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Monthly Archives: April 2017

The Cannabis Act and How Employers Should Respond

On April 13, 2017, the Liberal government—in partnership with law enforcement, health and safety experts, and the Task Force on Cannabis Legalization and Regulation—tabled legislation regarding cannabis (marijuana) legalization. In its proposal, officials noted that the government will provide regulated and restricted access to cannabis no later than July 2018.

If passed, the proposed Cannabis Act would end Canada’s prohibition on pot and regulate it for recreational use. Employers must be aware of the new changes and should consider doing the following:

  • Update drug policies. Legalizing recreational marijuana could increase the number of employees who smoke. Accordingly, employers must update existing drug policies and communicate new expectations to employees. These guidelines should outline testing procedures and define when testing may take place. While marijuana use will no longer be illegal, employers can restrict the possession of marijuana in the workplace.
  • Accommodate health needs. Remember, marijuana can be used to treat an illness or medical condition. In these cases, it may be helpful to review existing policies and procedures related to the use of prescription medications in the workplace.
  • Discipline employees when applicable. Remember that marijuana legalization does not give employees the right to freely smoke in the workplace. Employers should expect their employees to show up sober and ready to work. Employers should be empowered to discipline employees when marijuana usage has an adverse impact on job performance.

If passed, Canada would be the first member of leading industrial nations to legalize marijuana for recreational use. It’s important for employers to remain up to date on news related to the Cannabis Act and to act accordingly.

© Zywave, Inc. All rights reserved

Does Your Builders Risk Policy Cover Soft Costs?

Builders risk insurance provides valuable protection in the event of a direct property loss experienced by a contractor, project owner or other insured party during the construction process. However, when a catastrophic loss delays a project, indirect costs, such as soft costs and lost business income, can create substantial financial exposures for the businesses involved. Complicating matters further, many builders risk policies do not include coverage for soft costs or lost income related to construction delays.

Thankfully, firms can close this insurance gap with the addition of a soft costs endorsement to their builders risk insurance policy.

What are Soft Costs?

Construction projects are typically broken down into different categories of costs. The direct construction costs are the physical materials and supplies required to complete the structure. Labour costs are also included as a direct cost. These direct costs are referred to as the hard costs of construction.

On the other hand, soft costs are expenses not directly incurred for the physical construction of the project. Examples of soft costs that could be incurred include, but are not limited to: interest, real estate taxes, accounting and legal fees, developer’s fees, contractor’s general conditions, inspection fees, consulting and marketing fees, and additional insurance costs.

In the event that a loss occurs and the completion of a construction project is delayed, soft costs can represent significant expenses to the project owner and other parties working on the project.

To demonstrate how quickly expenses from soft costs can add up, consider an example of a project to build a new apartment complex. In the event of a catastrophe, the architects and engineers may charge a fee to redraw changes to plans. Legal fees may continue as well during this time, and new permits may need to be pulled. The site may need to be resurveyed, and insurance costs will increase if the term needs to be extended as a result of delay from a loss. Additionally, the apartment complex may lose potential renters when construction is delayed from the loss.

How Are Soft Costs Insured?

Insurance coverage for soft costs is most commonly obtained by adding an endorsement to a builders risk policy. The endorsement will specify which soft costs will be covered if a loss occurs. In the event of a loss that results in additional soft costs for the insured party, there are four requirements that typically must be met for coverage to apply:

  1. The delay must result solely from covered physical damage.
  2. The types of soft costs must be set forth in the policy endorsement
  3. Proof that the soft costs were necessary and reasonable must be provided.
  4. Proof that the costs would not have been incurred but for the delay must be provided.

Under a builders risk policy, soft costs are covered during the delay period. The delay period is typically defined as a period of time that commences with the anticipated completion date and ends when the project is actually completed.

Business Income Coverage

Another consideration for businesses purchasing builders risk insurance, especially project owners and developers, is whether their policies cover lost rental income or lost business income. This coverage, which can be added to a builders risk policy through an endorsement, replaces lost revenue or profits that would have been earned by the policyholder had the project been completed on time.

How Much Cover Do I Need?

When it comes to coverage for soft costs, a good understanding of project economics is key. Firms will need to account for potential delays based on worst-case scenarios. Potential exposures to soft costs can be assessed by reviewing the operational budgets that were established for the project.

In general, organizations seeking soft costs coverage should answer the follow question when assessing their coverage needs: If the worst possible loss occurred at the most inopportune time, how many and what type of extra expenses would be incurred?

© Zywave, Inc. All rights reserved

Is Your Organization Ready for Mandatory Data Breach Notifications?


On June 18, 2015, the Digital Privacy Act (DPA) received royal assent and became law. Among other things, the DPA amended the Personal Information Protection and Electronic Documents Act (PIPEDA) by revising consent requirements, introducing mandatory breach notification and record-keeping requirements, and adding significant fines for non-compliance.

