Canadian Underwriter

To Stack or Not Stack?

September 30, 2010   by Jim Tomlinson And Ruby TatlaNeil Gibson

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The common law has interpreted s. 267.5(7) of the Insurance Act as applying multiple deductibles for multiple motor vehicle accidents. A motion sought determination as to whether pursuant to this section of the Act, there is one deductible for non-pecuniary loss for each incident. Before the motion could be heard, the matter settled. In that case, two motor vehicle accidents occurred in June 2003 (under the Bill 59 regime) and one motor accident occurred in December 2003 (under the Bill 198 regime).

Before Oct. 1, 2003, under Bill 59, the statutory deductible for general damages, which is non-pecuniary loss that does not include non-pecuniary loss under clause 61(2)(e) of the Family Law Act, was $15,000.00. The statutory deductible for non-pecuniary loss under clause 61(2)(e) of the Family Law Act (FLA) was $7,500.00.

Bill 198, applicable to motor vehicle accidents after Oct. 1, 2003, increased the statutory deductible for general damages to $30,000.00 and the statutory deductible for non-pecuniary loss under the FLA to $15,000.00.

The Ontario Trial Lawyers Association (OTLA) has advanced arguments against the stacking of deductibles. Herein is a summary of the OTLA arguments and advancement of arguments in favor of the stacking of the statutory deductibles.

Statutory interpretation

The modern principle of statutory analysis is where the words of an Act are to be read in their entire context, in their grammatical and ordinary sense harmoniously with the scheme of an Act, the object of the Act and the intention of Parliament, Elmer Driedger wrote in a leading textbook on statutory interpretation.

S. 67 of the Legislation Act states that singulars should be read as plurals. Accordingly, OTLA argues that the word “action” can be interpreted as “action or actions” and the word “protected defendant” can be interpreted as “protected defendant or defendants.” This, thereby, leads to an overall interpretation wherein there is one deductible regardless of the number of accidents.

However, OTLA did not pluralize the word “amount” and once this word is pluralized, the text maintains its original intention to deduct the prescribed amount from the damages awarded against a protected defendant on a per accident basis.

OTLA contends that the limiting words “per accident” or “per collision” are not present in s. 267.5(7) or s. 267.5(8) of the Insurance Act. According to OTLA, the interpretation of s. 267.5(7) or s. 267.5(8) at the per accident or per collision level, in the absence of express language, is contrary to the principles of statutory interpretation. However, the scheme of the Act supports an interpretation of s. 267.5(7) and (8) at the per accident level.

S. 267.5(5) of the Act refers to multiple protected defendants, including the owner of the an automobile, the occupants of the automobile and any person present at the incident and only refers to the use and operation of one automobile and only one incident. Furthermore, the frame of reference of s. 267.5(5) of the Act is the liability of the protected defendants involved in the motor vehicle accident. S. 267.5(7) of the Act refers to s. 267.5(5) of the Act. In assessing general damages, the court first determines if the plaintiff’s injuries exceed threshold and if the plaintiff passes the threshold test, the court assesses the quantum of damages and then applies the deductible set out in s. 267.5(7) of the Act. In order to properly interpret s. 267.5(7) of the Act, one first needs to refer to s. 267.5(5) of the Act.

The intention of Legislature

OTLA submits the Legislature did not intend to abolish, limit or otherwise interfere with the rights of subjects. Specifically, it is OTLA’s submission that the Insurance Act limits the right to sue in tort by the application of the deductible, and any interpretation that provides for multiple deductibles ought not be allowed, absent clear and plain language. However, these submissions do not take into consideration the fact that s. 267.5 of the Act is drafted from the perspective of the protected defendant. Accordingly, by only applying one deductible, regardless of the number of accidents, one is taking away or limiting the rights of the protected defendant and it is the rights of the protected defendant that are the focus of s. 267.5 of the Act.

Third party property losses are one of the most difficult and challenging types of claim in the film and television business.

A film production is looking for that picture perfect location to match their storyline. Dan, a location manager, scoured various cities and before settling on what he believes to be the ideal setting. After approaching the homeowners and taking various photographs to show the director, a deal is reached to use the location — a place never before seen on film. Dan and the production team believed they found the perfect location, and the homeowners are excited at the thought of their property being portrayed on the big screen. The compensation for the use of their home for a period of 10 days didn’t hurt either.

However, from the first day of filming the homeowners were overwhelmed as forty crew members with lights, rigging and camera systems besieged their home — it was an experience they had never imagined. At the conclusion of filming, Dan and the homeowners completed a thorough inspection of the house, where they found more then fifteen areas of damage. While production acknowledged they had caused some of the damage, they completely disputed others. For other areas of contested damages, production had no idea if their work and actions could even have caused them to occur.

