Government Vehicles

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

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

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

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

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

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

25. Q and A Questions?