Liability claims that could arise from the pandemic
Shara N. Roy was interviewed for Canadian Underwriter's featured article Liability claims that could arise from the pandemic.
Publicly-traded firms have been sued in the past after share prices dropped as a result of what Roy calls “external factors.”
“If they do address it, it has to be specific,” said Roy. “It cannot be boilerplate and it needs to deal with the impact on their business directly.”
That said, publicly traded firms are not generally required to interpret the external, political, economic and social developments on their own finances, Roy said, quoting guidance from the Canadian Securities Administrators.
What could hurt the client’s directors and officers is if they told the financial markets they were well-prepared for this type of crisis.
“I think we see a lot of companies who say in securities documents, and generally communicate to the market, that they are ready for eventualities, that they have got these business continuity plans in place,” said Roy. “We see this around cyber security, and that kind of thing, and it turned out they were actually not as prepared as they thought they were or that they communicated that were. So I think those are the kinds of things that I think we are going to see litigation around: [Plaintiffs alleging] ‘You told us you could handle a situation like this and you haven’t.’”