Toronto politicians to examine unlimited indemnification clauses in actuarial consulting contracts

A proposal to set an upset limit on the liability of contractors performing actuarial services and general benefits consulting for the City of Toronto is on the agenda of this week’s council meeting.

Historically, the City has included a requirement for “unlimited indemnification” from its contractors, “as have many other levels of government,” Toronto Treasurer Mike St. Amant wrote in a staff report to the city’s government management committee Oct. 26.

Chaired by Councillor Paul Ainslee, the government management committee also includes Ward 2 Councillor (and former mayor) Rob Ford, Ward 6 Councillor Mark Grimes, Ward 28 Councillor Pam McConnell and Ward 11 Councillor Frances Nunziata.

The government management committee voted Nov. 9 to recommend that full council authorize the treasurer, “after consultation with the City Solicitor, to make such limitations on liability and indemnities in contracts for the provision of actuarial services and general benefits consulting, for Pension, Payroll and Employee Benefits as deemed appropriate in the interests of the City,” and in accordance with St. Amant’s report.

Full council meets Wednesday and Thursday.

A requirement in contracts for unlimited indemnification “assumes willingness on the part of the contractor to provide it, and assumes the financial ability of the contractor to make good on such a promise,” St. Amant wrote. “Some contractor operational risks are managed through the purchase of traditional liability insurance policies which in themselves provide protection limited to specific coverage amounts and to policy terms and conditions.”

However, he added that “as a practical matter, the requirement for unlimited indemnification has become more and more untenable.”

Many suppliers of actuarial services and benefits consulting, he suggested, have “been seriously questioning the reasonableness of a requirement for unlimited indemnification that goes well beyond their insurance protection.”

In addition to the recommended upset limit on liability, City Council is also scheduled to consider this week a proposal to request that staff advance the 2017 cashflow for basement flooding protection projects into 2016 if a greater-than-planned amount of work can be done.

Toronto Water has submitted a recommended 10-year capital budget and plan totalling $11.0106 billion for 2016 through 2025. Included in that plan is $1.638 billion for basement flooding protection – $67.754 million of which is earmarked for 2016.

City Council will vote this week on a motion to “request the Deputy City Manager and Chief Financial Officer in consultation with the General Manager, Toronto Water to advance the 2017 cashflow for the Basement Flooding projects into 2016, should it become evident that greater than planned volume of work can be completed, and that the 2017 – 2025 budgeted cash flows be adjusted accordingly as part of the 2017 Budget process.”

Some construction projects under the Basement Flooding Protection program include storm and sanitary sewers, surface storage ponds and an underground storm storage tank.

When the basement flooding protection program was first approved by City Council in 2006, it was based on service level standards requiring storm drainage systems to accommodate a 1-in-100 year event.

At the time, the plan included engineering studies in 31 areas that experienced significant flooding during storms in May, 2000 and August, 2005, when the Finch Avenue bridge over Black Creek collapsed.

In December, 2013 the basement flooding protection program was expanded city wide.

As of the end of October of this year, environmental assessment studies for 26 basement flooding study areas were complete, 15 more will be complete by the end of 2015 and the other eight are anticipated to be complete by 2017, Toronto Water reported in a recent staff report.