notice to policyholders concerning the wind-up of the Canadian Branch of The Home Insurance Company

When an insurance company fails

For well over a century, hundreds of competing property and casualty insurance companies in Canada have honoured millions of claims - amounting to billions of dollars - promptly, and in full. Insurance company failures, although rare, can and do occur. That's why Canada's property and casualty (P&C) insurance companies fund a special program, approved by government regulators, to protect policyholders and claimants.

When a Canadian P&C insurer like the Canadian Branch of THE HOME INSURANCE COMPANY ("THE HOME (CANADA)") is wound-up, the industry-funded, non-profit Property and Casualty Insurance Compensation Corporation ("PACICC") will respond to claims of policyholders under most policies. You don't need to apply for protection; it is extended automatically to eligible policies.

A wind-up order was made in respect of The Home (Canada) by the Ontario Superior Court of Justice on June 26, 2003. The Home (Canada) had been writing mainly commercial business in Canada and had been running off its business for some time. The Home (Canada) was licensed for property, accident and sickness, aircraft, automobile, boiler and machinery, fidelity, liability and surety. PACICC's protection does not extend to aircraft, fidelity or surety and while it responds to some liability it does not respond to directors and officers, employers liability, or errors and omissions insurance.

The Home (Canada) has been placed in liquidation at the instance of the Federal Superintendent of Financial Institutions to protect the interests of Canadian policyholders and creditors as the parent company in the United States had been placed in liquidation and declared insolvent on June 13, 2003.

Procedures

a) As The Home (Canada) had not issued any new policies for some time, there should be no claims outstanding for unearned premium. Valid claims for direct loss or damage will be considered by PACICC.

b) You must exhaust all other sources of insurance coverage before submitting a claim to PACICC.

c) The maximum recovery from PACICC is $250,000 with respect to all unpaid claims for losses arising from a single occurrence.

d) Policy deductibles are applied to the total amount of the insured loss.

e) If you choose to be compensated by PACICC, you must assign your claim to PACICC. If your claim exceeds the PACICC limits of $250,000, you may eventually be reimbursed for all or part of the shortfall from funds released by the liquidator. PACICC, however, will have to be reimbursed for the moneys it has paid to you before you will receive more.For example, if PACICC pays you $250,000 on an agreed-upon claim of $400,000 and eventually recovers $300,000 from the liquidator, PACICC will pay you a further $50,000, bringing your total recovery to $300,000. However, if the recovery were to be $400,000 from the liquidator, you would receive full payment of your claim.

f) An important advantage of compensation by PACICC, is prompt payment... avoiding the potentially lengthy delay before the liquidator is able to pay any part of your claim. Of course, you may claim directly from the liquidator, if you wish.

Questions and Answers

1) Which insurers are members of PACICC and who funds PACICC?

Unless they are covered by another authorized plan, all property and casualty insurers licensed in a province or territory of Canada to write the classes of insurance covered by PACICC are required to be members of PACICC. The exceptions include insurers licensed to sell only one or more of the following - automobile insurance in Manitoba, Saskatchewan or British Columbia, and specialty lines of insurance such as surety, fidelity, marine, or aviation. All participating P&C insurance companies pay a small levy to PACICC to cover its running costs. Should an insolvency occur, PACICC responds to valid claims and participating insurance companies are assessed for their share of the cost involved.

For a complete list of the kinds of insurance policies not covered by PACICC, see Schedule A to PACICC's Memorandum of Operation which can be found on its website at www.pacicc.com A list of PACICC's member companies can also be found on this website.

2) The Home (Canada) having failed, how do I submit a claim?

Contact your broker as soon as possible. When a company is declared insolvent, a liquidator "winds up" its affairs, including the processing of claims. The liquidator will write to all policyholders and claimants concerning claim procedures. Bear in mind, however, that the liquidator will need some time to examine The Home (Canada) records to gather the necessary information. If you have purchased your insurance directly from The Home (Canada) without assistance from a broker, notify The Home (Canada) head office of the claim.

3) Does PACICC determine the value of my claim?

No, the liquidator determines the value of your claim, but PACICC will want assurance that the amount is reasonable.

4) What happens if I disagree with the amount offered?
If you disagree with the amount offered and you cannot resolve the matter with the liquidator, you can try to bring an action in court; to do this, you will need the court's prior approval.

5) What happens if I am liable for a claim against me for which I am insured by The Home (Canada) and the claimant doesn't accept the settlement; can I be sued for the full amount? Who will defend me?

Someone having a claim against you has the right to sue for the full amount and is likely to sue you rather than your insurer. You should direct your inquiry to the liquidator of The Home (Canada). PACICC is involved only with payment of claims where agreement has been reached on the amounts payable.

6) What happens if an insurer cancels its membership in PACICC?

The companies which are members of PACICC can terminate their membership only if they cease doing business everywhere in Canada in those classes of insurance which are covered by PACICC.

Property and Casualty Insurance Compensation Corporation
20 Richmond Street East, Suite 210
Toronto, Ontario M5C 2R9
1-888-564-9199 / 416-364-8677
website www.pacicc.com