Insurance News - Sunday, July 31, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Sunday, July 31, 2016:

• Tesla and Google are taking different approaches to developing self-driving cars.
• Uber drivers in Ontario are now automotically insured,
• Auto insurance rates still rising, despite province's pledge to lower them.
• Uber plans to collect street-view photos in Mexico to further lays the groundwork for a fleet of autonomous vehicles.
• Canada tops the list of wealthy countries in the percentage of road fatalities related to alcohol impairment.
• Customers sour on insurers' UBI discount model.

Insurance News - Friday, July 22, 2016

Here are the leading auto insurance headlines from ONTARIO AUTO INSURANCE TOPICS ON TWITTER for Friday, July 22, 2016:

• A prominent Toronto lawyer who pursued a frivolous action on behalf of a client was found personally liable Tuesday for the legal costs.
• What will your car have to do for the police to pull you over when you’re in an autonomous car?
• In the U.S., being on the lower end of the wage scale can mean paying much more for auto insurance, even for good drivers.
• As self-driving cars change transportation, how will infrastructure adapt?
• Details on the first self-driving car death involving Tesla S using autopilot.
• Ontario’s program to allow testing of self-driving cars on public roads has not received any applications since it launched January 1,

US District Court for District of Massachusetts allows default judgment after defendant insured served by publication

After Juan Molina was killed in a construction site accident, his estate brought a wrongful death claim against multiple defendants including Santos Remodeling, Inc., a landscaping company. 

Santos was insured by Amguard Insurance Company.  The Amguard policy excludes bodily injury to an employee of the insured arising out of and in the course of employment. 

In a declaratory judgment action against Santos, Amguard alleged that Santos breached its duties under the policy because it never notified Amguard of Molina's death and has not cooperated in Amguard's defense of the claim.  Amguard alleged that is has been prejudiced by those failures both in its investigation of coverage and in its defense of the claim.

Molina's estate was also named as a defendant in the declaratory judgment action.  (Typically all parties to an underlying case should be parties in a dj action.)  The estate moved to dismiss for improper venue.  That motion was granted, so that the only remaining defendant was Santos.

Amguard's motion to serve Santos by publication was granted.  Amguard published a notice of the litigation in the local paper.  When Santos did not answer the complaint, Amguard moved for a default judgment.  That motion was allowed in Amguard Insurance Company v. Santos Remodeling, Inc., 2016 WL 424961 (D. Mass.) (unpublished). 

It's hard for me to understand why Molina's estate sought to be dismissed from the case instead of litigating on the merits.  Santos is likely judgment-proof, so any recovery against it must come from the insurer.   Maybe the estate felt that the insurer's facts were so strong, either on coverage or defense, that it was not worth fighting for coverage.  Maybe other defendants in the underlying matter have sufficient coverage that Molina's coverage is irrelevant.  (But if so, where are the carriers for the codefendants -- surely they would want to share liability with other defendants?) 

Ontario Auto Insurance Rates Remain Chronically High

FSCO's latest quarterly rate approval numbers have been released and suggest that consumers will see very few savings the statutory accident benefit cuts that became effective on June 1.

FSCO approved 14 private passenger automobile insurance rate filings during the second quarter of 2016. These 14 insurers represent 30.06% of the market based on premium volume. Approved rates increased on average by 0.33% when applied across the total market. This follows the modest 3.07% reduction in approved rate filings in the first quarter of 2016.

The end of lower rate filing approvals indicate that the any savings derived from the recent reform package are small. A portion of the savings could be wiped out before the end of the calendar year if companies continue to file for increases. The government has abandoned the the 15% rate reduction promise made in August 2016. However, if you aggregate all the rate changes since the 2013 announcement, the total rate reduction is 9.84% when applied across the total market.

Product reforms have proven to be an ineffective tool for controling auto insurance premiums in Ontario. As long as transactional costs within the system remain high, Ontario drivers will continue to pay high rates. A new delivery system is needed to bring Ontario's costs in line with other jurisdictions. For a discussion on how to address the systemic problems in Ontario, see my article entitled Ontario's 25-Year No-Fault Journey.

U.S. District Court denies insurer's request to remove arbitrator prior to arbitration award being issued

The following case is a straightforward decision on the law of arbitration, but it provides a glimpse into the world of reinsurance as well as the mergers, acquisitions, demergers and sales of insurance entities. 

