CANADA Law and Practice Contributed by: Chris McKibbin, Avi Sharabi, Alex Valova and Douglas Treilhard, Stieber Berlach LLP
factors are likely to lead to more reinsurance aggrega- tion disputes. The higher number and value of claims will be of considerable concern to insurance and rein- surance underwriters. This will lead to increased scru- tiny and due diligence at the outset to price these risks more accurately. The overall cost of these geopolitical issues will eventually be passed onto the policyholder by increased premiums and then eventually consum- ers. 8. Emerging Risks 8.1 Market Overview of Emerging Risks Increased climate volatility is driving higher fire, flood and wind claims for property insurers (both commer- cial and personal lines). The greater number of claims leads to more coverage disputes. AI liability creates exposures to a wide range of enter- prises, from boards of directors to automobile manu- facturers. Insurers will likely respond by drafting care- fully worded AI liability exclusions. This could create tensions in the areas of causation and the reasonable intentions of the parties when entering into the policy, especially where AI is a central focus of the policy- holder’s business. Such cases could then test the scope of the nullification of coverage doctrine. Another notable legal development affecting insurers is the increase in damages assessments across the country, often referred to as social inflation. This is particularly true in claims involving bodily injury and medical malpractice. Such increases affect commer- cial general liability insurers, home insurers, auto- mobile insurers and professional liability insurers in the health law space. High damages awards, such as those seen in the United States, have not been observed in Canada. Still, both judge and jury trials are generating higher damages assessments in these types of matters. Separately, large securities class action settlements in Canada have increased over the past few years, with some even in the CAD100 million range. High-value class actions in the securities law and other areas are sometimes triggered by socio-economic disasters such as a financial crisis or a pandemic. The more
volatile the socio-economic outlook, the more likely new high-value class actions are to emerge. 8.2 Impact of ESG on Underwriting and Insurance Litigation Canada has trillions of dollars’ worth of natural resources and most of its natural resources are unde- veloped. Even so, a significant amount of Canada’s economy is based on mining and energy. This creates the potential for friction with Canada’s broader ESG commitments. Mining and energy companies have been forced to shift their practices to meet certain emissions targets. This puts increased pressure on boards of such companies to (a) understand the obli- gations placed upon these companies; and (b) over- see the changes needed to ensure compliance. An increase in D&O liability claims involving ESG-related compliance concerns has been noticeable. As noted in 4.9 Financial Lines Coverage Trends , “greenwashing” is an example of a type of misrep- resentation that could trigger a claim under a D&O policy related to ESG. Greenwashing is falsely stating or overstating the amount of environmental compli- ance a company has performed. As more claims arise from greenwashing or similar misrepresentations, underwriters will ask how much due diligence they need to undertake at the outset to better understand the ESG-related steps a poten- tial policyholder is taking. If, for example, a company responds to numerous questions in an insurance application suggesting that it is doing more than it really is to comply with emissions compliance require- ments, the insurer may be able to rely on a misrep- resentation defence against a subsequent claim for Canada has a commercial privacy regime (the Person- al Information Protection and Electronic Documents Act) which is approximately 25 years old and is viewed by many as outdated. Canada has introduced Bill C-36. The bill is currently in the parliamentary debate stage and has not been enacted. If enacted in its cur- rent form, it would make privacy a fundamental right. coverage by the policyholder. 8.3 Data Protection Laws
54 I NSURANCE L I T IGATI O N 2026
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