Insurance 'an animal that's going to eat us up'
In October, the Association of Municipalities of Ontario made a submission to the province’s attorney general regarding the issue. Central to the problem is joint and several liability. Joint and several liability says that in a lawsuit where multiple defendants are named, if it’s proven that some of the defendants can’t afford to pay their damages, those damages can be transferred to a defendant who can afford to the pay them, even if they are found to be only one per cent responsible. This is why townships are often named as defendants in lawsuits.
For years, municipalities have been lobbying the province for changes, and the AMO submission calls for a form of proportional liability to be introduced instead.
“ . . . what is a challenge for municipalities and property taxpayers alike, is being asked to assume someone else’s responsibility for someone else’s mistake,” reads the submission, signed by AMO president Jamie McGarvey. “Municipal governments should not be the insurer of last resort. For municipalities in Ontario, however, the principle of joint and several liability ensures they are just that.
“Joint and several liability means higher insurance costs. It diverts property tax dollars from delivering public services. It has transformed municipalities into litigation targets while others escape responsibility. It forces municipal government to settle out-of-court for excessive amounts when responsibility is as low as one per cent.”
“This increased exposure to liability has had serious ramifications for municipalities, both as a deterrent to providing public services which may give rise to claims and in raising the cost and reducing the availability of insurance,” the submission continues. “The cost of claims has caused insurers to reconsider not only what to charge for premiums, but whether to continue offering insurance coverage to municipal clients.”
The submission mentions a number of specific cases, where municipal insurance premiums have increased by large amounts in recent years Currently, many municipalities are facing a year-over-year increase of 10 per cent or more, and the submission notes one municipality as facing a 59 per cent increase in its insurance costs for 2019.
During an Oct. 31 Minden Hills council meeting, councillors heard a presentation from Gwen Tassone, a senior vice president and account executive with Marsh Insurance about insurance and risk
management. There are variety of packages available to municipalities to best protect themselves and parties involved in public events from liability.
“Can you just generally talk about what’s happening with municipalities, in terms of their rates?” asked Councillor Bob Carter, “and the second part of that is, how are municipalities responding? Are they changing their deductible? Are they increasing coverage, decreasing coverage, what’s going on?”
“Generally, what we are seeing, especially on the liability side because of, to be frank, the competitive process, a lot of municipalities, the premiums have been reduced to the point that the municipal insurers, and there’s only a handful who will even write municipal business, have been losing money year over year over year,” Tassone said, adding there have also been increased instances of property damage due to events such flooding. “So, generally, what we are seeing, for general liability policies, is up to a 10 per cent increase.”
“Getting no change is rare, depending on a lot of factors, including the risk mitigation process that is in place,” Tassone said.
“In the AMO submission, there’s some in the order of 16 and 17 per cent,” said Mayor Brent Devolin, “ . . . so some of them are way up there, more than a point on their [tax] levy.”
Devolin asked Tassone if the insurance industry was part of the feedback process the AMO submission is part of. Tassone said indirectly, but that industry representatives were not directly at the table.
“This cannot go on, in this way and fashion,” Devolin said of the increasing costs. “It’s an animal that’s going to us up.”
“This is not sustainable at all, and it’s frustrating that something as simple as a public event that we get wrapped all up in this, and to protect our interests, we have to what, in my opinion, is not in the best interest of our community,” the mayor said.
Insurance deductibles and settlements for the township in 2018 totalled more than $255,000.