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As accountability in corporate leadership continues to broaden across a wider range of issues, legal challenges remain a significant concern for businesses. In Sovereign Insurance&rsquo;s annual Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/toronto/eduard-lecker" title="" target="">Eduard Lecker</a>, Senior Underwriter, &nbsp;Management Liability, shares his insights on key loss trends and exposures in this area in 2024 and what organizations should be aware of in 2025 as new risks take shape.&nbsp;
What were the key loss trends and exposures you saw in 2024?
The key loss trend in 2024 remained consistent with the previous year: an increasing number of claims focused on environmental, social and governance (ESG).1 These legal actions&mdash;which can be initiated by consumers, shareholders and investors, and environmental advocacy groups&mdash;are typically centred on allegations related to greenwashing and climate change. For example, a company might make misleading claims about its environmental strategies or fail to disclose climate-related risks, which can expose them to significant legal and financial risks.&nbsp;
What are some emerging risks to keep an eye out for in 2025?&nbsp;
One emerging risk is claims related to artificial intelligence (AI). As more companies use AI, there&rsquo;s a growing risk of misrepresentation about what these systems can do. Some tech companies may overstate AI&rsquo;s capabilities. Companies using AI for hiring, financial reporting, or ESG decision-making are especially vulnerable, as they could face legal action if the technology doesn&rsquo;t live up to expectations. For example, AI systems that filter job applicants can have unintentional biases, and companies may claim that AI can replace human decision-making&mdash;when, in reality, there&rsquo;s still a lot of human oversight involved. If AI tools generate inaccurate reports&mdash;like pulling up the wrong numbers&mdash;and those figures influence critical decision-making, legal claims can arise. Similarly, when companies use AI to track their environmental impact, inaccurate data could also expose them to risk.
There are a couple of emerging issues in the U.S. to keep an eye on, as developments there often follow suit in Canada. Under the new U.S. &nbsp;leadership, there are rollbacks in climate policies and diversity, equity and inclusion initiatives. For example, the U.S. has pulled out of the Paris climate agreement, which could prompt companies to scale back their own sustainability effects. This could expose them to legal challenges from groups that feel misled by these changes.&nbsp;
With the current trade war between the U.S. and Canada, there&rsquo;s growing sentiment around &lsquo;Buy Canadian,&rdquo; but labelling what qualifies as Canadian-made is complicated. For instance, a product might contain American apples processed in Canada but is labelled as being made in Canada. If a product doesn&rsquo;t meet legal definitions of terms like &lsquo;Product of Canada&rsquo; or &lsquo;Made in Canada,&rsquo; this could lead to claims. &nbsp; For example, if incorrect labels lead to misrepresentation of a product or its origin, it could lead to claims of misrepresentation or breach of contract.&nbsp;
We&rsquo;re also keeping an eye on U.S. cases in which directors and officers are facing personal liability in lawsuits. Holding directors personally liable for their decisions could lead to more legal challenges and impact decision-making at the top level. &nbsp;
How can organizations mitigate these risks?&nbsp;
For AI, it really comes down to transparency. Don&rsquo;t overstate, misrepresent, or overpromise what AI can do, and understand the legal consequences of any claims you make. It&rsquo;s similar to how companies should approach environmental strategies&mdash;be transparent about your actions and results. Like the saying goes, &lsquo;understate, overperform.&rsquo;
For the developments that we&rsquo;re watching in the U.S., it&rsquo;s difficult to say how to mitigate against them because there are still a lot of unknowns. When it comes to labelling Canadian products, it&rsquo;s important to be aware of the legal requirements. Transparency is key here, too&mdash;if there&rsquo;s any uncertainty, you can direct customers to your website where you outline your process, which some companies are starting to do. If you&rsquo;re not misrepresenting your actions, you&rsquo;re far less likely to face legal issues.&nbsp;
Sources 1 Jan. 31, 2025: Moodys, &ldquo;D&amp;O series &ndash; Evolving risks in the boardroom: A new era of D&amp;O liability &ndash; Part 3&rdquo; 1 Aug. 22, 2024: McCarthy Tetrault &ldquo;Greenwashing and AI Washing: Emerging Trends in D&amp;O Claims Across North America&rdquo; 1 Oct. 22, 2024: &ldquo;The Insurer: Greenhushing &ndash; An emerging D&amp;O liability?&rdquo;

