Canadian Underwriter

Tough Sledding

December 1, 2005   by Craig Harris

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One of Canada’s most popular winter recreational activities, snowmobiling, was hit with a double whammy by the insurance industry in recent years. Insurers perceived this motorized sport as high-risk, with increased chances of personal injury or fatality, and made individual “personal sled” insurance an expensive proposition. In many provinces, individual snowmobile insurance is mandatory and carries with it similar coverage to an auto insurance policy, such as accident benefits. That coverage became more expensive and difficult to get in some provinces.

The second – and arguably more challenging – threat is the extensive trail system that is ostensibly the responsibility of provincial snowmobile associations. While these associations do not “own” the trails, they have a series of legal leases and written and verbal agreements with both private and government landowners to create integrated province-wide trail systems. Multiple lawsuits have alleged that federations across Canada are liable for virtually any activity that occurs on the trail systems.

“The way the snowmobile trail system and winter tourism market has developed in Canada, the management of trails is not the responsibility of the government; it is the responsibility of these volunteer organizations, such as provincial federations,” Ross Antworth, the general manager of the New Brunswick Federation of Snowmobile Clubs (NBFSC), says. “If someone is hurt on a snowmobile and he or she contacts a lawyer, there is only one party to sue. And that’s us.”


As a result, premiums for commercial general liability policies for snowmobile federations have jumped exponentially over the past four to five years. The Ontario Federation of Snowmobile Club (OFSC)’s general liability insurance increased from $360,000 in 2001 to $3.1 million in 2003 – a whopping increase of more than 1,000% over two years. New Brunswick’s federation experienced similar problems: trail insurance premiums increased 400% in four years, to the current level of $350,000.

The situation became so urgent, the OFSC announced a “Save Ontario Snowmobiling” campaign in January 2004. The campaign protested against the effect of soaring insurance premiums on the recreational activity.

“Each winter, $1 billion in snowmobile-related spending provides jobs, revenues and new business opportunities in rural, snow-belt communities – and drives the winter tourism season, too,” OFSC president Dennis Burns says. “These benefits are in serious jeopardy if insurance premiums continue to escalate or remain at current levels.”

The huge increases are par for the course in virtually all regions, Alberta Snowmobile Association (ASA) executive director Louise Sherren says. “We are all in the same boat right across Canada,” she says. “We have had our insurance double over the past five years, and we have also had to take half the original coverage. So when you look at it like that, we are probably three or four times higher.”

The central concern for the federations and snowmobile enthusiasts is that these not-for profit associations may be forced to shut their doors, causing chaos for the country’s multi-billion dollar snowmobile industry.

“It is enough to put us out of business,” Sherren says. “We are a small organization, and when you are paying thousands of dollars for a policy just to open your doors and protect your volunteers, something is wrong.”

The economic impact of snowmobiling in Canada is $3.6 billion, according to the Canadian Council of Snowmobile Organizations. A network of groomed and marked trails spans more than 135,000 kilometers across the country. There are more than 760,000 registered snowmobiles in Canada and 868 local snowmobile clubs.

In terms of snowmobile insurance, a specialized handful of insurance firms offer coverage, including Lloyd’s, Sovereign General and Royal & SunAlliance. Insurer representatives say they respect the importance of this recreational activity to the economy and society; at the same time, they point out the insurance premiums simply reflect the legal environment in which snowmobilers use their vehicles.


Two general challenges face snowmobile insurers when it comes to losses: 1) accident benefits paid on personal sled policies, and 2) liability for trail systems, particularly related to lawsuits. The first concern is especially relevant in provinces that have a substantial schedule of accident benefits for individual snowmobile insurance, such as Ontario. In Ontario, for all intents and purposes, snowmobiles are treated as automobiles for insurance purposes and policies are written under terms identical to an auto insurance policy.

Mark Yakabuski, Insurance Bureau of Canada (IBC) vice president, Ontario region, says group insurance programs for snowmobilers “essentially disintegrated” during the hard market, leaving big gaps in the market for standalone personal sled insurance.

“The availability of snowmobile insurance has been problematic for the past couple of winters,” Yakabuski says. “Unless you had your homeowner and auto insurance policies with a given insurer, most companies were reluctant to take you on as a policyholder on a one-time basis.”

The main reason for that was “entirely predictable,” according to Yakabuski. “The loss ratios for this class of business certainly jumped considerably during the hard market period,” he says. “The loss ratio with respect to accident benefits for snowmobile insurance was reaching 200% and beyond. Insurers simply couldn’t price the product to reflect the high level of accident benefits expenses.”

In most provinces, personal sled insurance is mandatory. It carries with it not just coverage for personal injury, but also personal liability limits. In fact, snowmobile organizations in areas like Ontario and New Brunswick actively lobbied for compulsory personal sled insurance in the mid-’90s. They hoped to create more personal responsibility for snowmobile use – including an increased onus on individual liability for accidents or injuries.

But as Antworth points out, it didn’t work out that way. “The whole reason behind the strategy was to take some pressure off the large CGL policy we had to carry as an association,” he says. “But it had no impact. All it has done, unfortunately, is contribute to the cost of an individual snowmobiler.”


