Sewer repair partnership with U.S. firm puts city at risk, prof says

A municipal law professor says a private-public partnership between the City of Ottawa and an U.S. home warranty company puts the city at risk of financial liability, and the royalties to the city aren't worth it.

Personal home insurance may already provide coverage

Homeowners in Ottawa are responsible for the cost of repairing or replacing underground water and sewer lines up to the edge of their property, a cost that can easily exceed $5,000. (Lindsay Bird/CBC)

A municipal law professor says a private-public partnership between the City of Ottawa and an U.S. home warranty company puts the city at risk of financial liability, and the royalties paid to the city aren't worth it.

"If this private partner doesn't do its job properly, the city might end up on the hook for whatever damages they cause or whatever work they haven't done. And that to me as a taxpayer ... concerns me," said Stéphane Émard-Chabot, a former Ottawa city councillor who now teaches municipal law at the University of Ottawa. 

Earlier this week, homeowners in Ottawa started receiving cards in the mail with the City of Ottawa logo, informing them of the new optional protection plan.

However the letters were actually mailed by Service Line Warranties of Canada (SLWC), based in Pennsylvania, on behalf of the city to announce the company's partnership with the municipality.

For a monthly fee, SLWC said it will cover the costs of repairing a homeowner's underground water or sewer line should they fail, since homeowners are responsible for those pipes up until their property line or the water shut-off valve.

City of Ottawa may be taking on unnecessary risk in partnership with home repair company, lawyer says

CBC News Ottawa

2 months ago
Stephane Émard-Chabot, a municipal lawyer who teaches at the University of Ottawa, says the partnership with Service Line Warranties of Canada may make the city liable for any problems associated with the company’s work. 0:55

But the agreement is problematic not only for its ethics, but also for its potential risk to the city.

"The calculation really has to be: is, whatever pennies a month the city is getting for the plan that I buy for my house, is that worth the risk if this contractor or their sub-contractor hits a gas line and blows up half my neighbourhood, that the city's going to have to pay for it. Is it worth that much? That really is the question," said Émard-Chabot.

In Ottawa, homeowners are responsible for repairing or replacing underground water and sewer pipes up to their property line. (City of Ottawa website)

City pockets royalty of sales

SLWC charges homeowners $55 per year for water line protection, and $75 per year for sewer line coverage, plus taxes. Repairs to a home's water service or sewer line can range anywhere from $4,000 to $10,000 and potentially more for larger properties.

CBC has obtained a copy of the partnership agreement which shows the city will receive a quarterly royalty of 5 per cent of all revenue SLWC earns from the sales of its service plans in Ottawa.

In return, the company gets to say the city endorses its protection plan, and it can use the municipality's logo, subject to guidelines, on its correspondence with homeowners as well as on its website.

"This is a red flag," said Émard-Chabot. "This is something from the government's point of view that also raises concerns around that blurring of private and public."

Homeowners in Ottawa have been receiving these cards, addressed to them by name, from SLWC on behalf of the City of Ottawa. (CBC)

Endorsed by Association of Municipalities of Ontario

SLWC has responded that the structure of its partnership has been endorsed by the Association of Municipalities of Ontario, and Ottawa has joined other municipalities in the province already partnering with it.

"What these service plans do is provide a convenient option that's optional for the homeowner to purchase if they choose to, to protect that cost and inconvenience of making repairs to those lines," said Myles Meehan, senior vice-president of public relations for HomeServe USA, the parent company of SLWC.

He added that the deal requires SLWC carry enough insurance to protect the city in the event of litigation with a homeowner.

City is protected from liability in partnership with private service firm, company says

CBC News Ottawa

2 months ago
Myles Meehan, vice president of public relations for SLWC’s parent company, HomeServe USA, says the City of Ottawa is protected from liability in the case of litigation with a homeowner. 1:15

"The city is protected from that. We touch it, we own it," said Meehan.

In the drinking water section of the City of Ottawa website, an FAQ page on the SLWC program tells readers: "A homeowner who chooses to enrol in the program should do so with the understanding that the City in no way warrants or is liable for the work or performance of SLWC."

But despite those assurances, a homeowner could still sue both the company and the city, then let them sort out the blame later, said Émard-Chabot.

A screengrab taken of the banner of SLWC's website shows the approved use of the City of Ottawa's logo alongside the company's pitch for its protection program. (SLWC website)

Pipes may already be covered by home insurance

While insurance broker Steve Tanner agrees with the city's desire to promote awareness about aging water and sewer pipes on private property, he advises homeowners to call their insurance provider to check if they're already covered.

"You might not need this plan," said Tanner, president of Tanner Insurance. "That coverage is already available to you through your home insurance policy and I think the majority of insurance providers will include it automatically in their policy."

If they don't already have the coverage, said Tanner, homeowners can usually add the coverage for an additional cost, which he argues would likely be lower than the monthly fee charged by SLWC.

However Myles Meehan of SLWC points out that unlike insurance, his company's service plans don't require the customer pay a deductible.

"If I have a problem on one of those pipes, I'm going to make one phone call and I'm going to have one of the local contractors that service Ottawa come out and make those repairs," he said. "I don't have to worry about the out-of-pocket expense."

Steve Tanner, president of Tanner Insurance, says most home insurance policies already cover the cost of repairing or replacing underground water and sewer pipes. (Steve Tanner)

Add some “good” to your morning and evening.

A variety of newsletters you'll love, delivered straight to you.

Sign up now