Loss trends and emerging risks in 2025: Management liability 

Managing Risk

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As businesses continue to rely on essential machinery and equipment, the risk of damage and breakdowns remains a significant concern. These incidents can disrupt operations, lead to costly repairs and result in extended downtime. &nbsp; As part of our annual Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/calgary/razvan-ionescu">Razvan Ionescu</a>, Manager, Equipment Breakdown Underwriting, Large Accounts &amp; Operations at Sovereign Insurance, shares insights into key loss trends from 2024 and emerging risks that organizations should be aware of in 2025.&nbsp; What were the key loss trends and exposures you saw in 2024? If we were to look for trends in the equipment breakdown insurance industry, the most notable phases would be the heating season and the cooling season. In colder months when heating systems are activated, for example, boilers that are used for heating buildings might experience breakdowns. This happens because they haven&rsquo;t been used for an extended period and when they&rsquo;re restarted, can fail due to improper shutdowns or lack of maintenance during the off-season. Similarly, with cooling systems, a lack of ongoing use and maintenance can lead to mechanical failures. In addition to seasonal concerns, we continue to see typical breakdowns of production machinery, transformers, and other equipment that businesses rely on day in and day out. This can be caused by issues like aging equipment, wear and tear, and lack of preventative maintenance.&nbsp; What are some emerging risks to keep an eye out for in 2025? One emerging risk I&rsquo;ve seen is a shift from traditional generators to electric or lithium-ion batteries as backup power sources or to reduce the on-peak service use. While generators have been in use for a long time, some businesses are turning to electric batteries. This shift brings new risks, especially when it comes to maintenance and exposure. With traditional generators, you typically need a mechanical specialist on-site to keep things running smoothly. But with electric batteries, the high-capacity maintenance is usually handled by the OEM (original equipment manufacturer), who monitors the battery&rsquo;s performance in various ways, for instance, through remote monitoring. So, the whole approach to upkeep is different. A big concern here is fire risks. Batteries are prone to something called thermal runaway, which is a chemical reaction inside the battery that causes it to overheat and potentially catch fire. This can happen without the presence of oxygen, which makes it more dangerous than other types of fires. If a thermal runaway event happens, it could damage the entire battery system, which might cost a company hundreds of thousands to replace. And of course, there are significant human safety risks with any type of fire. In contrast, if something in a backup generator breaks down, it&rsquo;s typically a mechanical issue that can be fixed &ndash; similar to how you would repair a car. How can organizations mitigate these risks? To keep machinery and equipment running smoothly and safely, the best approach is to follow the OEM recommendations. For example, if the OEM advises performing thermal scanning on batteries on a regular basis, it&rsquo;s important to stick to that schedule. There&rsquo;s a well-known saying: &ldquo;If you don&rsquo;t schedule maintenance, your equipment will schedule it for you.&rdquo; By regularly scheduling maintenance, you can ensure it&rsquo;s completed on time and reduce the chances of delays in sourcing spare parts. When it comes to batteries, there are also specific best practices to follow around proper use, storage, transportation, and disposal. Organizations should familiarize themselves with these guidelines to minimize risks. For any type of equipment, preventative maintenance is essential. Although insurance policies are designed to cover profit losses during downtime, the key is to maintain uninterrupted service to customers.

