Insurance

1
Insurance

• What is insurance?
• Need for insurance
• Types of insurance
• Insurance concepts and terminology

2
Case Higgins v. Orion Insurance Co. Ltd.

• Higgins and Wood operated a sporting goods
  business as a partnership. They took out fire
  insurance for their building and contents, naming
  themselves as the beneficiaries. Wood, without
  the knowledge of Higgins, conspired with a 3rd
  party to intentionally burn down the store in
  order to defraud the insurer. He got caught.
• It was clear that Higgins was perfectly innocent
  and had no knowledge of the conspiracy or the
  attempt to defraud the insurance company.
  However, his claim was refused.

3
Case Higgins v. Orion Insurance Co. Ltd.

• Questions
• Is the innocent partner, Higgins, of a wrongdoer,
  Woods, entitled to collect on the policy?
• If Higgins received a payout, could Woods, his
  partner demand his fair share?

4
Insurance is

• Reduces the cost of loss by spreading risk, I.e,
  many payers pool funds
• Compensation, NOT a profitable windfall
• Contract of indemnity for loss

5
Need for insurance

• Liability from duty owed to participants,
  athletes
• Physical assets lost, stolen, destroyed
• Liability for services instruction, coaching,
  activities, food, alcohol
• Professional liability e.g., fitness leaders,
• Public use of facilities
• Work force turns over quickly
• Mandatory insurance municipalities, WCB, travel
  industry etc.

6
Types of insurance

• Property
• Fire, including incidental losses to a fire
• Theft
• theft comprehensive most expensive
• Burglary forced entry
• Robbery use of violence less common less
  expensive

7
Types of insurance

• Bonding
• Fidelity bond employee honesty
• Surety bond contract performance insurance
• Bonding company
• guarantor,
• Will sue the dishonest employee or poorly
  performing contractor
• Event insurance
• ticket refunds, cancellation, hole-in-one

8
Types of insurance

• Business interruption insurance
• Lost profits, continuing expenses,
• Credit insurance
• Life insurance
• Key persons

9
Types of insurance

• Extended health, disability
• Liability
• Land title
• Directors or employees insurance
  indemnification
• Mandatory insurance EI, WCB,

10
Case Coronation Insurance Co. v. Taku Air
Transport Ltd.

• Taku, a small airline in NW B.C., had a bad
  safety record and did not inform Coronation
• Taku required by law to have insurance
• Taku plane crashed, killing several
• Coronation refused to pay citing lack of utmost
  good faith by Taku

11
Case Coronation Insurance Co. v. Taku Air
Transport Ltd.

• Questions
• Could beneficiaries, families of the dead,
  receive payment?
• What was the purpose of the mandatory insurance?
• Should Coronation have to pay?

12
Insurance concepts

• Insurable interest
• Insurer has right of SUBROGATION
• Insurer takes the place of the insured
• Insured must mitigate loss report immediately

13
Insurance terminology

• Insurer
• Insured
• Premium
• Beneficiary

14
Insurance terminology

• Rider extra risk covered
• Endorsement increase amount
• Deductible clause
• Co-insurance
• Utmost good faith

15
Case Hammill v. Gerling Global Insurance Co.

• Mrs. Hammill obtained a life insurance policy in
  which she stated that she had been a non-smoker
  for the past 12 months. In fact, this
  information was incorrect. It was clearly
  established that she had smoked considerably
  during that period.
• She had taken out a policy in 1985 and was killed
  in an automobile accident on February, 1986.
  Although her smoking in no way contributed to
  the accident, the insurer refused to pay the
  beneficiary under the policy.

16
Case Hammill v. Gerling Global Insurance Co.

• Questions -
• What obligations did the insured, Mrs. Hammill,
  have in dealing with Gerling?
• What obligations does the insurer have to the
  beneficiary in these circumstances?

17
Insurance terminology

• Promptness of notice to mitigate loss
• Book value v. replacement value
• Insurance agent agent for insurance company
• Insurance broker acting for insured shops for
  right insurance
• Insurance adjuster expert appraiser in loss
  paid by the insurer

18
Case Christopher Tait v. Worker Compensation
Board

• Chris Tait was a groundskeeper at Longwoods Golf
  Course. Unfortunately he was hit in the head by
  Duffers stray ball and suffered complications
  from a concussion. He could either receive
  benefits from WCB or sue Duffer directly. He
  elected to accept WCB benefits.
• Tait settled for medical services and 5,000.
  WCB in turn sued the errant golfer for what was
  rumoured a substantial sum. Upon hearing this
  Tait decided to return the funds to WCB and sue
  Duffer directly. WCB refused, arguing that he
  had made an irrevocable decision.

