November 19, 1998.

To:Strategic Policies and Priorities Committee

From:City Clerk

Re:External Legal firms Retained for Insurance Claim Defence

Recommendation:

The Budget Committee on November 18, 1998 reports having received as information the report (October 16, 1998) from the Chief Administrative Officer and the Chief Financial Officer and Treasurer.

The Budget Committee reports having requested the Chief Administrative Officer and the Chief Financial Officer and Treasurer to provide a further report on this matter to the Budget Committee in January1999.

Background:

The Budget Committee on November 18, 1998, had before it a joint report (October 16, 1998) from the Chief Administrative Officer and the Chief Financial Officer and Treasurer regarding external legal firms retained for insurance claim defence

City Clerk

Barbara Liddiard/cp

Item No. 1

Attachment

c.Chief Financial Officer and Treasurer

Director of Budgets

Chief Administrative Officer

Len Brittain, Director of Treasury and Financial Services, Finance Department

(Joint report dated October 16, 1998 addressed to the

Budget Committee from the

Chief Administrative Officer and the Chief Financial Officer and Treasurer)

Purpose:

To report for information purposes, details on the use of external legal firms retained for insurance claim defence purposes.

Funding Sources, Financial Implications and Impact Statement:

There are no funding implications relating to this report.

Recommendations:

It is recommended that this report be received for information purposes.

Council Reference/Background/History:

At its meeting of July 29, 30 & 31, 1998, City Council referred the following motion to the Corporate Services Committee:

"BE IT RESOLVED THAT the Chief Administrative Officer and the Chief Financial Officer and Treasurer be requested to report to the October meeting of the Corporate Services Committee and the Budget Committee on:

-a list of all outstanding claims where external legal firms are retained, including all ABC's;

-a process on how firms are selected;

-the firms that are retained and annual billings by each; and

-how much has been drawn from the insurance Reserve Fund (now total at $40.6 million) in the last five years and to which firms, and a projection on how much would be paid in the future five years."

Comments and/or Discussion and/or Justification:

Staff is in the process of compiling available insurance claims data to show all outstanding claims in litigation, the external defence counsel used, legal costs to date and those amounts paid from the Insurance Reserve Fund. This work is complicated by the fact that insurance claims data for the former Toronto municipalities is currently maintained in several different computer systems. Each system provides different capabilities regarding the extraction of specific data, such as the defence counsel used and fees paid for a particular claim. As well most Agencies, Boards and Commissions such as The Toronto Transit Commission, Wheel-Trans, The City of Toronto Hydro Electric Commission, Parking Authority of Toronto, maintain their own insurance functions.

In some cases such as the system utilized by the former Metropolitan Corporation, it is not possible to separate fees paid to external legal firms from the claim data maintained on the system. Other systems may afford this opportunity. Consolidation of the existing claims data systems is an outstanding item to be resolved by the City's new Insurance & Risk Management Section. A consolidated information system will also allow for the centralized management of all outstanding open claims that predated amalgamation of the former Toronto municipalities.

The former municipality of North York utilized the external law firm of Forbes Chochla & Aitkins almost exclusively for the defence of its liability insurance claims over the past five years. The claims system operated by North York is capable of identifying legal fees paid to the external law firm.

The former City of Scarborough utilized both in-house and the external defence counsel of McCarthy Tetrault for insurance claims. In-house Scarborough counsel did not charge fees, therefore all legal fees recorded on the Scarborough claim system relates to McCarthy Tetrault.

The former City of Toronto also utilized both in-house counsel and primarily three external defence law firms, namely, Blaney, McMurtry, Stappels & Friedman; Borden & Elliot and Shibley Righton for insurance defence claims. However, the majority of claims were handled in-house. The claims system can identify legal fees paid to external law firms.

The compilation of information on external legal firms and fees paid relating to the former municipalities of Etobicoke, East York, York and the Metropolitan Corporation must come from their former insurer OMEX. A request for this information has been processed.

Legal fees for all liability claims are a component of the claim reserve amount. A claim reserve is the amount determined by the claims adjuster following an investigation of the claim and represents the amount that is required to bring the claim to a final conclusion. A claim reserve amount includes legal fees, adjusting fees, settlement amounts and pre-judgement interest.

It is the intention of the newly formed Insurance & Risk Management Section of the Finance Department to establish and recommend to City Council, claims handling procedures for the new City. It is anticipated that the selection and use of internal and external defence counsel as agreed between the City's Finance and Legal staff and the City's insurance company will be defined in the recommended procedures. It is anticipated that the forthcoming claims handling procedures will provide guidelines on whether internal or external defence counsel is used and what reporting requirements are to be followed.

Conclusions:

The formation of the City's Insurance & Risk Management Section within the Finance Department will provide a stable platform for the establishment of claims handling procedures and the consolidation of claims information from the former Toronto municipalities. The formation of these two important risk management initiatives will be the basis of further reports to the Corporate Services Committee. Staff will compile the information requested and respond to City Council's request.

Contact Name:

Len Brittain, Director of Treasury & Financial Services, 392-5380

E-mail: lbrittai@city.toronto.on.ca