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