Canadian Underwriter

Making Adjustments

March 1, 2016   by Angela Stelmakowich and Greg Meckbach

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49th Annual Canadian Insurance Claims Managers Association/Canadian Independent Adjusters’ Association Ontario Chapter Joint Conference and Ontario Insurance Adjusters Association’s 2016 Professional Development and Claims Conference


One of the insurance industry’s biggest challenges on the underwriting side is “how to effectively and profitably transfer cyber risk with respect to machine-to-machine technology,” Brian Rosenbaum, national director of the Legal and Research Practice at Aon Risk Solutions, said during the CICMA/CIAA Ontario Chapter Joint Conference.

“I really can’t overestimate how significant the risks associated with machine-to-machine technology are, despite the tremendous benefits that the Internet of Things (IoT) will confer,” Rosenbaum told conference attendees.

Although the definition of IoT is broad, so are the associated risks. While it used to be, for the most part, that cyber risk and cyber risk insurance revolved around the protection of personal identifiable information, things are changing.

“Arguably, the biggest risk we face today is the risk going forward with respect to property damage and personal injuries as a result of a cyber event,” Rosenbaum suggested.

Real estate clients, for example, “are worried about a hack into their automated systems,” he said, adding the same goes for energy and commercial manufacturing clients. Consider that “41% of all hacks targeted to critical infrastructure have been targeted to the energy sector,” he noted.

“As the big first wave of claims for personal injury and property damage as a result of a cyber event emerge, we’re going to see a lot more litigation and a lot more pressure on the claims people to make good decisions with respect to that,” Rosenbaum predicted.

“Are we providing this coverage on our policies now?” he asked, answering that, “in reviewing CGL (commercial general liability) policies, D&O (directors and officers) policies, cyber policies, the answer to that question is not clear.”

For the most part, “insurance wordings are limited with respect to physical perils arising from a cyber event,” he said. “The majority of CGL policies contain what I would call a data or cyber exclusion,” Rosenbaum said, adding unless there is tailored wording or a watered down exclusion, there will generally not be “fulsome coverage if somebody is injured as a result of a cyber event.”

For clients asking whether or not they have coverage for risks such as cyber terrorism, extortion, systems breakdown and mischief on any of their policies and, if not, what coverage is needed, “what I’m concerned about is that we don’t have the answers to these questions. We’re not keeping up with these emerging risks from a placement and underwriting point of view.” Things to consider include if any coverage is embedded in existing policies, and if there is any overlapping coverage.


There will be a full-scale shift as autonomous car technology improves, James Dunn, a partner with Blouin, Dunn LLP, predicted at the CICMA/CIAA conference.

“The companies that are developing these autonomous vehicles, they don’t want humans to have any override power,” Dunn said. “Ultimately, I think the technology will be refined to the point where that will be the case.”

Once that occurs, it will become “an evaluation of all of the recording information that the cars have,” whether from inside the car or some outside database. “There won’t be any guessing as to what happened because all of the information will be technologically recorded.”

Noting that it then becomes a product liability case, Dunn said that in the event of an incident, there is likely to be products coverage under a CGL policy, with the auto policy probably “reduced to little or nothing.”

Chris Giffin, president and co-founder of Giffin Koerth, suggested in the next five to 10 years with autonomous vehicles, the industry is going to see significantly fewer accidents. In the short term, the technology already available with semi-autonomous vehicles (like the tools to help avoid accidents) “will make up for the rampant distraction that, especially young people have when they’re behind the wheel of a vehicle,” Giffin said.

“The litigation will change to vehicle manufacturer liability and road authority,” he suggested, although things like weather and road construction will need to be taken into account.

Aon Risk Solutions’ Brian Rosenbaum suggested that “the interaction between the driver and the automated system is going to be very important from an underwriting point of view.” There will be a need to underwrite the driver, the car and the software manufacturer, Rosenbaum said, looking at the whole package.

“The question for underwriters will be in what circumstances can the driver impose their will on the vehicle once it’s in operation,” he said. If very little, the underwriting will be a technology underwrite; if a human element is retained, “there will be a human element of underwriting to it.”


Drones are a new technology that could lead to more claims, but also clearly illustrate the need for adjusters with a different skill set, said Paul Hancock, national director of global technical services for Crawford & Company.

“Due to obstacles like the skills of operators, lack of training, untested technology and the liability associated with drones in crowded areas, I think there’s going to be more collisions, accidents, injuries and property damage,” Hancock suggested to joint conference attendees.

“Do we have the skilled adjusters that understand the regulation, the technology, that are able to handle the claims?”

For the most part, things like drones, the Internet of Things, telematics and driverless cars offer the promise of reducing claims, he said. But there is a “growing need for more and different complex loss adjusters. The future of adjusting will be engineering, IT professionals, data analysts, lawyers, accountants, quantification experts doing their thing, for the most part, 24/7, 365, remotely and virtually,” he added.


