PIPEDA & Commercial Activity: The Latest
This is a story about a lawyer, his insurer and the Law Society (and, no, it’s not about me). Normally, this is not a topic one sees in this blog but it just happens to involve the latest judicial decision that touches upon what constitutes “commercial activity” for the purposes of PIPEDA. I have to admit: this decision is a bit of a head scratcher.
In Cusack v. The Lawyers’ Professional Indemnity Co., the applicant, a sole practitioner in Toronto, made an application for an order requiring his insurer (LawPro) to defend him. LawPro had denied coverage with respect to a malpractice claim and sent a reporting letter to the Law Society regarding the allegations made against the applicant.
One of the issues that arose was whether the insurer owed a duty of confidentiality to an insured lawyer when it comes to disclosing materials relating to that lawyer to the Law Society for regulatory purposes. One of the arguments raised by the applicant involved Personal Information Protection and Electronic Documents Act (“PIPEDA”).
That argument was that LawPro violated PIPEDA in disclosing the applicant’s personal information without consent. This is where it gets interesting. In response the court stated:
“Counsel for LawPro submits, correctly in my view, that the providing of mandatory professional liability insurance to the province’s lawyers is not a commercial activity within the meaning of section 4(1)(a) of PIPEDA. Although LawPro is designed to conduct itself in a financially viable manner, its principal shareholder is the Law Society – a regulatory body – and its mandate entails “a commitment to working with the bar in the public interest over the long term”…That mandate takes LawPro outside of the type of activities to which PIPEDA applies.”
PIPEDA speaks to “conduct” not who does what or why. Commercial activity is defined in PIPEDA as
“Any transaction, act or conduct or any regular course of conduct that is of a commercial character, including the selling, bartering of donor membership or fundraising lists.”
Not-for-profit organizations are not automatically excluded from PIPEDA’s coverage; their commercial activities are subject to the legislation: Rodgers v. Calvert. Similarly, the OPC has found that the fact that the organization is non-profit and membership-based does not mean that it does not engage in transactions of a commercial character which would trigger the application of PIPEDA: PIPEDA Summary 389. Finally, as noted in State Farm Mutual Automobile Insurance Company v. Privacy Commissioner of Canada:
“The primary characterization of the activity or conduct in issue is thus the dominant factor in assessing the commercial character of that activity or conduct under PIPEDA, not the incidental relationship between the one who seeks to carry out the activity or conduct and third parties.” [ Para. 106]
The primary characterization of this particular activity of LawPro would appear to be the provision of insurance. It’s hard not to consider insurance companies to be “in business” and the provision of insurance as being an activity that has a “commercial character”. Granted LawPro’s pool of customers is limited and it does have a unique relationship with the Law Society but limited mandates and special relationships do not make an activity any less commercial in nature. State Farm was dismissive of the relationship aspect yet this decision emphasizes it.
LawPro disclosed personal information without consent. Does this mean PIPEDA was violated? This is where one looks at PIPEDA’s exceptions to disclosure without consent. Paragraph 7(3(d) of PIPEDA provides that disclosure without consent is authorized if:
“d) made on the initiative of the organization to an investigative body, a government institution or a part of a government institution and the organization
(i) has reasonable grounds to believe that the information relates to a breach of an agreement or a contravention of the laws of Canada, a province or a foreign jurisdiction that has been, is being or is about to be committed,…”
One could reasonably take the view that LawPro, acting within the parameters of s. 7(3)(d), would not have been in violation of PIPEDA in making a disclosure to the Law Society. It would have been reporting a possible violation of a statute to an investigative body whose task is to investigate such matters. For those wondering, the Law Society is an “investigative body” for the purposes of PIPEDA: Regulations Specifying Investigative Bodies. A lawyer is prohibited from engaging in professional misconduct or conduct unbecoming a licensee: Law Society Act, s. 33. Arguably, evidence of possible professional misconduct provides reasonable grounds to believe that there is a contravention of the Law Society Act.
Classifying LawPro as not being engaged in a “commercial activity” seems counter-intuitive. Time will tell if Cusack becomes an “outlier” or represents a new direction in the application of PIPEDA.