Sue Me!

Like it or not, Canadian society is becoming more litigious every day. In the past, it was popular for us to smugly sneer at headlines coming from the US about multi-million dollar settlements that were out of all proportion to the wrongs they were meant to redress: the apocryphal tales about too-hot coffee spilled on someone’s lap, for instance. But Canadians are beginning to catch up to Americans in their desire to run to the courts to seek financial recompense for (real or perceived) corporate wrongs, and Canadian legislators have helped push this trend along.

Take securities class actions. Coming into force in 2003, Ontario’s Bill 198 included provisions similar to the US Sarbanes-Oxley Act mandating improved accuracy and reliability of corporate disclosures. In our May issue last year, our three authors from the law firm of Borden Ladner Gervais pointed to the findings from NERA Economic Consulting that indicate a steady rise in so-called “Bill 198” class actions in the last decade. This trend has not slowed down. In its January report, NERA noted that another 15 securities class actions were filed in Canada in 2011, nine of which were Bill 198 cases. There are currently 45 active Canadian securities class actions representing $24.5 billion in outstanding claims. “It now seems beyond question that the uptick in securities class action filings since 2008 is not a transient phenomenon,” concludes the report.

Companies are suing each other a lot, too. Research conducted in 2008 by law firm Fasken Martineau found that 40% of responding companies had at least one dispute commenced against them in the last year and 29% had initiated a dispute. Other kinds of litigation are also on the rise. According to the firm Medical Litigation Consultants, the rate of malpractice claims against Canadian doctors has been climbing about 10% a year for a decade.

Brokers in the specialty lines space need to pay attention to these trends because sooner or later, a liability Katrina is going to make landfall on Canada’s legal shores and fundamentally alter the current soft market for D&O and E&O insurance. (In our March issue, Matt Wolfe of reinsurance brokerage Beach & Associates offered a couple of suggestions of systemic risks that could have this kind of impact.)

In the meantime, these are good days to be a civil litigator, as there appears to be no shortage of work in this country.