Government Vehicles

Managing Liability Risk

Financial Management Institute

November 24 2008

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Maxim

“No man hath endurance,

as he that selleth insurance”

-anon

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Our Organization and Role

Acquisitions Branch

Policy, Risk and Strategic Management Sector

Acquisition Program integrity Secretariat

Risk Management Advisory Services

Support the the procurement process by providing advice on insurance and limitation of liability

Manage the National Master Standing Offer agreement for insurance services

Advise other departments and agencies on insurance management

Prepare Treasury Board Submissions for Acquisitions Branch

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Today’s Objective

Provide a general overview of automobile liability and risk

Enable understanding of the financial and legal implications of the risks

Help create a higher degree of risk sensitivity

Instill confidence through risk control

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Agenda

Quick Facts Regulatory Environment Policy Environment Self-Underwriting Insurance Key Financial Exposures Legal Issues Risk Identification and Analysis Risk Control Monitoring the Risk Personal Considerations Q and A

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Quick Facts

From 2000 to 2004, 32% of accidental deaths in Canada were attributed to motor vehicle accidents

70% of these deaths occurred in the 15-24 year old age group

In addition, each year there are over 200,000 people injured in motor vehicle accidents

From 1979 to 2004, fatalities declined 52%

Sources: Transport Canada/Statistics Canada

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Quick Facts

In Canada, automobile insurance accounts for almost half of all private sector insurance premiums: $16.6B in 2006

Provincial government insurance regimes in QC, MB, SK and BC added another $5.3B in premiums

Non-government insurers paid $4.1B in Third Party Liability claims and $2.3B in Accident Benefits

Source: Insurance Bureau of Canada

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Regulatory Environment

Provincial Legislation

Highway Traffic Acts

Negligence Acts

Motor Vehicle Acts

Insurance Acts

Workers’ Compensation Acts

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Regulatory Environment

Federal Legislation

Department of Justice Act

Financial Administration Act

Government Employees Compensation Act

Canada Labour Code

Criminal Code of Canada

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Policy Environment

Treasury Board Policies

Risk Management Policy

Integrated Risk Management Framework

Policy on Claims and Ex Gratia Payment

Motor Vehicle Operations Directive

Directives on Fleet Management

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Self-Underwriting

To self-underwrite is to retain and fund the risk of accidental loss

Similar to self-insurance, except that a self-insured can transfer excess or catastrophic risk to an insurer

The Crown self-underwrites its own risks, with some exceptions

Financial losses are paid from a revolving fund and charged to the department incurring the loss

Managing the risk of loss is crucial to self-underwriting schemes

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Insurance

The TB Risk Management Policy permits the placement of insurance by Crown departments

Automobile Liability insurance is mandatory for:

Crown vehicles entering the USCrown Ministers fleet

The insurance in place for both risks pertains only to third party liability

The insurance premium is paid, and the policy managed by the department which purchased the insurance

Other costs, such as deductibles, are the responsibility of the department

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Key Financial Exposures

Catastrophic Loss: Liability for the value of the loss

Statutory Accident Benefits: Liability for long term medical expenses and income replacement benefits

Loss transfer: Liability for third party insurer costs for accident benefits where:

Accidents involve the use of large vehicle; e.g. >5,000Kg

Other liability, e.g. product liability, is imputed to the Crown

Statutory Penalties: Liability for fines levied for late or non-payment of statutory benefits

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Legal Issues

Priority of Payments

Insurance Acts determine who pays first and when

Principle applies in Accident Benefits and in some cases of third party injury

In Ontario, injured persons are required to claim for benefits against their own insurance policy

Those who don’t have a vehicle can claim against the owner’s policy whose vehicle was involved

Legislation in ON, AB and BC limits the liability of lessors and transfers the primary payment obligation to the driver

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Legal Issues

Protected vs. Unprotected Defendant

Protected defendant applies in no-fault (e.g. ON Insurance Act) cases where a a liable party cannot be sued

Protected defendant can lose that status where liability can be imputed for negligence other than operation of the vehicle

Cases of unsafe vehicle, defects can permit a plaintiff to sue for negligence related to product liability

In such cases, the plaintiff is not restricted by no-fault legislation

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Legal Issues

Joint and Several Liability

Principle in law that each and every defendant can be fully liable for a loss

One party can be required to pay the full value of the loss despite being partially negligent

In some cases, 1% of negligence can equal 100% liability

Such cases can occur with uninsured or underinsured defendants and one “deep pocket” defendant

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Legal Issues

Non-Owned Liability

Arises from the use of vehicles not owned by the Crown

Common to rental vehicles, where the limit of insurance carried by the Lessor may be at the provincial minimum

The Crown may be held liable for liability losses exceeding the insurance limit

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Risk Identification and Analysis

The Risk Profile

Fleet size and composition

Range and type of operations

Operator training and permit requirements

Maintenance requirements and service contracting

Repair and service history

Loss History

Policies and Procedures on Vehicle Use

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Risk Control

Loss Prevention

Vehicle use restrictions

Operator training, testing and abstracts

Application of safe operation manuals

Remedial training following infractions and accidents

Circle checks – before and after

Preventative maintenance schedule

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Risk Control

Loss Reduction

Loss reporting procedures

“In vehicle” accident instructions and contact numbers

Accident investigation

Loss adjustment services

Incident review

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Risk Control

Loss Transfer

Using contracts to transfer the risk of loss or requirement to insure

Rental agreements can transfer the obligation of third party liability insurance – subject to certain legislation

If contractors use government vehicles, their own insurance policies can be endorsed to provide liability insurance coverage

Loss adjustment and appraisal services can be used to reduce costs and focus resources in core areas

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Monitoring the Risks

Resource Deployment

Policy and Procedure Oversight: Commitment and adherence by senior management

Loss data and reporting: Manage loss data, reporting and relationships with service providers

Claim file audits: Audit claim files to ensure high performance standards

Culture of Compliance: Reinforce best practices and recognize success

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Personal Considerations

Automobile Liability is a common but significant risk

Prudence and common sense can help avoid and prevent serious loss

Low value measures can help contain high costs

Lead by example

Seconds can change a life!

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Resources

Canada Safety Council: www.safety-council.org/

Canadian Association of Road Safety Professionals: www.carsp.ca/

Insurance Bureau of Canada: www.ibc.ca/

Insurance Institute for Highway Safety: www.iihs.org/

SMARTRISK: www.smartrisk.ca/

Transport Canada: www.tc.gc.ca/roadsafety/pub/menu/

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Q and A

Questions?