Wednesday, February 22, 2006

Strict liability for data breaches?

Mark Rasch at Security Focus is discussing whether there should be strict liability for data breaches so that those whose information is compromised may sue for damages: Strict liability for data breaches?.

I just recently gave this a bit of thought for an upcoming article for the Ontario division of the Canadian Bar Association's privacy section. Unless there is an actual misuse of the information leading to a loss, the biggest impediment under traditional tort law is going to be proving an actual injury. The tort of negligence requires there to be (i) a duty of care, (ii) a breach of the standard of care and (iii) an injury of some sort directly related to the breach. For most individuals whose information is lost, the injury is an increased likelihood of identity theft or other fraud, and quantifying that risk is mostly speculative. The courts of Canada generally have not been very amenable to compensating bare risks.

PIPEDA itslef contains provisions that allow an aggrieved individual to seek damages in the Federal Court, but there is no mention in the statute that it creates a strict liability tort or waives the usual requirement for demonstrating injury. So far, nobody has taken their complaint seeking damages that far.

We may get some clarity about this if the class action lawsuit against CIBC ever makes it to court in Ontario. Much of the injury claimed in the statement of claim relates to the time and expense related to more vigilant credit and account monitoring. (There is also a claim related to emotional distress and the class is seeking punitive damages.) Hopefully the court will address this question, if it does get to court.

While American legislators are thinking about this issue more than Canadians, it is worth thinking if there should be an entitlement to statutory damages for a failure to notify individuals if sensitive personal information (the disclosure of which can be harmful) is compromised without giving the individuals notice. This would avoid tussles in the court rooms and would give businesses some certainty of their actual exposure. We may even hear about it at the upcoming five year review of PIPEDA.

In the meantime, anybody advancing a claim under this sort of theory of liability will be taking a gamble on the possibility of recovering anything.

1 comment:

Anonymous said...

Absent damages, companies are demonstrating a willingness to gamble on the newness of 1386. Witness the petulant interpretations from the unknown retailer and Cardsystems. Damages for failure to notify would help tilt the balance towards notification, which would help citizens and consumers make better decisions.