Loss trends and emerging risks in 2025: Equipment breakdown

From distracted driving on busy highways to the explosive rise of quick e-commerce deliveries on city streets, the landscape of risk is rapidly shifting for the transportation sector. As part of Sovereign&rsquo;s 2025 Q&amp;A series, Kevin Dutchak, Senior Risk Specialist, Commercial Auto, provides insights into the key loss trends of 2024 and offers practical advice on how businesses can mitigate risks to protect their operations this year and beyond.
<h4>What were the loss trends and key exposures you saw in 2024?</h4>
Distracted driving is still a big issue and it&rsquo;s becoming even more significant with the growing use of technology in the industry. Technology can be great, but it can also be distracting. For example, some drivers try to map out routes on the fly, and in the e-commerce delivery space, drivers are constantly looking at addresses along residential streets. These kinds of distractions may lead to a lot of loss incidents.
Additionally, traffic seems to get busier all the time. During rush hour and with ongoing construction, it&rsquo;s like that old video game, Frogger, with drivers switching lanes back and forth, speeding, suddenly cutting in front of other drivers, and trying to get ahead of everyone. Statistics show that road travel continues to be the riskiest form of transportation, from property loss and minor fender benders to serious injuries and fatalities. When you add distracted driving and traffic congestion into the mix, it can increase the risk significantly.
Driver controls are another ongoing issue. For example, there are cases where drivers took short cuts to try to save time. But that winding two-lane highway with limited passing lanes, for instance, can put you more at risk, especially in winter conditions.
<h4>What emerging risks should businesses be aware of in 2025?</h4>
Climate change and severe weather events are becoming more of an issue for the transportation sector. We&rsquo;re seeing more frequent storms and extreme temperatures, which can cause delays and put drivers in unsafe situations.
While cybercrime is becoming more of a risk in many industries, I don&rsquo;t see much of that in trucking yet. But as more companies integrate artificial intelligence into their operations, they should ask what they&rsquo;re doing to protect themselves so people can&rsquo;t hack into that and use it to their advantage.
<h4>How can organizations effectively mitigate these risks?</h4>
When it comes to distracted driving, the key to mitigation is the constant reminder that driving is your job 100% of the time. You can&rsquo;t afford to compartmentalize your thinking&mdash;you have to concentrate on the road because it&rsquo;s such a fluid situation.
Sound defensive driving practices are also critical. I&rsquo;m surprised at the number of fleets that don&rsquo;t provide that training, assuming that because their drivers have a licence, they don&rsquo;t need it. But despite our best efforts, we can all become complacent, distracted and forgetful. So, companies need to get the focus back on training. It&rsquo;s an investment in your drivers that can pay dividends.
In terms of driver controls, trip management programs can mitigate risks. Managers should have discussions with drivers to outline expectations: Here is when we expect you to be on the road, this is the route we expect you to take, here&rsquo;s when we expect you to stop. When there is an interruption to the plan due to situations such as poor road and weather conditions, traffic delays on route and driver fatigue, protocols should be in place for drivers to communicate with dispatch and operations staff to keep them advised, which in turn can be communicated to their clients. The safety of drivers and other road users is always the top priority. Telematics can also be used to monitor drivers&rsquo; routes and ensure drivers are following the proper procedures, such as speed limits and safety protocols.
If a driver does have a significant loss event, it&rsquo;s critical for companies to take effective corrective action, such as retraining or a driver interview. Often, a lack of corrective action can lead to further and more significant losses.
For weather events, fleet operations should focus on forecasting models, if they aren&rsquo;t doing so already. When severe weather conditions are imminent, companies should consider shutting down operations in the affected areas; all drivers should find the first safe place to park, advise dispatch of their status and stay in place until the shutdown order is lifted.

Loss trends and emerging risks in 2025: Transportation 

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Sovereign - Tools

Complete your daily vehicle inspection by referring to the guide below. Keep in mind, all defects must be recorded on the inspection report and reported to the operator immediately. No vehicle should be driven with a major defect.
To download the guide, click the &ldquo;Download Tool&rdquo; button above.

