Coverage, Contracts and the Currency Difference

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 driving 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 impact 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 is now more of an alarming concern as we watch the erosion of limits just by dictating 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 the elevation of limits is considered to maintain the policy limits’ original comfort to cover the exposures at hand.

Ever consider cargo contracts?

Many shipper contracts are generated in the U.S. The language of these contracts speaks 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 contract’s terms.

With the Canadian dollar’s erosion, 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 binds the carrier to the terms of the U.S. contractual agreement for the transportation of goods.

In summary, respect the policy’s limits and any terms that could be breached by currency differences and adjust the coverage limits accordingly.

If you have questions on your coverage, contracts, and how currency differences may be leaving your exposed, speak to your Bryson Insurance Broker or call us today at 1-800-661-5196.

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 lcolgan@brysoninsurance.ca