Canadian insurance policies are written in Canadian dollars. It is common knowledge that the U.S dollar holds more muscle compared the weakened Canadian currency. This means that business conducted over the border has a very dramatic impact on the payment and settlement of claims.
Linda Colgan, RIB, CAIB - Senior Account Executive
With the strength of the U.S. dollar repairs, towing, storage are settled at a higher amount while in the United States. Converting currency places additional strain on the limits provided by the insurance policy.
For the most part vehicle repairs will not be affected by coverage limits however the final loss settlement will have an impact on the overall loss ratio. Simply a claim in the U.S will cost the insurer/carrier more.
Many transportation companies carry minimum liability limits while travelling south of the border. Although insurance Brokers discourage this practice it now is more of an alarming concern as we watch the erosion of limits just by the dictation of the currency difference.
A Canadian carrier who maintains minimum liability of $2,000,000 does not have the parallel limits once the border is crossed. It is encouraged that elevation of limits be considered in order to maintain the original comfort of the policy limits to cover the exposures at hand.
Ever consider cargo contracts?
Many shipper contracts are generated in the U.S. The language of these contracts speak in U.S. currency. If a carrier is required to uphold a specific limit for liability and cargo, the onus of responsibility befalls upon the carrier to uphold sufficient limits and abide by the terms of the contract.
With the erosion of the Canadian dollar increased limits must be accommodated to advocate the binding agreements with shippers.
In Ontario, freight is governed by the Highway Traffic Act unless a carrier has bound themselves to a written contract that supersedes the boundaries of the HTA. Carmack applies to inbound freight and thus once again binds the carrier to the terms of the U.S. contractual agreement for the transportation of goods.
In summary respect the limits of the policy and any terms that could be breached by currency differences and adjust the coverage limits accordingly.
Linda Colgan has been an Insurance Broker in the transportation industry since 1986 and is Senior Account Executive with Bryson & Associates Insurance Brokers Ltd. Feel free to email Linda at email@example.com
“Most companies do not have the luxury of self-insuring. How many businesses possess the wherewithal to conduct proper investigations, and the expertise to determine the best course of action with the least exposure to legal ramifications?”
Tammy McCarthy, RIB, CAIB – Dir. of Transportation
Amidst the growing litigious nature of our society and skyrocketing settlements, the importance of protecting company assets has reached the forefront of diligent leadership and management.
Here are some key considerations when determining how much Liability coverage is right for you.
Damages, and the Law
Not all damages relate to physical injury to tangible property; there are increasing numbers of claims involving bodily injury, or even death.
Remember, the consumer of your product, the recipient of your work, or any person exposed to your operations has the right to expect reasonable care, and that all goods, work, operations and the establishment are in a safe condition; even when visiting or passing by. There is the added expectation that there will be no interference with their personal property or liberties.
Your business may be held liable for General or Special Damages, such as pain and suffering, future earnings, medical fees, loss of earning capacity, funeral expenses, and extended healthcare services, to name a few. Such costs are not only unpredictable; they are difficult to control and impacted by factors such as the victim’s social and financial position.
For certain industries, the large-dollar exposures are apparent (e.g. airline, pharmaceutical or manufacturing sectors), while others require closer analysis. Regardless, exposures do exist.
It is important to be aware of court awards involving similar businesses to your own, including emerging precedents. These cases set the foundation for future settlement of similar actions.
Legal Costs and Interest
Courts can impose payment for the Plaintiffs’ legal costs, pre-judgment and/or post-judgment interest. These costs are in addition to actual ‘damages’ awarded and can be quite substantial.
Existence of Insurance
Juries may be more generous when insurance is in place. It’s often referred to as the Deep Pockets Theory. The general concept being: those who have the greater ability to pay, should pay.
Although the existence of a liability policy is often inadmissible as evidence, a subtle inference or assumption may lead the Jury to believe one exists. This can serve as a form of psychological detachment; removing the sense of direct financial ‘injury’ to the Defendant(s).
U.S. sales or exposure? Consider the possibility that there may be less reluctance to commence a legal action when an incident occurs south of our borders. Not to mention the exchange rate and higher costs for your Canadian insurer to investigate, mitigate, defend and settle the claim.
Courts often give consideration to inflation – pushing awards to higher levels to compensate.
Ability to Absorb Losses
Most companies do not have the luxury of self-insuring. How many businesses possess the wherewithal to conduct proper investigations, and the expertise to determine the best course of action with the least exposure to legal ramifications? How many have reserve funding readily available when faced with a significant liability loss?
Fact: the ability to pay an award is NOT a consideration by the Courts!
Businesses may be left with no other option but to liquidate. And, in cases where that is still not enough to cover the Judgment, there is a potential impact on future earnings and any personal guarantees posted in association with the operations.
Fact: Bankruptcy does not necessarily absolve payment of a Judgment!
Tammy McCarthy has been in the insurance industry since 1997 and is the Director of Transportation with Bryson & Associates Insurance Brokers Ltd.