Vehicle Inspection Guide

This checklist provides a list of critical items for a driver to check on the vehicle prior to the start of the shift or workday. Completing this checklist not only helps ensure the vehicle is safe to drive, it may also help prevent costly on-road breakdowns.
To use a digital version of this tool, click the "Download Tool" button above. Once the PDF file is downloaded and opened in Adobe Acrobat Reader, click the "Fill &amp; Sign" button in the right column to start digitally filling the PDF file.

Non-commercial Vehicle Pre-trip Inspection Checklist

This checklist tracks the periodical mechanical inspections required for your commercial power units and trailers, to help you ensure that critical safety functions have been inspected and managed appropriately. It also keeps a log of the maintenance history of your inspected equipment, so that you can track maintenance/repair trends. To use a digital version of this tool, click the "Download Tool" button above. Once the PDF file is downloaded and opened in Adobe Acrobat Reader, click the "Fill &amp; Sign" button in the right column to start digitally filling the PDF file.

Fleet Preventative Maintenance Checklist

Liquid Bulk Trucks & Trailers: Product Offloading Best Practice

Accidents happen quickly and without notice. Therefore, we have listed some important tips to remember if you are faced with a motor vehicle incident. Use this kit as a tool to aid you in making a claim in the event of a motor vehicle accident.&nbsp;
To use a digital version of this tool, click the "Download Tool" button above. Once the PDF file is downloaded and opened in Adobe Acrobat Reader, click the "Fill &amp; Sign" button in the right column to start digitally filling the PDF file.

Automobile Accident Reporting Kit

Designed with fleet managers in mind, the Auto Risk Management Toolkit offers helpful resources to protect and support your drivers and help prevent road risks before they happen. The toolkit includes: The benefits of defensive driver training
While preventing accidents to keep people safe is the most compelling benefit of defensive driver training, there are several other benefits.&nbsp; Find out what defensive drivers look out for, the key benefits of defensive driver training, and some key defensive skills and techniques to keep your drivers, and fleet, safe. The importance of pre-hire road tests When hiring new drivers, applicants with years of trucking experience can look great on paper. However, regardless of a candidate&rsquo;s work history, it&rsquo;s crucial for fleet owners and operators to conduct a pre-hire road test to ensure the driver&rsquo;s skills and professionalism are up to speed. Learn what&rsquo;s involved and how to put your drivers to the test.&nbsp; Fleet preventative maintenance checklist template This checklist tracks the periodical mechanical inspections required for your commercial power units and trailers, to help you ensure that critical safety functions have been inspected and managed appropriately. It also keeps a log of the maintenance history of your inspected equipment, so that you can track maintenance/repair trends. Non-commercial vehicle pre-trip inspection checklist template This checklist provides a list of critical items for a driver to check on the vehicle prior to the start of the shift or workday. Completing this checklist not only helps ensure the vehicle is safe to drive, it may also help prevent costly on-road breakdowns. Liquid bulk trucks &amp; trailers: product offloading best practice infographic When offloading product from a liquid bulk truck/trailer, it&rsquo;s critical that drivers remain at the controls. Remind your drivers of this important best practice with this pictogram &ndash; and optional decal!

Auto Risk Management Toolkit

Designed specifically with Fleet Managers in mind, use this report template to track your fleet's accident and incident trends to support your drivers in upholding safe and responsible driving practices. Included in this template: are three different registers to help you track trends in your fleet: an Accident/Incident Register, a FMCSA Accident Register and a Violation Register To download the Excel Template, click the &ldquo;Download Tool&rdquo; button above.

Accident/Incident Register

Having a response to an unplanned shutdown of your office, facilities, project site, etc. should be part of your Business Continuity Plan. It&rsquo;s important to plan for such events by establishing a contingency plan and a systematic procedure to coordinate your facility shutdown in the best possible way. Complete this checklist to help you coordinate an unplanned shutdown of your facility.

Unplanned Shutdown Checklist

If your employees are using their own vehicles to support your business operations, for instance shifting their responsibilities to include driving deliveries of your products to clients, your current insurance policy may not provide appropriate coverage. Use the checklist below to help you screen and onboard employees into driver roles.

