Barn Doors and Horses: The Importance of Insurance

1. Barn Doors and Horses: The Importance of Insurance 2012 ALOC/Government of Ontario Educational Conference Christine Gooderham, Senior Counsel, MGS Legal Services Branch

2. Coffee at Lloyd’s • A brief history of insurance: a group of individuals met at a coffee house called “Lloyd’s” to enter into agreements where each agreed to contribute to make good the loss suffered by another in the group for the carriage of goods overseas • The effect is transferring the risk of a random loss 2012 ALOC/Government of Ontario Educational Conference

3. Five Underlying Principles • Utmost good faith • the customer must disclose all matters relevant to risk • Fortuity • The loss must occur randomly, and not deliberately • Indemnity • Covers the financial loss, but no more; no double recovery • Consumer Protection • Regulation preserves the financial viability of the insurer • Compensation • Automobile and life insurance include a compensation rationale 2012 ALOC/Government of Ontario Educational Conference

4. Managing Barn Doors • Managing risk • Identification of the risk • Alternatives of managing the risk • Risk Control • Risk Financing (Retention or Transfer) • Selection of a Technique • Implementation • Monitoring 2012 ALOC/Government of Ontario Educational Conference

5. Government Insurance • Risk Management & Insurance Services Branch is the mandatory central common services provider of risk management and insurance services for all ministries and qualified agencies • RIMSB has three areas of responsibility • Insurance Acquisition and Business Services • Claims • Risk Control and Advisory Services 2012 ALOC/Government of Ontario Educational Conference

6. Managing Government Insurance • RMISB acquires different types of insurance for Ministries and agencies as required by Legislation: • Auto Liability policy • Marine Liability policy • Aviation Liability policy • Agency speciality coverage • Marina, Directors’ and Officers’, Commercial General Liability 2012 ALOC/Government of Ontario Educational Conference

7. Commercial General Liability • Between 1975 and 2003, the Province purchased insurance from a series of insurers up to $20,000,000 per occurrence • The premium price jumped 67% for the policy year 2002-03 due to large claims globally and 9/11 • Move to technically optimised retention for $5,000,000 with insurance for excess • Currently self-insured program for general liability claims 2012 ALOC/Government of Ontario Educational Conference

8. General and Roads Liability Protection Program • Coverage mirrors that provided by the insurers: bodily injury, personal injury, property damage and advertising injury; and, road liability claims arising from obligations under the Public Transportation and Highway Improvement Act. 2012 ALOC/Government of Ontario Educational Conference

9. Exclusions from CGL • The Protection Program is CGL coverage and does NOT provide coverage for to: • Directors’ and Officers’ Liability Coverage • Errors & Omissions Coverage (also known as Professional Liability Coverage) • Aviation Liability • Marine Liability 2012 ALOC/Government of Ontario Educational Conference

10. Agencies • Closely held agencies generally qualify for RMISB services • If they are Public Bodies and Commissioned Public Bodies • Fully funded by the CRF • Have no right to indemnify • Operational Enterprise and Service agencies operate in a commercial manner and generally do not qualify for RMISB services 2012 ALOC/Government of Ontario Educational Conference

11. Agencies (cont’d) • When agencies are created, the responsible ministry should address insurance coverage in the MOU and the TB/MBC submission • Where an agency has been set up with the right to indemnity, assets in their own name then they would not be indemnified by the Crown. • RMISB working with MGS Legal has identified wording to be used in the MOU. 2012 ALOC/Government of Ontario Educational Conference

12. Government Contracts • Policy approach is to transfer risk by contract to the Supplier providing goods or services • Standard contract language includes an indemnity in favour of Her Majesty, and insurance requirements to support the indemnity • The indemnity does two things: defends the Crown and makes the Crown whole 2012 ALOC/Government of Ontario Educational Conference

13. CGL Insurance • Most common form of third-party insurance purchased by companies and organizations to protect them if they are sued by a third party who alleges harm by an act or omission by the insured entity • Typically covers bodily injury, property damage, personal injury, advertising injury • NOT intentional acts or injury to its own employees or professional services 2012 ALOC/Government of Ontario Educational Conference

14. Errors & Omissions Insurance • Historically only available to recognized professions like doctors, lawyers, engineers • Now widely available to those who offer advice or specialized services • Covers against claims that an error or omission in professional services caused harm to a client 2012 ALOC/Government of Ontario Educational Conference

15. Government as “Added Insured” • Typical CGL policy allows the insured to add “additional insured” often limited “but only to the extent required by the contract” • CGL policy only contain a cross liability and severability of interest clause that allows the insured to add “additional insured” to the policy “but only for liability arising out of the actions of the named insured.” • No other insurance has this clause since two named insured cannot sue each other under the same policy. • Cannot be added as an “additional insured” to an E&O policy 2012 ALOC/Government of Ontario Educational Conference

16. The “Push Back” • The Supplier may ask for a mutual indemnity to “be fair to both parties” • But this does not achieve the transfer of risk • And it triggers s. 28 of the FAA • The Supplier may seek to limit the indemnity to breach of contract or tortious conduct • But this does not make sense for third party claims • And the Crown will incur defence costs 2012 ALOC/Government of Ontario Educational Conference

17. More “Push Back” • The Supplier may claim insurance is too expensive • But the cost of insurance is a standard cost of being in business • And the cost of doing business is built into the cost of the contract 2012 ALOC/Government of Ontario Educational Conference

18. Insurance Certificate • Typically issued by the supplier’s insurance broker, a certificate of insurance confirms a valid insurance policy with a registered insurance carrier. • The statement of coverage should reflect the indemnified parties as “additional insured” and the terms of the contract • If in doubt, RMISB can advise 2012 ALOC/Government of Ontario Educational Conference

19. The Business Decision • The Ministry, not RMISB, is responsible to evaluate options to respond to risk • In rare instances where the risk to the Crown has been determined to be minimal, it is possible to omit the indemnity and allow the common law to apply • If the contract does not include an indemnity provision, then no insurance is required (The Indemnification Directive) 2012 ALOC/Government of Ontario Educational Conference

20. Contact Information • Christine Gooderham MGS Legal 327-3669 2012 ALOC/Government of Ontario Educational Conference