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CCCA_V3No4_Dept-RiskMgmt-FIN.qxd:CCCA_V1No2_Dept-CrossBdr-V1.qxd 11/24/09 11:26 AM Page 12 Risk Management If a problem with electrical wiring first facility it had rented,and trying to contain a sign that you did something you had to becomes known in 2005, but the claims the spread of the disease. It also actively do to settle.” against the company occur in later years, co-operated with health-care authorities. Donnelly said, a potential gap in coverage “We thought we were fully entitled… Directors & Officers exists if it is successfully argued that the to a return of the extra expenses we suf- insurance coverage 2005 policy will not apply because there fered, and the loss of profits,but the insur- There is a more aggressive complainant’s has been no “property damage” taking er didn’t see it that way,” Cerrone said in class-action bar today, requiring good place in the 2005 policy period, and the an interview.“Had we not been such a big Directors and Officers (D&O) insurance later policies will not apply because of this company,and were we not resourced our- coverage, says Ian Gold of Thomas Gold “no loss” interpretation. selves, we would have been stuck.” The Pettingill LLP. However,“generally speaking the court case was eventually settled out of court. “Disclosing everything”is key to keeping will not interpret the policy so that it’s His advice: get your insurance broker this coverage,as an insurer can rescind a pol- nullified… I can see, however, the cover- involved early to help properly administer icy where the insured makes material mis- age being limited to one or two policy your claim; get expert, aggressive counsel representation or non-disclosure when years as opposed to being spread across the who will understand the minds of the applying for insurance. If an insurer can policy years.” insurers; get excellent, fair evaluators; get prove material misrepresentation, it can Frank Cerrone, senior vice-president, the case to trial,in front of a judge,as soon either rescind the policy;do nothing;or give general counsel and secretary for Revera as possible. notice of cancellation and return of premi- Inc.,which operates retirement homes and “I think you need experts — counsel um. (The policy holder should not cash the long-term care facilities in Canada and the with deep experience with defence work cheque if it wants to fight the claim.) United States,spoke of his own company’s with insurance companies, and also suing Severability clauses can protect innocent experience with insurance litigation. insurers in the past — to understand what directors from misrepresentation made by Revera Inc. experienced outbreaks of those written words are intended to mean, other directors, and specific rescindability Legionella in one of its homes in the and then how a court will interpret it. coverage can be purchased, Gold said. 1990s. Cerrone said his company acted “And remember that mutual dissatisfac- appropriately, closing the home to further tion is the key to settlement: if you both Elizabeth Raymer is a freelance writer based admissions, moving residents to another feel you left something on the table, that’s inToronto.. Insurance Checklist 1. Make sure you have appropriate coverage in place. Get a good “generally list every possible way the policy can be voided,” so broker and work with him, “because the broker is going to be must be considered carefully, says Thomas. the source of your success if you’re going to do well” in the 5. The insurer has a duty to respond promptly to a claim. Denials event of a claim dispute, says Bruce A. Thomas of Toronto’s are normally in writing. Where there is a questionable claim, the Thomas Gold Pettingill LLP. insurer will try to avoid paying it; “in large claims, an insurer 2. Insurance policies should be properly stored off-site, archived, would rather deny… than put up millions of dollars.” In either indexed and backed up digitally in case of fire. “The onus is on case, the policy holder should see not only their broker, but coun- the policy holder to prove that coverage is in place,” says sel who specialize in insurance recovery, analysis and litigation. Thomas Donnelly, also of Thomas Gold Pettingill. 6. If a claim can’t be settled directly, arbitration may be required. 3. Follow the notice provisions in the policy. Report all losses in Though it can be costly, it allows for the selection of the writing, including via email, and “err on the side of caution,” person who will try the issue, as opposed to a judge, says Thomas says. Thomas. Arbitration is faster than a court case, more efficient, 4. Co-operate with the adjustor, who is protecting the insurer’s and confidential. interests. “Whatever you say must be accurate, prompt, and 7. Litigation is usually the end of the road, and precludes a long- appropriate.” Non-waiver agreements are normal where there term relationship with the insurer. And, “where there’s a lot of are coverage issues; if the policy holder refuses to sign one, the money involved, insurers put their A-team on it and you’ve got insurer will set out a reservation of rights letter, which will yourself a battle.” 12 CCCA Canadian Corporate Counsel Association WINTER 2009