COVID-19 Non Owned Auto Exposures Checklist

Ontario provincial regulations (Technical Standards and Safety Authority) require certain boilers and pressure vessels be inspected and certified. We can help you determine your inspection requirements.

Ontario Equipment Breakdown Boiler and Pressure Vessel Checklist

Here are some tips to help you ensure that your construction site, the partially built structure, and neighbouring area remain well safeguarded and secure when construction has ceased.
This checklist provides general guidance only. Refer to the terms and conditions of your policy for further details regarding your obligations with respect to construction sites and partially built structures. In the event of any conflict between this general guidance and your policy, the terms of your policy will govern.

How to Manage Your Site when Construction Stops Checklist

The following checklist provides guidance and best practices to help you secure and protect vacant, shut down or unoccupied buildings.
This checklist provides general guidance only. Refer to the terms and conditions of your policy for further details regarding your obligations with respect to vacant, shut down or unoccupied buildings. In the event of any conflict between this general guidance and your policy, the terms of your policy will govern.

Securing Vacant/Unoccupied Buildings Checklist

Whether a major event shuts down your business completely, or allows you to continue operating at reduced capacity, you&rsquo;ll be glad you developed a solid Business Continuity Plan (BCP). No matter which scenario you may find yourself in, it&rsquo;s important to recognize that the risks to your business evolve with the state of your operations.&nbsp; When it comes to protecting your critical equipment, at a minimum your BCP should outline how you will operate, fix, shut down and even restart your equipment. And if it&rsquo;s missing some key considerations, we can help!

Safeguarding your Equipment in Challenging Times

Completing this Hot Work Permit is required before starting any operation that involves an open flame or produces heat and/or sparks.

Hot Work Permit

Qu&eacute;bec provincial regulations (R&eacute;gie du b&acirc;timent du Qu&eacute;bec) require certain boilers and pressure vessels be inspected and certified. We can help you determine your inspection requirements.

Quebec Equipment Breakdown Boiler and Pressure Vessel Checklist

Take appropriate steps to safeguard your business while your fire protection systems are impaired by completing this checklist and emailing it to your broker.

