Finding Balance: Advocating for Liability Reform
Liability reform has long been an objective of municipal governments. The legal regime of joint and several liability makes municipalities and property taxpayers an easy target for litigation. Just a fraction of fault can push municipalities to pay huge damage awards, often targeted deliberately as insurers of last resort. If other parties are unable to pay, “joint and several liability” means that damages can be recovered from any defendant even if they are deemed just one per cent responsible.
For municipalities, as public organizations with “deep pockets,” this often means that a finding of slight or minimal liability can result in responsibility for millions of dollars in damage awards in cases where other liable parties do not have sufficient assets. Municipal insurance rates have risen substantially due in part to growing claims and the regime of joint and several liability. For example, in 2010, Essex County’s insurance rates increased by 47.5 per cent.
In 2009, the Association renewed its efforts on this issue. In 2010, AMO released a detailed paper regarding joint and several liability.
AMO’s Work
In the spring of 2010, the Ontario Government proposed amendments to the Insurance Act which would permit the transfer of OHIP costs to municipal governments, as road authorities, if they were found to be liable for an auto accident injury. Known as subrogation, the proposal came as a surprise to the Association.
Having already done extensive research on the issue of liability, AMO was able to demonstrate that the proposal would put added pressure on insurance rates and would leave municipalities at substantial risk for higher costs.
AMO disputed out-of-date provincial data that had been used by the Government to estimate municipal risk. It also effectively refuted claims that municipalities could reduce their risks, given the municipal risk management measures already taken.
As a result of AMO’s advocacy, the proposed amendment was withdrawn and municipal governments were spared further pressure on liability premiums.
Outcome and Long-term Benefits
Advocacy for joint and several liability continues. The Insurance Bureau of Canada, Ontario’s municipal insurers and Chartered Accountants of Ontario support the push for legislative change.
In 2011, AMO conducted a comprehensive survey of municipal insurance costs and found that liability premiums had increased 22 per cent over five years. In response, the Premier made a commitment to further discuss options for reform and those discussions are ongoing.
Paying insurance premiums should not undermine a municipality’s ability to deliver services to residents. Within that context, AMO will continue to advocate for liability reform.