Insurance
• What is insurance?
• Need for insurance
• Types of insurance
• Insurance concepts and terminology
Case – Higgins v. Orion Insurance Co.
Ltd.
• Higgins and Wood operated a sporting goods business as a
partnership. They took out fire insurance for their building
and contents, naming themselves as the beneficiaries.
Wood, without the knowledge of Higgins, conspired with a
3rd party to intentionally burn down the store in order to
defraud the insurer. He got caught.
• It was clear that Higgins was perfectly innocent and had no
knowledge of the conspiracy or the attempt to defraud the
insurance company. However, his claim was refused.
Case – Higgins v. Orion Insurance Co.
Ltd.
• Questions –
• Is the innocent partner, Higgins, of a wrongdoer,
Woods, entitled to collect on the policy?
• If Higgins received a payout, could Woods, his
partner demand his fair share?
Insurance is…
• Reduces the cost of loss by spreading risk,
I.e, many payers pool funds
• Compensation, NOT a profitable windfall
– Contract of indemnity for loss
Need for insurance
• Liability from duty owed to participants, athletes
• Physical assets – lost, stolen, destroyed
• Liability for services – instruction, coaching,
activities, food, alcohol
• Professional liability – e.g., fitness leaders,
• Public use of facilities
• Work force turns over quickly
• Mandatory insurance – municipalities, WCB,
travel industry etc.
Types of insurance
• Property –
– Fire, including incidental losses to a fire
– Theft –
• “theft” – comprehensive – most expensive
• Burglary – forced entry
• Robbery – use of violence – less common – less
expensive
Types of insurance
• Bonding
– Fidelity bond – employee honesty
– Surety bond – contract performance insurance
– Bonding company –
• guarantor,
• Will sue the dishonest employee or poorly
performing contractor
• Event insurance –
– ticket refunds, cancellation, hole-in-one
Types of insurance
• Business interruption insurance
– Lost profits, continuing expenses,
• Credit insurance –
• Life insurance –
– Key persons –
Types of insurance
• Extended health, disability
• Liability –
• Land title
• Directors or employees insurance – indemnification
• Mandatory insurance – EI, WCB,
Case – Coronation Insurance Co. v. Taku Air
Transport Ltd.
• Taku, a small airline in NW B.C., had a bad
safety record and did not inform Coronation
• Taku required by law to have insurance
• Taku plane crashed, killing several
• Coronation refused to pay citing lack of
“utmost good faith” by Taku
Case – Coronation Insurance Co. v. Taku Air
Transport Ltd.
• Questions –
– Could beneficiaries, families of the dead, receive
payment?
– What was the purpose of the mandatory
insurance?
– Should Coronation have to pay?
Insurance concepts
• Insurable interest –
• Insurer has right of SUBROGATION
– Insurer takes the place of the insured
• Insured must mitigate loss – report
immediately
Insurance terminology
• Insurer
• Insured
• Premium
• Beneficiary
Insurance terminology
• Rider – extra risk covered
• Endorsement – increase amount
• Deductible clause
• Co-insurance
• Utmost good faith
Case – Hammill v. Gerling Global Insurance
Co.
• Mrs. Hammill obtained a life insurance policy in
which she stated that she had been a non-smoker
for the past 12 months. In fact, this information
was incorrect. It was clearly established that she
had smoked considerably during that period.
• She had taken out a policy in 1985 and was killed
in an automobile accident on February, 1986.
Although her smoking in no way contributed to
the accident, the insurer refused to pay the
beneficiary under the policy.
Case – Hammill v. Gerling Global Insurance
Co.
• Questions -
– What obligations did the insured, Mrs. Hammill, have
in dealing with Gerling?
– What obligations does the insurer have to the
beneficiary in these circumstances?
Insurance terminology
• Promptness of notice – to mitigate loss
• Book value v. replacement value
• Insurance agent – agent for insurance company
• Insurance broker – acting for insured – shops for
right insurance
• Insurance adjuster – expert appraiser in loss – paid
by the insurer
Case – Christopher Tait v. Worker
Compensation Board
• Chris Tait was a groundskeeper at Longwoods Golf
Course. Unfortunately he was hit in the head by
Duffer’s stray ball and suffered complications from a
concussion. He could either receive benefits from WCB
or sue Duffer directly. He elected to accept WCB
benefits.