Fire Protection Impairment Notification Checklist

Today, boilers and pressure vessels are ubiquitous in modern society and are used across many sectors, including power generation, manufacturing, agri-food, forestry and dry cleaning.1 But when it comes to managing the risks associated with them, many companies still aren&rsquo;t aware of the role their insurers play with regards to inspections, their responsibilities as owners and how inspections can be beneficial to their businesses. We break down three key reasons why you not only need a jurisdictional inspection, but how it can benefit your business.
<h4>It&rsquo;s the law!</h4>
First and foremost, regular inspection of boilers and pressure vessels is the law, and it&rsquo;s important for owners and operators to stay on top of any regulatory changes. In July 2018, The Technical Standards and Safety Authority (TSSA) introduced new regulations for boilers and pressure vessels in Ontario.2 Previously, the insurer would issue a Certificate of Inspection directly to the client. Now, boiler and pressure vessel (BVP) owners must work directly with the TSSA, which will issue a Certificate of Inspection after the device has passed a periodic inspection and the insurer submits a Record of Inspection. Owners are required to pay a fee to the TSSA to receive their Certificate of Inspection. Ultimately, the onus is on owners and operators to comply with the law. In Ontario, if it&rsquo;s determined that the boiler or pressure vessel falls under the regulations, the owner or user is responsible for having it inspected before being put into operation (by the TSSA) and on a periodic basis after being put into service (by their insurance company). Once in operation, the insurer or third-party inspector will inspect every one, two or three years as required by the regulations. Qu&eacute;bec has similar requirements, though differs slightly in inspection frequency. In Qu&eacute;bec, if it&rsquo;s determined that the boiler or pressure vessel falls under the regulations, the owner or user is responsible for having it approved before being put into operation by the R&eacute;gie du b&acirc;timent du Qu&eacute;bec (RBQ).3 After being put into service, the boiler or pressure vessel is then inspected on a periodic basis by a person or body recognized by the RBQ, which issues a periodic inspection certificate. The inspection frequency varies, and may be a one, two, three or four-year cycle depending on the type of boiler or pressure vessel. Insurance companies are valuable partners in this regard. They can help companies determine if their vessel falls under the regulations and what the inspection requirements are, as well as help them comply with the regulations.
<h4>It&rsquo;s a matter of safety</h4>
In any jurisdiction, the primary reason boilers are periodically inspected is to verify compliance with safety requirements. Boilers can explode, causing property damage, injuries and deaths4, so ensuring the safety of people who are in the vicinity of the unit &mdash;whether they&rsquo;re employees or members of the public &mdash; is job number one.
<h4>It can save you money</h4>
Beyond the critical importance of safety, regular inspections have bottom-line benefits for owners and operators. For example, a common discovery during inspections is the formation of scale on the heat transfer surfaces of the boiler.5 Scaling reduces the rate of heat transfer across boiler tubes, and the reduced efficiencies result in increased energy costs.6 &nbsp;While regular maintenance and proper upkeep is imperative, an inspector&rsquo;s expertise can help ensure efficient operation and extend the life of the equipment. Though explosions are rare considering the sheer volume of boilers in operation around the world, they can also be very costly to businesses. First, there&rsquo;s the damage from the explosion itself, and then there&rsquo;s the cost of replacing the units. Insurance is the obvious way to reduce financial impacts in the event of an accident &ndash; but you need the right coverages in place. For example, it&rsquo;s important to note that losses to equipment aren&rsquo;t always covered under Property policies and there are exclusions that Equipment Breakdown insurance is designed to fill.7
<h4>We can help</h4>
At Sovereign, we make every effort to determine &mdash; based on your type of business &mdash; whether you have boiler or pressure vessel equipment installed and can arrange a visit from our inspector as needed. We have extensive equipment inspection services and can provide jurisdictional inspections in both Ontario and Qu&eacute;bec through our trusted partners.
&nbsp;
1&nbsp;Ontario&rsquo;s Regulatory Registry:&nbsp;<a href="https://www.ontariocanada.com/registry/view.do?postingId=24227&amp;language=en">Boilers and Pressure Vessels Regulatory Review</a>&nbsp;June 2, 2017 2 TSSA:&nbsp;Amendments to Ontario&rsquo;s Boilers and Pressure Vessels Regulation&nbsp;February 2, 2018 3 B-1.1, r. 6.1 - <a href="http://legisquebec.gouv.qc.ca/en/pdf/cr/B-1.1,%20R.%206.1.pdf" target="_blank" rel="noopener">Regulation respecting pressure installations</a>&nbsp;Updated November 1, 2019 4&nbsp;Engineering 360: <a href="https://insights.globalspec.com/article/2044/training-and-vigilance-key-to-preventing-boiler-accidents" target="_blank" rel="noopener">Training and Vigilance Key to Preventing Accidents</a>&nbsp;February 2, 2016 5&nbsp;The National Board of Boiler and Pressure Vessel Inspectors: <a href="https://www.nationalboard.org/Index.aspx?pageID=164&amp;ID=224" target="_blank" rel="noopener">Water Maintenance Essential to Prevent Boiler Scaling</a>, accessed August 22, 2019 6 U.S. Department of Energy: <a href="https://www.energy.gov/sites/prod/files/2014/05/f16/steam7_surfaces.pdf" target="_blank" rel="noopener">Clean Firetube Boiler Waterside Heat Transfer Surfaces</a>, accessed August 22, 2019 7 Sovereign Insurance: <a href="https://www.sovereigninsurance.ca/Industries-and-Solutions/Equipment-Breakdown">Equipment Breakdown</a>

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