A system that sees municipalities as money bags when it comes to awarding legal settlements is a longstanding sore spot for Ontario’s local governments. Now, with a potentially friendlier ear at Queen’s Park, they’re making a push to change what’s known as joint-and-several liability provisions in provincial legislation.
Currently, municipalities are often seen as the insurer of last resort in cases where, for example, a collision has left someone injured but the other driver doesn’t have enough insurance to cover the costs awarded in a legal judgment. If the municipality is deemed just one percent liable for the action – say, because of an obscured road sign or uncleared snow – it could end up on the hook for most of the costs. The existing legislation means municipalities are often deliberately targeted as “deep pocket” insurers, the Association of Municipalities of Ontario (AMO) has long maintained in calling for changes.
Now, the Conservative government is in the process of reviewing the liability scheme, with AMO and its member municipalities pushing for a favourable resolution.
In Woolwich, staff is currently drafting a report in support of the AMO position, with the goal of having council discuss the matter next week. Comments are to be forwarded to the provincial attorney general.
“The current system is such that someone in an accident they’re liable for, but they don’t have the money … the municipality is on the hook,” said township chief administrative officer David Brenneman.
“We’re seen as the ones with the deep pockets,” added director of finance Richard Petherick, who is drafting the report.
The township hasn’t been hit by such claims to date, but there’s strength in numbers by joining in on the AMO plan for change, he added, noting the goal is to have the system replaced by a form of proportionate liability that would see municipalities pay only for its share of any settlement.
In advocating for proportionate liability, AMO points to successful version of that system operating successfully in many U.S. states and parts of Australia.
“A pure proportionate (several) liability system would allow compensation to an injured plaintiff to the extent that any defendant is found liable. Therefore if a municipality was found 25% liable and another codefendant 75%, but without funds to pay, the municipality would pay only its 25%,” the report notes.
A proportionate system is also the preferred alternative for the Association of Municipal Managers, Clerks and Treasurers of Ontario (AMCTO). The group also calls for a cap for economic loss awards and tighter reporting requirements for the insurance industry, among other changes.
Woolwich is part of a shared Region of Waterloo insurance pool that has managed risks well and kept premiums manageable, Petherick said. Other municipalities in the province have faced double-digit premium increases, however, due to the joint-and-several provisions of the Negligence Act.
While the issue may seem somewhat arcane, it really boils down to dollars and cents, and making a system that’s fair. As it stands, residents could face large tax increases to offset potential liability claims.
Such indirect costs are already a fact of life, according to AMO, costing municipalities and taxpayers dearly in the form of rising insurance premiums, service reductions and fewer choices.
“It is entirely unfair to ask property taxpayers to carry the lion’s share of a damage award when a municipality is found at minimal fault or to assume responsibility for someone else’s mistake,” reads an AMO report calling for reform of the system.
“Joint and several liability is problematic not only because of the disproportioned burden on municipalities that are awarded by courts. It is also the immeasurable impact of propelling municipalities to settle out of court to avoid protracted and expensive litigation for amounts that may be excessive, or certainly represent a greater percentage than their degree of fault.”
The province announced a review of joint-and-several liability issues back in January, with a consultation phase launched in the summer. Attorney General Doug Downey called on municipalities to share their concerns, particularly in relation to insurance costs and “liability chill” that adds to legal expenses.
Woolwich’s planned input and support for the AMO position is part of the consultation stage, as municipalities lobby for improvements.
“We’re fairly fortunate in terms of the insurance pool. Premiums are up a little this year, an inflationary thing, but last year they went down,” said Petherick. “We want to be able to keep managing risk.”
If the municipalities are successful in getting changes to the legislation, that reduces the potential burden on taxpayers, Brenneman noted, seeing Woolwich’s involvement in the debate as a pre-emptive move in that capacity.