CIAA’s Ontario Region Educational Seminar

Significant Changes to the CGL Policy

Of the 23 changes made to the standard Commercial General Liability (CGL) policy by the Insurance Bureau of Canada, seven are considered significant, delegates were told.

The first major change is in regards to compensatory damages, Vincent Burns, partner at McCague Peacock Borlack McInnis & Lloyd LLP, told the attendees.

In the past, most policies would restrict coverage to compensatory damages.

However, in the new policy compensatory damage is now a defined term and does not include punitive or exemplary damages or the multiple portion of any multiplied damage award, Burns told the crowd. According to the CGL policy, “‘compensatory damages’ means damages due or awarded in payment for actual injury or economic loss.”

There were significant changes made to the insuring agreement, under the Bodily Injury and Property Damage Liability, that is intended to clear up any confusion regarding the time period covered and to overcome the trend of courts to expand the time period covered by a triple or continuous trigger theory, he explained.

Bodily injury or property damage has to occur during the policy period, but can still be covered if latent damage is not known, he said. However, damages known to have occurred prior to the policy period are not covered.

“[The] key now is not so much not only when the damage happens but the knowledge of the insurer,” Burns said. “[It’s a] pretty significant change.”

A new paragraph was added to clarify and explicitly exclude coverage for alleged negligent hiring, training or supervision in the aircraft/watercraft exclusion and the automobile exclusion.

In addition, the automobile exclusion has been updated to clarify that coverage is not provided for negligent loading and unloading of the automobile or for damages relating to a defect or improper maintenance of an automobile that has been leased to an individual for 30 days or more on the condition that the lessee is obligated to insure the vehicle.

The new wording of the section is mainly to prevent the CGL policy from being requested to respond to claims recoverable under an automobile insurance policy, Burns noted.

The Personal and Advertising Injury Liability (Coverage B) has been revised to add advertising injury to the coverage, whereas before it was simply personal injury liability. The amendments to the section were added to exclude intellectual property offenses from coverage when they are not related to advertising, in addition to a number of increased exclusions in Coverage B.

Grammar is important

Ambiguity in policy wording often benefits the insured and not the insurer, Anthony Cole, Associate at McCague Peacock Borlack McInnis & Lloyd LLP, told attendees at the seminar.

“Ambiguity is sort of in the eye of the beholder.” Cole said. “[Policy is] not always as clear as the drafter intended.”

Be aware of industry jargon, which often does not have any meaning to the insured and is often not very compelling to the courts, Cole warned.

The same goes for fancy grammar. While a sentence might be grammatically correct, if it can be interpreted another way, or if another meaning tends to be more common (even if it is incorrect), it is best to reword the sentence so that there is no confusion in meaning. Cole noted the case of “nor.” The correct meaning of “nor” is “and not,” yet most people thing it means “or.”

This can cause confusion in the interpretation of a policy, he suggested.

Cole said reviewing and rereading the policy could help to ensure that there is no discrepancy or room for misinterpretation.

“If a word has broad implications … think of how an insured might interpret that,” Cole suggested. “Carefully read and carefully draft your policies … from the perspective of the insured.” He added “the court is going to go with the insured more often than not.”

He mused that if you find yourself in court and are wondering what your chances are of winning, think about this: “A judge once told me ‘when you’re determining your chances of winning, decide which side your mom would be on’.”

Changes to the limitation period

On January 1, 2004, Ontario’s limitations regime was amended substantially, in an attempt to streamline the process, delegates learned.

“In Ontario, there were a myriad of different limitation periods,” Shannon Parsons, a partner at McCague Peacock Borlack McInnis & Lloyd LLP, said. She noted in the material handed out to delegates that before the new legislation was enacted there were varying limitation periods, ranging from short times, such as in the case of actions against municipalities which were limited to a three-month statute of limitations, to six or more years for others.

A large part of legal actions in Ontario, and a major player in the insurance field, are negligence and breach of contract. Prior to the new legislation, these claims had a six-year limitation period, whereas in the amended legislation, any cause of action since January 1, 2004 is subject to a two-year limit for the vast majority of claims. While this helps to ensure that relevant people, information and evidence is available for the case, it also means that claims must be reported and investigated quickly, Parsons notes in her handout.

A major change in the legislation is in the case of third party claims for contribution and indemnity. Parsons points out in her notes that these “are now subject to the two-year basic limitation period, calculated from the date of service of the statement of claim.” This differs from previous legislation when defendants could add third parties for as long as one year after the date of settlement or judgment.

Claims against municipalities for injury due to improper road repair now has a two-year limitation and claims against health care workers have been increased to two years as well.

According to the new legislation any claim made based on an action that occurred after January 1, 2004 is subject to the new statute. Parsons writes in her notes that “a claim is discovered when the claimant first learns of the existence of a set of facts which constitute the essential elements of the cause of action.”

As with most legislation, there are exceptions to every rule and therefore all changes should be carefully read and reviewed to ensure that all parties involved are aware of the new limitations.

Awards On the Rise

There has been a significant increase recently in awards for future care costs, mainly in the area of head injury, Van Krkachovski, a partner at McCague Peacock Borlack McInnis & Lloyd LLP, told the delegates.

Part of the reason for these higher awards is that judges often hang on words such as the “chance of” and “possibility” in cases involving head injury. If it can be proven that there is a possibility that a plaintiff might require future care, the judge is likely to rule that this is a good enough reason to award future care costs.

When awarding future care costs, there are a number of factors that are taken into consideration, including: age; future income; whether a person will need round-the-clock care at any point due to injury; life expectancy; cost of therapists, support workers and trainers; medication; transportation; home modifications; etc.

“[It’s a] matter of creating enough concern in the mind of the judge or jury,” Krkachovski said regarding the plaintiff’s council.

Oftentimes, the defense will refute that nothing has happened to the plaintiff so far, that s/he seems healthy, but the plaintiff’s council will probe the what ifs. What if down the road they need medical care? What if down the road they require 24-hour supervision? What if down the road they cannot live on their own? What if there is an emergency, can they handle it?

There are also times the plaintiff will appear healthy and think they are healthy, but medical discovery shows som ething entirely different.

“They don’t recognize they have a brain injury,” Krkachovski said. “They think there is nothing wrong with them.”

Technology, such as MRIs, are proving to be powerful pieces of evidence for the plaintiff’s council, Krkachovski said, as they show injuries such as brain atrophy and hemorrhages and thereby a correlation between injury and result.

Unfortunately when it comes to allocating an award, there is no real factor that judges can use at the moment, so there is no rhyme or reason behind the decisions.