CANADA Law and Practice Contributed by: Chris McKibbin, Avi Sharabi, Alex Valova and Douglas Treilhard, Stieber Berlach LLP
A body of US common-law privacy torts has been adopted by Canadian courts since the early 2010s. Those common law privacy torts have resulted in an increase in privacy claims, including class actions. However, certain of those privacy torts are character- ised by a level of intentionality that should preclude coverage. Where coverage issues have arisen is in respect of negligent supervision and other non-inten- tional aspects of such claims against, for example, employers of the “snooper”. Legislation often informs the common law duty of care in negligence claims, as seen in commercial retailers and occupiers’ liability. In this area of law, the statu- tory regime prescribes the standard of care owed by the commercial retailer. Similarly, if Bill C-36 creates more fundamental privacy rights and even treats pri- vacy as a fundamental right at law in Canada, could that broaden the scope of the duty of care owed by various commercial entities to the greater public? It is likely that this will be the case. As in other areas of law, the broader the scope of a duty of care, the greater the potential for breaches, resulting in more claims. 8.4 Data Centres Data centres create a cascading risk of potential claims. First and foremost, they are large-scale phys- ical spaces exposed to various property risks (fire damage, water damage, etc) and equipment break- down risks. While the size of the physical space and the quantum of the physical costs to repair damage, can be quantified relatively more easily, consequential loss may be more difficult to quantify. Data centres are the physical manifestation of the so- called cloud. They hold the world’s access to energy infrastructure, transportation infrastructure, e-com- merce and social media. What does a business inter- ruption (ie, consequential loss) claim look like for a data centre effectively keeping several municipalities’ energy grids powered? Will an insurer be surprised when a CAD1 million fire loss claim results in a CAD20 million business interruption claim or are the under- writers already accounting for this in their premium negotiations? These issues are likely to be tested as coverage disputes involving data centres emerge.
What about the resulting broker negligence claims that often accompany coverage disputes? If a broker is acting for a company utilising data centres or storing data in those centres, does the broker understand the true potential value of a business interruption claim? Similarly, has the broker obtained adequate liability limits to cover potential third-party claims that may arise from a loss sustained at data centres? Insurance brokers are not expected to be experts in every field. However, insurance brokers are held to high standards in Canada. Canadian courts will likely have little sympathy towards an insurance broker who did not at least try to understand the potential first- party and third-party risks at stake, as well as their client’s financial reliance on the data centre. 8.5 Social Media Risk The Supreme Court of Canada has rendered deci- sions on what constitutes claimable mental distress in Canada. The Court has held that a medical diagnosis is not required. The plaintiff must prove their claim on a balance of probabilities (ie, more likely than not or at least 51%). Without the requirement of a medical diagnosis, a plaintiff must establish that their men- tal distress is “serious and prolonged”. This means that the claimant must demonstrate, on a balance of probabilities, that they are suffering from something more than the ordinary stresses of life. This argument naturally raises questions of causation. Mental distress from social media addiction could be characterised as a claim for mental distress on its own. Mental distress may form part of the dam- ages claimed in a bodily injury claim or personal injury claim. However, mental distress on its own, ie, without an accompanying event of physical harm, may not be insurable under standard-form liability wording for bodily or personal injury risks. Claims arising from social media addiction have the potential to impact policyholders at the executive and board levels and therefore potentially trigger D&O lia- bility policies. Social media companies create obvious risks with their software applications. As new case law develops, the scope of obligations placed on execu- tives and boards of social media companies could expand regarding what they allow on their platforms.
55 I NSURANCE L I T IGATI O N 2026
CHAMBERS.COM
Powered by FlippingBook