1. Government Vehicles Managing Liability Risk Financial Management Institute November 24 2008

2. 2 Maxim “No man hath endurance, as he that selleth insurance” -anon

3. 3 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

4. 4 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

5. 5 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

6. 6 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

7. 7 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

8. 8 Regulatory Environment Provincial Legislation  Highway Traffic Acts  Negligence Acts  Motor Vehicle Acts  Insurance Acts  Workers’ Compensation Acts

9. 9 Regulatory Environment Federal Legislation  Department of Justice Act  Financial Administration Act  Government Employees Compensation Act  Canada Labour Code  Criminal Code of Canada

10. 10 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

11. 11 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

12. 12 Insurance  The TB Risk Management Policy permits the placement of insurance by Crown departments  Automobile Liability insurance is mandatory for: Crown vehicles entering the US Crown 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

13. 13 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

14. 14 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

15. 15 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

16. 16 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

17. 17 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

18. 18 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

19. 19 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

20. 20 Risk Control Loss Reduction  Loss reporting procedures  “In vehicle” accident instructions and contact numbers  Accident investigation  Loss adjustment services  Incident review

21. 21 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

22. 22 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

23. 23 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!

24. 24 Resources  Canada Safety Council: www.safety-council.org/www.safety-council.org/  Canadian Association of Road Safety Professionals: www.carsp.ca/  Insurance Bureau of Canada: www.ibc.ca/ www.ibc.ca/  Insurance Institute for Highway Safety: www.iihs.org/  SMARTRISK: www.smartrisk.ca/www.smartrisk.ca/  Transport Canada: www.tc.gc.ca/roadsafety/pub/menu/

25. 25 Q and A Questions?