Canadian Lawyer

LEGAL REPORT/Personal Injury/Insurance Law Solway anticipates some insurers are going to change the conditions in homeowner's policies and tighten up coverage. While overland flooding is excluded under most homeowner's policies, he notes storm sewer backup coverage is typically available for an additional premium. When losses are caused by both flood and sewer backup, he says it can be difficult to determine to what extent coverage is available. "The Alberta floods really heightened the awareness about flood exposure and what is and isn't covered under a homeowner's policy." Some insurers will likely put sublimits on what's covered, increase deductibles, or, in some cases, remove coverage completely, he says. On the other hand, some insurers may not be able to afford to take steps that may lose business in the competitive market. Toronto lawyer Steven Stieber, of Stieber Berlach LLP, says if market forces allow insurers to charge higher premiums or look at the infrastructure to assess risk, this could allow insurers to recoup losses from higher damage payouts. However, he says this isn't a practical solution right now. "The market just won't allow it," he says. "If you don't write it because you think there's too much risk, there's somebody else who's going to." As more natural disasters and large-scale accidents occur, this will lead to more lawsuits brought by policyholders and insurers. Dolden says there will be litigation over whether damages from flooding are covered. "Generally, floods are not covered. But what we found in Toronto and Calgary was a lot of people experienced Kyla A. Baxter, CSSC PRESIDENT, BAXTER STRUCTURES What do your clients need? The means to move on. Guaranteed . ™ Baxter Structures customizes personal injury settlements into tax-free annuities that can help your clients be secure for life. Need more information? Contact us at 1 800 387 1686 or baxterstructures.com 48 ntitled-1 1 F e b r uary 2014 www.CANADIAN L a w ye r m a g . c o m sewer backups." He says since insurance policies often cover sewer backups, there is a lot of litigation over whether the event was purely a flood or a sewer backup. The amount of litigation will also depend on the government. Bruce Churchill-Smith, of Borden Ladner Gervais LLP in Calgary, points out the government stepped in with the Alberta floods, creating the Alberta Disaster Recovery Program. "That program is set up for people whose claims are either not covered by insurance or for part of the claims not covered by insurance." Whether people decide to bring lawsuits may depend on what the program covers. He says the government may also consider any further development on flood plains in deciding whether to cover a loss in a recovery program. "Whatever the government may do may affect what the insurers are going to cover, what their premiums are going to be." Stieber also believes natural disaster events will bring about more lawsuits in the form of class actions. He says what is now happening is the insurers get together and start a class action to recovery money paid out, suing a municipality or perhaps a contractor that did something that caused or contributed to the damages. "It's the insurance industry trying to recover from the insurance industry of someone else." With large-scale disasters creating the potential for millions if not billions of dollars in claims, parties will also need to find a way to be compensated when an at-fault party doesn't have adequate insurance. One of the problems Stieber sees insurance companies and municipal governments facing is joint-and-several liability. In these situations, one party may have only a small portion of negligence attributed to it, but has to bear the largest portion of any judgment because the party with the greatest liability is insolvent, can't satisfy the judgment, or has inadequate insurance limits. This means insurers have to look at what activity the insured is engaged in and the risk the insured may become involved in a largescale disaster. "It's not just evaluating the risk posed by your insured, but the tremendous risk your insured has in the event somebody else has been the primary party to cause the loss," says Stieber. In a situation like Lac-Mégantic, where the rail company only had $25 million in policy limits, "you can imagine that all the big players that may have had some minor role to play will have their limits totally exposed," says Stieber. He adds those insurers would not have taken into account they could be exposed to a risk of hundreds of millions of dollars given their insureds' roles. "You see the amount of damages that have been sustained as a result of [that rail accident]. There's no company that could possibly carry enough insurance to address the significant exposure caused by that type of disaster." Stieber doesn't believe the higher payouts will necessarily lead to higher premiums on insureds for natural disasters and largescale events. "The market's going to dictate to what extent companies are able to increase their premiums." He says the pressure on the industry to continually reduce premiums, as well as the tremendous competition, is going to ultimately lead to insurers that aren't able to sustain market forces. He believes this could result in fewer insurers in the industry. "There are problems if you can't properly charge for the type of losses that you're sustaining. Something's got to give somewhere." 13-09-16 2:53 PM

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