Can a butterfly fluttering its wings cause a hurricane on the other side of the world? In other words, can the after effect of a seemingly insignificant event build and build to result in a catastrophic outcome? When it comes to drafting contracts, it seems the answer is “YES”. One of the extreme examples of this is the so-called “Million Dollar Comma Case”- Rogers Communications v. Aliant Telecom, CRTC Decision 2006-45. In that case, the implications of the smallest of drafting errors resulted in a multi-million dollar outcome when Rogers convinced the CRTC that the insertion of a comma to separate a termination clause from a clause about future renewals allowed the contract to be terminated before its expiry date. Without the comma (which was not present in the French version), the right to terminate was unambiguous.
Canada is no longer a safe haven when it comes to avoiding damages arising out of privacy breaches. Class actions are here. Regulatory and criminal investigations are here and so too are individual actions resulting in damage awards. The losses are mounting and regulators are crying for legislation to impose substantial fines. The times, they are a changing. If you are interested in examples of Canadian breaches where losses have occurred, read on.
Nearly a decade ago, “Bill 198″ was proposed and eventually enacted into law. The amendment to the Securities Act (initially in Ontario and subsequently across essentially all of Canada) was designed to make it easier to bring class action suits against companies that mislead investors when they traded on the secondary market. The changes removed an arduous requirement that shareholders prove they relied on faulty disclosures when they invested on the secondary market, which requirement had previously been the death knell of class actions. That was then; where are we now with secondary market actions?
Bill 198 sought to avoid some of the perceived deficiencies our neighbours to the south had experienced with frivolous lawsuits, the so-called “strike suits”, brought by plaintiffs who believed that companies would quickly pay out to get them to go away, even absent compelling evidence. And, it was often the case that companies, and insurers, did. The Canadian amendments include provisions that put into place safeguards to guard against this type of behaviour. Although secondary market suits under the new provisions have been slow off the mark in Canada, the last couple of years have finally brought judicial developments that are helping to shape the landscape.
A 2012 PriceWaterhouseCoopers whitepaper on risk practices talks about the increasing frequency of black swan events, those catastrophic events that catch us by surprise. “By their nature, black swan events should only occur at unprecedented intervals. Yet recent experiences suggest that events that fit the definition of black swans are happening more and more frequently. So, are black swans actually turning grey?” Is the unthinkable now not only thinkable, but part of the landscape? It is these types of events for which Directors and Officers (D&O) insurance is designed. Will they happen? Hopefully not. But luckily, D&O insurance covers more than hope does.
What You May Not Be Getting with Your Current Policy
For the past five or six years, we’ve been in a soft market. Usually, these ebb and flow, but we’re still in the thick of it. What this means for policy purchasers, though, is that prices are very low. How could this be anything but good? The issue is that the policies tend to be very broad. Coverage has expanded so much that you cover a number of interests under one policy. For instance, you’ll have directors, officers, independent directors, internal management, and the company at-large all sharing one limit.
The first auto insurance policy was issued in the U.S. in 1898 and offered US$5,000 of liability coverage to Dr. Truman Martin of Buffalo, New York. As the Insurance Journal remarks, “Martin would likely have been more concerned with crashing into one of the country’s 18 million horses, rather than another of the 4,000 cars in the U.S.” Traveler’s Insurance took a bit of a risk, banking on auto technology making the horse obsolete. Today, insurance companies again find themselves entering a new era. Privacy concerns, like cars, are quickly becoming more numerous and are jamming our information highways. The threat of adverse events increases proportionately as well. Privacy insurance is, in many ways, in its infancy in Canada, but privacy is an issue that is only going to grow in importance.