo Rental Car. EACC has built additional interfaces to expand the systems real-time claims reporting. The Internet Claims application has been under development for a number of months.

EACC is providing their network of collision repair facilities and the Internet claims application the service will run on. ``eAutoclaims has taken our core service application, the 'Bricks to Clicks' Internet Claims Application, and customized it to meet the service requirements of the Royal & SunAlliance program,'' stated eAutoclaims President & CEO, Eric Seidel. ``The new application incorporates much of our next generation technology and will further reduce cycle time for Royal & SunAlliance and their policyholders.''

``Our Guaranteed Repair Solution represents a fundamental change in our approach to claims settlement,'' said Mike McGinley, chief claim officer for Royal & SunAlliance. ``We offer our customers a complete, seamless solution to their loss, helping to get their lives back to normal much faster than before. And our customers can have total confidence in the system because we guarantee satisfaction with all repair work.''

eAutoclaims.com, Inc. generates revenue from administrative fees and discounts earned by processing collision & glasswork through its system.

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When the Claim Occurs

Jim's Corner, Insurance Brokers Association of Hamilton, January 2001

Over the past several weeks I have frequently been told of charging an incorrect deductible on an automobile claim. Insureds may not understand the Direct Compensation Property Damage section of their policy particularly when there is a claim in which the insured is partially at fault. As an example and if the "fault chart" assesses your insured to be only 25% at fault, the DCPD will pay 75% of the damage to his auto (assuming 0 deductible DCPD). The other 25% will come from his collision section.

The error occurs when the claims examiner deducts the full collision deductible instead of pro-rating the deductible in the same proportion as the fault determination.

In other words, if the damages were $4000, the collision would be paying 25% or $1000. If the insured carries collision with a deductible of $300 then the collision claim should be $1000 less 25% of his deductible or $75. The collision claim is thusly $925. The examiner may review the policy and apply the full $300 deductible. The insured, not understanding the policy, gets charged an excess amount of $225!

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Canada's Liberty Mutual Hit with Lawsuit Aftermarket Parts Class Action suit in Canada Claims 1/4 Billion Dollars

Jan 31, 2000

Only days after class action suits were started in Quebec against insurers AXA Canada and ING Canada, Liberty Mutual Insurance in Canada became the next victim of the aftermarket parts legal fever sweeping North America.

With its American parent having a class action suit filed against it previously in the U.S., Liberty Mutual Insurance, the twelfth largest auto insurer in Ontario, was named in a notice of action filed with the Supreme Court of Justice.

More and more insurance companies are feeling the impact of the U.S. aftermarket parts class action trial that ended October 8th in Marion, Illinois with a $1.18 billion(US) award against State Farm Insurance. The plaintiffs had accused State Farm of failing to perform its obligations under its contract with insured motorists and violating the terms of its policies by using non-original equipment manufacturer (OEM) parts or "aftermarket" crash parts to repair their insureds' vehicles instead of restoring vehicles to original "pre-loss" condition as promised in the company's insurance policies.

In the Toronto action, Court File #99-CV-182436, against Liberty Mutual Insurance, and reported by a new lobbying organization called "The Consumers Fight Back Group," the plaintiff, Terrance O'Brien, claims on his own behalf and on behalf of the members of the class of persons in Canada as defined herein whose motor vehicles were involved in accidents or otherwise damaged and, in breach of the policy of insurance issued by the defendant to the plaintiff, were not repaired, rebuilt, or replaced by the defendant with parts of "like kind and quality" compared to their original, pre-damaged parts.

The plaintiff is requesting an order enjoining Liberty Mutual Insurance from using or requiring the use of parts manufacturerd other than by the original equipment manufacturer where the defendant has selected the vehicle repair shop, damages in the sum of $250 million or other sum as the Court may deem appropriate, and punitive, exemplary and aggravated damages in the amount of $10 million.

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Aftermarket Parts Lawsuits Hit Canada

AXA Canada and ING Canada named in class action IBC to look at insurance company practices

Monday, January 3, 2000

Insurance companies in Canada are starting to feel the impact of the U.S. aftermarket parts class action trial that ended October 8th in Illinois with a $1.18 billion award against State Farm .

