Canadians Becoming More Litigious

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Canadians have become as inclined to take their battles to court as their United States counterparts over the past five years, concludes a recent survey by Chubb Insurance Company of Canada.

In fact, more Canadians sue for employment-related disputes than their American counterparts.

The latest Chubb Private Company Risk Survey concludes commercial litigation is generally similar in both countries although court awards in Canada are slightly lower.

“The survey findings were surprising as, generally, Canadians are thought to be far less litigious, and therefore Canadian companies are seen to be less vulnerable to litigation, than our American neighbors,” says David Williams, senior vice president of Specialty Insurance for Chubb Insurance Company of Canada.

“There appears to be a gradual shift in Canada to initiating litigation as a method of dispute resolution. We are continuing to see private companies facing similar allegations in litigation against management as larger, public firms.”

He added that “Awards in Canada remain smaller than in the States but on a number of fronts, the survey results should be a real eye-opener for private companies in Canada.”

The survey looks at a number of areas that trigger lawsuits in Canada and calculates the proportion of actions within a five-year time frame.

In suits against directors and officers (D&O), 16 per cent were launched by customers, six per cent by vendors, five per cent by competitors and three per cent by shareholders. Although, in sum, the survey concludes respondents deemed the risk of D&O to be nominal. The average cost to the defendant company was $338,699.

Employment practices liability (EPL) accounts for just under one third, or 27 per cent, of the litigation launched against companies in Canada, which surpasses the proportionate 15 per cent of employment-related lawsuits in the U.S.; Judgments, settlements, fines and legal fees for employment matters cost affected Canadian companies an average of $63,724.

Approximately one in 10 companies in Canada have been sued for errors and omissions, which constitutes an error or failure in service, the survey finds; the mean payout in those claims was $73,649.

The survey was conducted for Chubb by market research firm, Pollara, which interviewed specialty insurance decision-makers at 300 Canadian for-profit, private companies, and 469 firms in the U.S. during the latter part of 2007.

Chubb will release an executive summary of the survey results this fall.

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