19
Case Christopher Tait v. Worker Compensation
Board

• Questions
• What is the position of the WCB?
• Do they have the right to sue Duffer?
• Is Tait entitled to any portion of those
  proceeds?
• May Tait now sue the golfer?

20
Insurance in Outdoor and Adventure Tourism

• Heli-ski operation premiums - 17,000 for 60 days
  of activity
• Cave tours private operator in provincial park
  premiums from 2,500 to 10,000 from 2003 to
  2004
• Many operators may forego paying for mandatory or
  optional insurance!

21
Insurance industry in 2003

• 2001 - worst year ever
• 2002 increased premiums but increased claims
  and lower investment income
• Highly cyclical industry now a hard market
• B.C premiums increase 25 average
• Rest of Canada 35 to 40

22
Insurance issues effecting tourism, outdoor
recreation

• Host liquor liability (e.g., wine tasting)
• Large personal injury judgements, plus legal
  costs
• Forest fires, floods
• Litigation from U.S. customers
• Food illnesses e.g., BSE
• SARS, Norwalk virus,
• Mould, fungus, leaky buildings

23
Insurance issues contd

• Computer viruses, data security
• International terrorism
• Occupier liability high burden of liability
• Canada Marine Liability Act commercial vessels
  on the water
• No waivers allowed
• Mandatory insurance
• Limit liability to 350,000

24
Legal issues - waivers

• Mandatory! no waiver, no insurance
• Strong common law support Black Letter law
• Recognized in Occupier Liability Act
• But
• Not enforceable against minors
• High standard of use, e.g., clearly brought to
  the attention of signer
• contra proferentum rule ambiguities ruled
  against the operator

25
Legal issues - voluntary assumption of risk

• In Canada rejected after 1963 SCC case of
  Lenhert v Stein must be a voluntary EXPRESS
  waiver
• Canadian provinces Occupier Liability Acts
  recognize voluntary assumption of risk, but
  courts do not (unless in a waiver)
• In U.S.
• Courts accept primary assumption of risk
• Statute laws Inherent assumption of risk
  recognized but must be willingly assumed

26
Law in other jurisdictions

• Alaska and 26 other states statute law
  recognizes inherent risk in sport and
  recreation
• Colorado parents may waive childs right to sue
• Australia
• caps damage payouts,
• improved risk management practices,
• group pooling/buying of insurance
• New Zealand
• no fault insurance victim may not sue

27
Managing legal issues

• Good management waivers, due diligence,
  S.T.O.P.s, risk management
• Lobby for legislative changes
• Recognize inherent risk of sport and recreation
  in Occupiers Liability Act
• Allow parents to waive the rights of their child
  to sue
• Allow waivers in Marine Liability Act

28
Legal issues - Caution

• BUT be careful! B.C. has a good reputation
• Common perception threat of litigation keeps
  operators on their toes!
• Fine line between inherent risk and gross
  negligence
• Good example of B.C. River Rafting industry
• high standards consistently enforced.-
• Recognized best in the world

29
Successful insurance models

• Canada West Ski Areas Association industry self
  regulation and strong communication with
  insurance companies
• Strong risk management program
• Waivers, ski patrol,
• grooming standards,
• qualified staff,
• minimum snowboarder competency,
• maintenance program
• Members buy individual insurance but central
  incident data base

30
Successful insurance models contd

• Industry group insurance e.g.,
• Guide Outfitters Association of B.C.,
• Municipal Insurance Association,
• Nurses Association of B.C., Law Society
• Self insurance Adventure Ecotourisme du Quebec
• Large number of small operators
• Operator risk management program
• Cap coverage, but larger operators opting out

31
Successful insurance models contd

• Captive insurance company supported by statute
  law 15 in B.C.
• Surety bonding
• Customer buys insurance European model
• Communication, risk management and long term
  commitment

32
Short term insurance solutions

• Communicate with insurer incident data base
• Both the business and the industry
• Implement risk management program
• Increase deductible
• Reduce coverage
• Co-insurance