A Supreme Court of Canada ruling last year illustrates the need for insurance adjusters in Ontario to examine all auto accident benefit claims they receive, even if their companies are not involved, it was suggested at the Ontario Insurance Adjusters Association’s (OIAA) Professional Development and Claims Conference, held following the CICMA/CIAA event.

“If you get an OCF 1 and you are an auto insurer of any kind in Ontario, you have got to adjust the claim, do your priority investigation… and put those other insurers, whoever they are, on notice,” Kadey Schultz, a partner with Schultz Frost LLP, told attendees.

In 2006, Sukhvinder Singh was in a single-vehicle collision involving a rented vehicle insured by Zurich Insurance Company. Singh declined to buy an accidental death and dismemberment policy from Chubb Insurance Company of Canada, which was being offered by the car rental company.

But after the accident, Singh applied for accident benefits with Chubb Insurance, which denied her claim on the basis its policy was not a motor vehicle policy. Zurich Insurance argued before the Financial Services Commission of Ontario (FSCO) that Chubb Insurance should have administered the claim first.

FSCO ruled against Zurich Insurance, a decision reversed by the Superior Court of Justice and, then, overturned by the Court of Appeal for Ontario. The Supreme Court of Canada ruled in favour of Zurich Insurance, citing dissenting reasons in the appeal court decision.

The overriding public policy “is to provide timely delivery” of accident benefits to injured parties, the opinion noted. “That public policy would be seriously eroded by allowing an insurance company that writes motor vehicle liability policies in Ontario to argue, in a case in which the nexus test is satisfied, that it is a ‘non-motor vehicle liability insurer.'”

The high court found a “nexus” between Chubb Insurance and the claimant, even though the policy was not auto.


Just who is liable when it comes to a breakdown involving a smart home still needs to be fleshed out, although a European agency is pushing to get those issues clarified there, Aon Risk Solutions’ Brian Rosenbaum said during the joint CICMA/CIAA conference.

The European Union Agency for Network and Information Security is pushing European Union (EU) privacy commissioners to come out and clarify, with respect to smart homes in EU countries, who is responsible for breakdowns, said Rosenbaum. “They have made it a primary directive to push these regulators in the EU to actually pass legislation to attribute liability in these circumstances. They see it as a very significant risk that we haven’t sorted out that needs to be sorted out through regulations.”

A number of stakeholders are involved and could be liable for a malfunction or security breach, he told attendees. “Is it the homeowner? Is is the manufacturer of the components of the smart home? Is it the certifier of the component?”

Speaking about investigations in general, Chris Giffin of Giffin Koerth said “an innocuous upgrade or change to a process can often have very unanticipated consequences, resulting in some significant losses.” But it is unlikely these innocuous changes will be reported should a loss occur. “You can just appreciate the amount of code that might need to be gone through to understand what’s resulted in the loss.”


Insurance adjusters cannot always rely on legal precedents, now that the Court of Appeal for Ontario has overturned an earlier ruling by the same court, related to a vehicle owner’s vicarious liability for negligent operation of the vehicle, Ian Gold said at the OIAA conference.

“If you are lending your vehicle to somebody and you are giving them some restrictions, and they don’t follow [those restrictions], at the end of the day, it’s still going to be your insurer that responds,” said Gold, a founding partner of Thomas Gold Pettingill LLP.

He made the comments with regard to a court ruling last year – arising from an all-terrain vehicle (ATV) accident – in which Ontario’s appeal court declined to dismiss a lawsuit against Carlos Almeida, the ATV’s owner.

Sara Fernandes was injured in 2007 while riding as a passenger on an ATV, driven by Eliana Araujo. Fernandes sued both Araujo and Almeida, whose insurer, Allstate Insurance Company of Canada, argued that Araujo was driving the vehicle without Almeida’s consent.

Araujo acknowledged “she did not have express permission to take the ATV off the farm property,” but not that Almeida had “forbidden her from driving the ATV on the highway, and the motion judge refused to draw that inference.”

In Fernandes v. Araujo, the Court of Appeal for Ontario reversed Newman v. Terdik, issued by the same court in 1952.

The court earlier found a vehicle owner was not vicariously liable for a driver’s negligence when the driver had the owner’s permission to drive on the owner’s property, but drove on the highway without permission.

Overruling Newman v. Terdik “would enhance, rather than undermine, the interest of clarity, coherence and predictability in the law,” the appeal court recently noted. When an owner has given a driver permission to possess his or her vehicle, “even if the vehicle is operated in a manner forbidden by the owner,” the owner can still be liable under Ontario’s Highway Traffic Act.

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