While many of the measures introduced by the DPA have been in force since the bill was first enacted, the government held off on imposing mandatory breach reporting until the proper regulations were implemented.

Such regulations could be in place as early as fall 2017, and organizations will want to ensure that they know what is expected of them in order to remain compliant and avoid costly fines as high as $100,000.

Mandatory Data Breach Notifications

The DPA imposes reporting requirements for every organization in Canada that suffers a data breach, particularly if that data breach creates a real risk of significant harm to the personal information of one or more individuals. While the full extent of the reporting requirements will not be known until the corresponding regulations are published, the DPA defines significant harm broadly to include the following:

  • Bodily harm
  • Humiliation
  • Damage to reputations or relationships
  • Loss of employment, business or professional opportunities
  • Financial loss
  • Identity theft
  • Negative effects on credit records
  • Damage to or loss of property

Most often, the existence of “a real risk of significant harm” will be based on the sensitivity of the personal information involved in the breach, the probability that the personal information will be misused and additional factors that may be prescribed by the forthcoming regulations.

If a breach causing significant harm to one or more individuals occurs, the affected organization must do the following, as soon as feasible:

  • Report the incident to the Office of the Privacy Commissioner of Canada (Privacy Commissioner).
  • Notify affected individuals of the breach and provide them with information on how they may minimize the harm caused by the breach.
  • Inform other organizations and government entities of the breach, especially if they believe that doing so could reduce risks or mitigate harm.

Notices must contain enough information to help affected individuals fully understand the extent of harm caused by the breach. Additionally, notices must be conspicuous and provided directly to affected individuals. However, in limited circumstances, indirect notices may be permitted. Once again, more detail will be available to organizations once the forthcoming regulations are published.

Record-keeping Requirements

Another key change under the DPA will be the requirement that organizations keep records of all security breaches involving personal information. While it is still unclear the level of detail these records will need to contain, it is clear that the Privacy Commissioner will have the right to request and review these records at any time.

Penalties for Non-compliance

Under the DPA, fines up to $100,000 may be imposed against organizations that knowingly violate the mandatory breach notification requirements or breach record-keeping requirements. Until the regulations are finalized, it will remain unclear if a violation will include a single incident (for example, a single failure to notify all individuals impacted by a breach) or each incident (for example, each failure to notify each individual impacted by a breach). However, it is clear that the Privacy Commissioner now has the ability to impose significant fines for non-compliance.

What Does this Mean for Organizations?

Mandatory data breach notifications could impact any organization that is at risk of a cyber attack. Given the reach of the DPA and upcoming regulations, all organizations should consider doing the following:

  • Review and update existing protocols and policies to account for detecting, responding and reporting data breach incidents internally.
  • Assess the types of information—personal information, intellectual property, supplier data, etc.—they hold and how they would respond in the event of a breach.
  • Create a data breach incident response plan if one does not already exist. Such a plan should include methods for notifying the Privacy Commissioner and any impacted individuals.
  • Ensure that they have sufficient insurance in place and have taken the steps to mitigate any litigation exposures. Such steps often include requiring employee training, performing security audits and identifying cyber security vendors.

Organizations should review the DPA to ensure they are compliant with all aspects of the legislation.

© Zywave, Inc. All rights reserved

Insured Losses from Catastrophic Events Reached $4.9 Billion in 2016

In insurance, a catastrophic event is one that is typically unpredictable and causes extreme loss. Catastrophic events can be either natural or man-made disasters, and common examples include earthquakes, floods, hurricanes, wildfires and terrorist attacks.

According to a review conducted by Property Claim Services (PCS), insured losses from catastrophic events in Canada reached about $4.9 billion last year, which is nearly 10 times more severe than 2015. When these events occur, they have a heavy impact on the market—often driving up premiums.

The report—“More Than 50 Cats: PCS Full-Year 2016 Catastrophe Review”—also found that, over the past five years, the average insured loss from a catastrophic event was $2.1 billion. During this time frame, the two largest events on record in Canada were the 2013 Alberta floods ($1.7 billion) and last year’s Fort McMurray wildfires ($4 billion).

Six of the 2016 catastrophic events that occurred in Canada were in the “wind and thunderstorm” family and resulted in industry losses of nearly $860 million.

Furthermore, the report noted that the increase in catastrophic events had an impact on reported personal losses. In 2015—a quiet year for catastrophic losses—personal losses accounted for only 45 per cent of the insured loss estimate. In 2016, personal losses accounted for 71 per cent of the insured loss estimate.

Moving forward, there is a possibility that major, catastrophic events will increase in frequency and severity, making it all the more important for insurers and businesses to stay ahead of the game. In 2017, many insurance companies will be looking to advance their tools and share best practices for assessing and responding to catastrophic disasters, whether natural or man-made.

© Zywave, Inc. All rights reserved



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