Skyrocketing insurance batters tourism operators

Nunavut’s small tourism operators face liability insurance rates that have jumped by as much as 500 per cent over the past year – and there’s no easy solution in sight.

“It hasn’t been pleasant. There is not a lot of good news on the horizon, and I don’t have any magic solutions either,” said Gilles Valade, a former insurance broker who led a workshop on liability insurance and risk management at Nunavut Tourism’s annual general meeting in Iqaluit last weekend.

The result is that liability insurance is now less affordable – and even unaffordable – for many small tourism operators.

“In Nunavut, liability insurance is required in order to be licenced by the government to operate, and, as a result, these businesses face an irreconcilable situation in which they have little control,” says a draft discussion paper prepared last fall by Nunavut Tourism staff.

It’s now more difficult for operators to get outfitters’ licences, and the situation exposes them – and their employees and associates – to the possibility of multi-million-dollar lawsuits.

Another group that’s getting more fearful of the liability issue are Nunavut’s so-called “landowners” – those entities who manage or own land on which tourism activities take place, such as Parks Canada, Nunavut Tunngavik Inc. and the Government of Nunavut.

“It’s a big issue for us,” Pauline Scott of Parks Canada said during the workshop.

These organizations are especially fearful of multi-million-dollar lawsuits launched in U.S. courts by aggressive trial lawyers on behalf of hurt or angry clients.

“The landowner is always named in any lawsuit against a tourism outfitter, and as these organizations generally have the deep pockets, they will be targeted by the lawyers,” Nunavut Tourism’s discussion paper says.

The Nunavut government will not give licences to tourism outfitters unless they carry at least $1 million worth of liability insurance. But Nunavut Tourism is discovering that the insurance policies carried by those businesses may not provide adequate protection against claims for compensation.

Valade, who teaches at the University College of the Cariboo in British Columbia, said liability insurance rates are rising because of a long, complicated list of reasons, all of them beyond Nunavut’s control.

The global insurance industry is in the throes of a crippling financial crisis, set off by huge payouts triggered by events such as the Sept. 11 terrorist attacks and the spectacular bankruptcies of big companies like Enron and Worldcom.

The adventure and outdoor travel industry has been hit hardest of all, because most insurance brokers consider it to be a high-risk business.

Nunavut’s fledgling outdoor and adventure travel industry is perceived to be among the most risky – because the insurance industry is ignorant of Nunavut and tends to exaggerate the risks of operating tourism businesses here.

Nunavut Tourism’s board is now looking at a range of cheaper insurance options – none of them easy – that Valade presented them with.

They include the use of a reciprocal insurance exchange, the creation of an industry-owned insurance company, or the creation of a “risk purchasing group” that would buy insurance on behalf of a group of operators.

In the meantime, the organization is looking at ways of mimimizing risk and helping its members become more insurable through training and education, and the development of safety standards among its members.

At last weekend’s general meeting, Nunavut Tourism members passed a resolution authorizing the development of an industry-wide “waiver” document. A “waiver” is a special legal document that tourists sign, promising not to sue for compensation if certain things go wrong during their trip.

The organization hopes that if they develop a waiver document for its members to use when signing up customers, they can at least minimize the risk of a major lawsuit in a U.S. court.

Waiver documents, however, cannot be offered by boat-tour operators. That’s because the Marine Liability Act prohibits their use.

Nunavut Tourism is an independent business organization representing Nunavut’s tourism-related businesses, funded by membership fees and annual grants from the Government of Nunavut. One of its jobs is to market and promote Nunavut as a tourist destination on behalf of its members.

Even that function is threatened by the insurance crisis. Under Nunavut’s Travel and Tourism Act, Nunavut Tourism is not legally allowed to advertise unlicenced outfitters.

As well, some southern tour operators are reluctant to partner with small Nunavut tourism businesses, partly because they fear the consequences of becoming party to a huge compensation claim.

Worst of all, perhaps, is that it’s creating a huge barrier that could prevent the creation of new, community-based tourism businesses, especially among Inuit.

“Many operators, again especially unilingual Inuit, are not aware of the issues around possible litigation arising from running a tourism business. There is a similar lack of awareness of the risk management tools, such as waivers and indemnity forms, that can be used to reduce this risk,” Nunavut Tourism’s discussion paper says.