John Hancock Life Insurance Company entered into an agreement with Employers Reassurance Corporation  by which John Hancock would transfer to Employers a percentage of its retention of liability under some of its policies.  The transfer agreement included an arbitration clause that provided that in the event of a dispute each party would appoint one arbitrator and those two arbitrators would select a third. 

John Hancock initiated arbitration to resolve a dispute regarding Employers' right to increase the reinsurance premiums charged under the agreement.  Employers selected Denis Loring as its appointed arbitrator.

John Hancock alleged that the appointment of Loring violated the agreement's prohibition on the appointment of arbitrators who were past or present employees of John Hancock or its affiliates because Loring had worked for one of its affiliates.  Employers asserted that the appointment was consistent with the agreement because Loring ceased working for the affiliate before it became affiliated with John Hancock, and the affiliate is no longer affiliated with John Hancock.  (The name of the affiliate is John Hancock Mutual Life Insurance Company -- not to be confused with John Hancock Life Insurance Company, the plaintiff in this case.) 

In John Hancock Life Insurance Company (U.S.A.) v. Employers Reassurance Corporation, 2016 WL 3460316 (D. Mass.) (unpublished), the United States District Court for the District of Massachusetts held that the Federal Arbitration Act does not authorize a court to remove an arbitrator before a final arbitration award has been issued.

A great insurance event (a month later)

Last month I was privileged to attend a fantastic networking event at the Insurance Library in Boston, where I caught up with scattered colleagues and met local giants in the insurance field including current and former commissioners of the Massachusetts Division of Insurance, the publisher of The Standard, a weekly insurance journal, long-time teachers of insurance certification classes, and others.  

Agency Checklists, one of my favorite blogs, posted about it here along with a description of some of the services offered by the Insurance Library.   

New Ontario Towing and Storage Regulations Are Now In Effect

New regulations are now in effect if you repair, tow or store vehicles in Ontario. The new regulations under the Repair and Storage Liens Act took effect on July 1, 2016. Further regulations will come into force starting January 1, 2017.

 The following new rules come into effect on July 1, 2016:

• If a vehicle being stored is subject to a lien and is received from someone other than its owner or a person having the owner's authority, then the storer must give notice to the owner and other interested parties of the lien in writing (e.g. secured parties who have registered their interest, such as lease and finance companies). 
• For vehicles registered in Ontario, the notice period is reduced from 60 days to 15 days after the day after the vehicle is received. If notice is not provided within 15 days, a storer's lien is limited to the unpaid amount owing for that period. The 60-day notice period remains unchanged for out-of-province vehicles. 
• If no amount has been agreed upon for repair and storage costs, fair value may be determined by a court. There is a new list of discretionary factors a judge will be required to consider (such as fixed costs, variable costs, direct costs, indirect costs, profit and any other relevant factors).

Ontario Regulation 427/15 can be found here.

Ontario Changes Fleet Definition To Accommodate Ride-Sharing

This week, the Ontario amended Regulation 664 to expand the definition of a fleet to accommodate ride-sharing services. The change opens the door for insurers to offer policies to drivers of vehicles for hire using an online app such as Uber.

The regulation amendment expands the fleet definition to include vehicles available for hire through a common online-enabled application or system for  pre-arranged transportation. The vehicle owner or lessee is to be a named insured under an auto insurance contract. The regulation change will make it easier for Ontario businesses to insure a group of privately owned vehicles under one insurance policy as a “fleet” when they are available for hire using an online app.

FSCO has already approved a fleet policy proposed by Intact Insurance Company. The Intact policy provides blanket fleet coverage under a standard automobile owner’s policy (OAP 1) for private passenger automobiles used in the transportation of paying passengers who utilize Uber. The Intact fleet policy only provides coverage when the driver is logged onto the Uber online app. In other situations, coverage under the personal owner’s policy for the automobile is applicable.

FSCO has also approved the use of an electronic insurance card for use in connection with ride-sharing. The electronic insurance card will permit ride-sharing drivers, who are covered under the Intact policy the option, to provide evidence of insurance electronically using an online-enabled app (e.g., to law enforcement officials).