Some recent Canadian events:

• A class action style lawsuit has been filed in Quebec against Groupe Desjardins, ING Canada (the second largest auto insurer in Canada) and AXA Canada (seventh largest) relating to their use of non-OE parts.
• The Insurance Bureau of Canada (IBC) has asked its Ontario claims committee to look at their current practices with respect to aftermarket parts and develop a sound position on the issue.
• The Automotive Industries Association of Canada (AlA), representing automotive manufacturers and suppliers in Canada, is urging full disclosure to consumers of the aftermarket status of any collision repair part, and worries that all aftermarket manufacturers will be tarred with the same brush. Ray Datt, AlA president said "We worry about insurers dictating to body shops on price rather than proper fit. In some cases an aftermarket part is fine; in other cases it isn't."
• Both State Farm and Liberty Mutual Insurance have announced a prohibition on using some or all non-OE crash parts on vehicles repaired in Ontario. Liberty Mutual Insurance is one of nine insurers named in aftermarket parts class action suits in the United States.
• Transport Canada is being requested by a trade association in Alberta to prohibit importation of possibly unsafe aftermarket parts and stop them from entering Canada.
• A group in Ontario is demanding that Transport Canada provide for recalls of unsafe structural aftermarket parts in the same fashion that OEM parts are recalled. Aftermarket mechanical parts manufactured by such brand name companies as Monroe and Moog Canada have previously been subject to Transport Canada recall.

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ALBERTA DROPS STAFF ADJUSTER LICENSING

December 2000, Canadian Insurance

In a major coup for the Alberta insurance industry, regulators agreed in mid-November to remove any requirement for staff adjuster licensing from the new Insurance Act.

Insurers had strongly opposed the requirement, arguing that it was unnecessary and potentially costly. Peace Hills General Insurance Company president Diane Strashok, who helped spearhead the lobby, says insurers have it in writing from MLA Marlene Graham and Superintendent of Insurance Bernie Rodriques, that an amendment will be made to the Act. Insurance companies will now be formally responsible for the product of their employees, including staff adjusters. "Now, if there is a complaint of incompetent, fraudulent or illegal activity, the Superintendent will have the power to make sure that person no longer handles claims," says Strashok. "The insurance company can move that person to a different area-and we agree with that process." Strashok notes that the Alberta Insurance Council, which handles consumer inquiries, has to date received no complaints about the conduct of staff adjusters.

Alberta's Insurance Act, Bill 25, has received royal acent but has not been proclaimed into law. Several industry observers expect that to happen in the current legislative session.

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Comments from the Hamilton District Autobody Repair Association (HARA)

Dec.15.1999

Following the pattern of aftermarket crash parts litigation that rocked State Farm Insurance with a $1.2 million (US) penalty, two separate lawsuits were filed November 11 against The Hartford and Travelers for using and not disclosing the use of aftermarket parts in policyholders' car repairs. This brings to 9 the number of insurers with law suits pending. Most are asking for class action status.

Other suits filed against insurers are: State Farm, CNA, Allstate, SAFECO, Liberty Mutual, USA, and GEICO. In Ontario, Liberty Mutual and State Farm have announced restrictions on their use of aftermarket parts to repair collision damaged vehicles.

Aftermarket crash parts, also known as non-Original Manufacturer Equipment (OEM) parts - sheet metal parts, such as hoods and fenders - fail to restore cars to their "pre-loss condition" as promised in the companies' insurance policies, according to the plaintiffs. James Johnson, attorney at New York-based Goodkind, Labaton, Rudoff, and Sucharow, the firm representing the plaintiffs, also claims that aftermarket parts pose a safety threat to drivers.

In Ontario, The Hartford sells some $5 million (Cn) in vehicle policies with Travelers accounting for only $1.3 million (Cn). State Farm writes $529 million (Cn) in car policies annually in Ontario, with Allstate and Liberty Mutual taking in $201 million (Cn) and $194 million (Cn) respectively.

The cases are the first aftermarket parts lawsuits brought against The Hartford and Travelers, according to Johnson. They were filed in the Stamford division of the Superior Court of Connecticit and are seeking nationwide class action status. "This case seems to have been prompted by both the recent verdict against State Farm and the proclivity of the plaintiffs' bar for copycat suits," says Cynthia Michener, a spokesperson for The Hartford, the USA Number 15 auto insurer. Travelers, the Number 10 auto insurer in the USA, pays for OEM parts to repair cars that are not more than two years old, according to Kris Hammond, a spokesperson for the company

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