This example is something seen all too frequently when dealing with third party property damage losses in film production claims.

Who caused the damage?

There are a number of reason why a production company will rent a location: Most commonly to suit the plot or because the cost is less than that of constructing a set. While extensive steps and precautions are taken to prevent damages, it is sometimes unavoidable. Most of the time, the damages are minor in nature, including scratches to the hardwood or scuffs on the wall. Unfortunately, sometimes things go very wrong, and as many as twenty or thirty areas of damage can occur over a one-week shoot.

Occasionally, a situation arises where a production team is adamant that the third party is taking advantage of them and dispute causing any — or at least some — of the damages being claimed. This is the general situation an adjuster must face when dealing with a third party property damage claim.

The relationship between the parties can affect a loss of this type. On some occasions there is a close relationship between the employee of the production (location manager) and the property owner. If the location manager tends to use the property or deal with the owner regularly, he may have a slight bias in wanting to take care of the property owner, legitimate or not.

It must also be kept in mind that while productions are not malicious or intentional when it comes to damages at a location — and they generally do take some precautions — their focus and attention is almost always on the camera and the job at hand.

Most production package insurance policies contain what is known as third party property damage protection. It provides coverage for the property of others while in the care, custody and control of the production, for physical loss or damages for which the insured is legally liable. There are also various conditions and exclusions applicable such as reasonable care or intentional acts that need to be closely reviewed and assessed on any loss.

Examining documents

There are several key factors that need to be determined by the adjuster, including an examination of the agreement between the production company and the owner, how the da
mages were caused, the production team’s level of liability for the damage and the recovery entitled to the third party.

The first key document that needs to be obtained is the location agreement. This is essentially a lease document that not only stipulates the dates and compensation that will be provided for the use of the premises, but it usually outlines production’s responsibility with regard to damages and other pertinent terms including agreed alterations and use of the premises. Within the contract is also usually a clause relating to the acceptance of responsibility for damages and a valuation clause. In most cases, the terms simply require production to be responsible for reparation or restoration of the property to its original condition. However, on occasion it could stipulate replacement cost without deduction for depreciation.

On any given film shoot, there can be thirty or more individuals working on different aspects of the production, and typically no one will acknowledge or even notice the damage occurring. Additionally, there are times when production has nothing to do with the damage — it pre-exists the production team — but no one ever noticed or recorded it and the damage is only discovered once production has left and the property is inspected closely.

It is essential, for several reasons, that the cause of loss for each area of damage be determined. Firstly, it needs to be verified that the production is responsible — and more importantly liable — for the damages. Secondly, the policy generally carries a per occurrence deductible, so if there are fifteen areas of damage, then there is a possibility there was anywhere from one to fifteen occurrences.

Document the scene

The first tool in evaluating the loss is something that is done before any of the damages occur. Prior to a shoot, the location manager attends the property and takes scout location photographs. These are generally taken from different angles throughout the location and presented to the director so he can get a feel for the location and see how it will look on camera and consequently choose the location for filming. Although these photographs are not taken for the purpose of an insurance claim investigation, they can be a key tool as they can sometimes identify if a certain area of damage is pre-existing or not.

A prime example of this was a shoot at an old abandoned mansion that contained hundreds of antiques. At the conclusion of the shoot, the owner contended that production had caused cigarette burns, cracks, scrapes and other damages to approximately forty antiques throughout the house. Production had no knowledge of causing any of the damages, and when the scout location photographs were reviewed, they clearly showed that thirty eight of the items being claimed were damaged prior to production’s attendance. The scout location photographs can also assist in the assessment of depreciation, if applicable, as they may show the condition of the property prior to any damage.

The production insurance business has always made a push for the location manager to document any and all damages prior to production’s attendance on scene. This would make verification of any and all damages after the fact a much simpler process. Unfortunately this process is rarely completed.

Another helpful hint is there is often a prototypical nature to a lot of the damages that occur on a film shoot. For example, most damages to floors by a production team are generally from one of three causes: (1) They were scratched when the crew was bringing in the gear, (2) they were scratched by a camera dolly system or (3) production placed tape on the floors that removed the surface. So while no one may report exactly what occurred, sometimes it can be fairly obvious to determine through an examination of the damage itself.

There are some relatively straightforward aspects to the handling of the claim that simplify the review and verification of the loss. However, there are also aspects which make it more difficult. The key is to understand how a production works, the relationship and role of each individual involved and how they can assist in the assessment of the loss, and what is needed to determine the coverage, liability, and quantum involved.

Neil Gibson is a senior general adjuster with Crawford Global Technical Services.