The evolving legal liability of snowmobile associations has caused the biggest insurance headache. The main culprit for the multi-percentage increases in CGL premiums for these organizations is an increasingly litigious environment related to snowmobile incidents, several sources say.

“Insurance is not the solution, as long as the federations and trail associations are still on the hook for liability,” Don Forgeron, vice-president of IBC, Atlantic region, says. “They have to look at ways to limit the liability they are currently operating under. And until such a time is reached, unfortunately, they will be forced to deal with higher insurance premiums.”

“Liability is the one line of insurance that has simply not responded in the more recent positive market conditions,” Yakabuski says. “This is a reflection of the fact that our legal environment has changed in a very material way over the last five years. That is exposing a whole bunch of groups to levels of legal activity we would not have contemplated five years ago.”

Snowmobile federations acknowledge they are facing “multiple lawsuits.” But sources declined to disclose any figures related to numbers or actual payouts. “We know the number of lawsuits we are defending as a volunteer organization is astounding to us,” says Antworth. “It certainly has an impact on our availability (of insurance). When we go out to market, they (insurers) take the number of lawsuits, put a reserve on them and, poof, there is your premium.”

There are examples of major snowmobile-related lawsuits, such as the case
of a man who became a paraplegic after riding his snowmobile into a snow bank in Ste. Marguerite du Lac Masson, Quebec. In September 2004, the man was awarded more than $1.8 million, to be paid by the municipality. The court found the municipality had created the snow bank after clearing a section of a frozen lake to make an airplane landing strip.

In a November 2004 action, a Quebec Superior Court judge awarded 600 residents of St. Jovite approximately $8 million in damages due to pollution and noise from snowmobiles. Residents of the municipality, located north of Montreal in the Laurentians, complained about the high volume and noise of snowmobilers on a nearby rail trail. The local municipal authority, the provincial government and the regional snowmobile association, the Federation des Clubs de Motoneigistes du Quebec (FCMQ), were all named in the lawsuit. But costs affected only the government entities. The case prompted the Quebec Liberals to impose an 18-month legislative moratorium on lawsuits over snowmobile trails, enacted in legislation late last year.

The major liability concern in many cases is not the lawsuits, but rather the mounting defence costs required to contest the litigation (the FCMQ had to pay defence costs for the noise lawsuit). “What ends up happening is that anyone can sue anyone under any circumstances. So the lawsuit goes out and you still have to pay a lawyer to reduce that or get your name discharged,” says Sherren.

Defending liability claims involves hiring not only lawyers, but also potentially engineers, investigators and expert witnesses. Trail federations and their insurers must pay these costs to properly investigate liability claims – expenses that are typically covered under most liability insurance policies.

“Many of these lawsuits may be unsubstantiated claims, but you have to defend against them,” says Yakabuski. “The number of these claims has been rising and the cost of defending against them is very expensive.”


The snowmobile industry has responded to insurance challenges by publicly lobbying lawmakers. They want to see protective legislation that will shield trail volunteers and not-for-profit organizations against unreasonable or frivolous liability claims.

Also, associations have looked into alternative insurance funding mechanisms – such as captives or reciprocal exchanges – but right now there don’t appear to be any concrete plans to establish a formal entity. Instead, many associations are focusing on comprehensive risk management and loss prevention programs. Several federations, such as the NBFSC, ASA and OFSC, have implemented strategies that include better signage, waiver forms, assumption of risk for trail use documents and litigation management protocols.

“Groups like the OFSC have developed a sophisticated risk management strategy regarding their own exposure, and this has helped them considerably in repositioning their own risk with potential insurance partners,” says Yakabuski.

Sources in the insurance industry say they understand the concerns of the snowmobile federations and share the same goals when it comes to issues like premium stability. For example, Yakabuski notes that changes to Ontario auto insurance in Bill 198 helped alleviate some of the pressures on accident benefits costs for snowmobile insurers as well. In addition, the OFSC has sent a draft of a separate snowmobile insurance policy, developed in conjunction with the insurance industry, to the Ontario government.

“There may not be the right fit between an auto insurance policy and a snowmobile policy,” Yakabuski says. “A separate snowmobile insurance policy we think could be much more affordable and improve availability.”

The area of commercial general liability insurance, however, has been a tougher nut to crack. Forgeron says the IBC’s Atlantic region helped set up a task force to study the issues of availability and affordability for both the private and not-for-profit sectors. The task force, which included the NBFSC’s Antworth as a member, was released at press time in late November.

“If we don’t attack the root of the problem, we are not going to provide the greatest relief for these associations,” says Forgeron. “And the root of the problem is that these associations are faced with significant payouts in terms of liability claims and defence costs. If you don’t treat what is causing that, it won’t change much.”

Inevitably, the discussion turns toward whether provincial governments will realize the impact of the current liability environment on not-for-profit groups and associations such as snowmobile federations. “What we are really talking about is tort reform, and as soon as you mention tort reform to a member of the legislature, who is likely a lawyer, he or she goes into a cringe fit,” says Antworth.

“Whether the government has the will to make some of these changes is the $64,000 question,” Yakabuski says. “We have suggested to government that measures have to be taken to protect snowmobile clubs and other organizations against liability. Without that, a lot of recreational activities are going to be finding themselves in a very difficult situation across the country.”

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