• Tait settled for medical services and $5,000. WCB in
turn sued the errant golfer for what was rumoured a
substantial sum. Upon hearing this Tait decided to
return the funds to WCB and sue Duffer directly. WCB
refused, arguing that he had made an irrevocable
decision.
Case – Christopher Tait v. Worker
Compensation Board
• Questions –
– What is the position of the WCB?
– Do they have the right to sue Duffer?
– Is Tait entitled to any portion of those proceeds?
– May Tait now sue the golfer?
Insurance in Outdoor and Adventure Tourism
• Heli-ski operation premiums - $17,000 for
60 days of activity
• Cave tours – private operator in provincial
park – premiums from $2,500 to $10,000
from 2003 to 2004
• Many operators may forego paying for
mandatory or optional insurance!
Insurance industry in 2003
• 2001 - worst year ever
• 2002 – increased premiums but increased
claims and lower investment income
• Highly cyclical industry – now a “hard
market”
• B.C premiums increase = 25% average
• Rest of Canada = 35% to 40%
Insurance issues effecting tourism, outdoor
recreation
• Host liquor liability (e.g., wine tasting)
• Large personal injury judgements, plus legal costs
• Forest fires, floods
• Litigation from U.S. customers
• Food illnesses – e.g., BSE
• SARS, Norwalk virus,
• Mould, fungus, leaky buildings
Insurance issues – cont’d
• Computer viruses, data security
• International terrorism
• Occupier liability – high burden of liability
• Canada Marine Liability Act – commercial vessels
on the water
– No waivers allowed
– Mandatory insurance
– Limit liability to $350,000
Legal issues - waivers
• Mandatory! – no waiver, no insurance
• Strong common law support – “Black Letter law”
• Recognized in Occupier Liability Act
• But …
– Not enforceable against minors
– High standard of use, e.g., clearly brought to the
attention of signer
– “contra proferentum rule” ambiguities ruled against the
operator
Legal issues - voluntary assumption of risk
• In Canada – rejected after 1963 SCC case of
“Lenhert v Stein” – must be a voluntary
EXPRESS waiver
• Canadian provinces – Occupier Liability Acts –
recognize voluntary assumption of risk, but courts
do not (unless in a waiver)
• In U.S. –
– Courts accept “primary assumption of risk”
– Statute laws – Inherent assumption of risk recognized
but must be “willingly assumed”
Law in other jurisdictions
• Alaska and 26 other states – statute law recognizes
“inherent risk” in sport and recreation
• Colorado – parents may waive child’s right to sue
• Australia –
– caps damage payouts,
– improved risk management practices,
– group pooling/buying of insurance
• New Zealand –
– no fault insurance – victim may not sue
Managing legal issues
• Good management = waivers, due diligence,
S.T.O.P.s, risk management
• Lobby for legislative changes
– Recognize inherent risk of sport and recreation in
Occupier’s Liability Act
– Allow parents to waive the rights of their child to sue
– Allow waivers in Marine Liability Act
Legal issues - Caution
• BUT be careful! – B.C. has a good reputation
– Common perception = threat of litigation keeps
operators on their toes!
– Fine line between “inherent risk” and “gross
negligence”
– Good example of B.C. River Rafting industry –
• high standards consistently enforced.-
• Recognized best in the world
Successful insurance models
• Canada West Ski Areas Association – industry
self regulation and strong communication with
insurance companies
– Strong risk management program
• Waivers, ski patrol,
• grooming standards,
• qualified staff,
• minimum snowboarder competency,
• maintenance program
– Members buy individual insurance but central incident
data base
Successful insurance models – cont’d
• Industry group insurance – e.g.,
– Guide Outfitters Association of B.C.,
– Municipal Insurance Association,
– Nurses Association of B.C., Law Society
• Self insurance – Adventure Ecotourisme du
Quebec
– Large number of small operators
– Operator risk management program
– Cap coverage, but larger operators opting out
Successful insurance models – cont’d
• Captive insurance company – supported by statute
law – 15 in B.C.
• Surety bonding
• Customer buys insurance – European model
• Communication, risk management and long term
commitment
Short term insurance solutions
• Communicate with insurer – incident data base
– Both the business and the industry
• Implement risk management program
• Increase deductible
• Reduce coverage
• Co-insurance