Canadian Underwriter

I’m Sorry

October 1, 2011   by Canadian Underwriter

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By Geoffrey Rowan, Partner, Managing Director, Ketchum Public Relations Canada; Norm Letalik, Partner, Insurance and Tort Law Practice Group, Borden Ladner Gervais LLP; and Irene Bianchi, Senior Vice President, Claims, Corporate Services & Strategic Sourcing, RSA

Several Canadian jurisdictions have introduced ‘apology legislation’ over the past few years. The legislation is intended to allow one party in an accident to express regret without worrying that the apology will be used against them in a court of law.

But what are the implications of saying, ‘I’m sorry’? What is the impact of this legislation on a party’s reputation? Will it affect the party’s legal case? And will the apology affect insurance coverage?

Canadian Underwriter hears from three main actors in an insurance claim involving a party that apologizes – a public relations expert speaking about the party’s public reputation, a lawyer defending the party in court and the insurer providing insurance coverage for the party’s liability claim.

A Public Relations Perspective
Geoffrey Rowan, Ketchum Public Relations

One can argue about whether the world’s second oldest profession is law or public relations. But for as long as the two have existed, a dynamic tension has existed between them over when, if ever, to say: “I’m sorry.”

Both professionals have a duty to serve and protect their organizations, but they approach this duty from different perspectives. The lawyer’s responsibility is to protect from legal liability. The communicator’s role is to protect reputation, which is linked to an organization’s license to operate.

Breaking it down a bit, the lawyer tries to protect the organization from criminal and civil liability. Obviously, it would not reflect well on the company if its CEO and board of directors were to be jailed. Likewise, shareholders (and insurers) tend to frown at the prospect of hundred-million-dollar class action settlements. So the lawyer advises: “Keep your mouth shut.” And if you are unable to do that, then by all means make it a non-apology apology. Something like: “We’re sorry that you feel something terrible has happened to you.”

The PR person’s obligation is to protect the company’s reputation. It’s a little harder to put a price tag on that – especially when the corporation’s legal department is making a forceful case that a $200-million damages award might dampen the bonus pool a bit. But it’s not impossible to infer the value of reputation. At its most basic, the value of reputation is the value of all forward sales. For a public company, it is the difference between a company’s market capitalization and its book value. (You could also add the premium an acquirer would be willing to pay over market value.)

Why do apologies work? Well first, they only work if they are sincere. A non-apology apology can inflame the situation.

People who feel wronged, abused, mistreated or disappointed by an organization sometimes want nothing more than to hear the organization acknowledge that their pain and suffering is real. They want the organization to acknowledge its role in causing the pain and suffering, and to express genuine sorrow for that. Also, they want to hear the organization promise not to do it again. When people are upset, or when they feel there is a lack of honesty, they are more likely to sue. They feel they have to in order to force the truth out into the open.

An apology is not a panacea. What do you do if you’re not at fault? What if the level of your involvement and fault is not clear?

First and foremost, you let your humanity show. If there is human pain, you address that first. Counsel may advise that you have a fiduciary duty to protect shareholder value by minimizing exposure to liability. But if you create a greater risk to shareholder value by undermining your good reputation, then you have done a great wrong.

So start with human concern. Address the issues provoking the human anxiety and potential conflict. If people are in pain, acknowledge their pain. If you don’t know the cause of that pain, promise them you will find out and you will tell them. Also tell them you will take responsibility if it is yours. Don’t point fingers.

If you choose a different route, and assume a defensive posture, those who wonder about you will have no choice but to attack you. That can only result in a damaged reputation, which is associated with real costs.

A real apology, on the other hand, can be cathartic. It can be a new beginning.
A Legal Perspective
Norm Letalik, Borden Ladner Gervais

Humans are not perfect. We make mistakes. We commit wrongs. Our parents teach us from an early age that when we hurt someone physically or psychologically, the right thing to do is to say you are sorry and to apologize for your actions.

We are also taught that contrition is good for the soul. So saying you were wrong and that you are sorry for your actions is not only good for the person receiving the apology, but it is also good for the person giving the apology. In this way, apologies can have a cathartic effect for both the person receiving and giving the apology. Apologies are a way of stopping, accounting for one’s actions, admitting a wrong and then hopefully learning not to repeat the same wrongs going forward.

In some instances, an apology alone is enough for people to forget the wrong committed and then to carry on. In other situations, an apology is not sufficient redress and a remedy from the courts might be pursued, typically through tort actions such as a claim in negligence. Even when court actions are pursued, however, a plaintiff might not be as aggressive in seeking maximum damages if the defendant has admitted that he or she was in the wrong and proposes reasonable compensation for damages suffered by the plaintiff.

In our current legal culture, based as it is on the determination of fault and the calculation of compensation, an apology can also be seen as an admission of liability. Therefore, the smart legal thing to do is to say nothing, admit no responsibility for the wrong and deny that any psychic or physical damages have been suffered. This inevitably leads to hard feelings, yet the courts are only equipped to compensate by awarding monetary damages.

Courts cannot offer psychic healing other than ruling either for or against one of the party’s positions. So the following conundrum was presented: injured people are looking for an admission of fault and an apology so that there can be some psychological closure for a wrong act, but the legal system militated against people offering apologies.

This problem was especially pernicious when the wrongs involved the death of a loved one, such as in the case of medical malpractice; someone was wrongly convicted on the basis of a false identification by a witness; or severe physical and psychological injuries resulted from sexual abuse in residential schools, to name but a few vexing examples. Apology legislation is a way of addressing this impasse.

Apology legislation was first introduced in Canada in 2006, when British Colombia introduced the Apology Act.  Saskatchewan followed shortly thereafter with its Evidence Amendment Act, 2007. This led to the Uniform Law Conference of Canada developing a Uniform Apology Act modeled on the B.C. and Saskatchewan legislation. Ontario used the Uniform Law Conference of Canada’s work as a model for its Apology Act, 2009. Manitoba also introduced similar legislation in 2008.

In the United States, about 30 states now have apology legislation in place, as do virtually all Australian states. The acts state an apology made by or on behalf of a person does not constitute an express or implied admission of fault or liability by the person in connection with a matter, and cannot be taken into account in any determination of fault or liability in connection with a matter. It a
lso states that despite any other act or law, evidence of an apology is not admissible as evidence in any civil proceeding, administrative proceeding or arbitration as evidence of fault or liability.

This simple but effective legislation goes a long way toward allowing us to do the right thing, apologize for our wrongs without fear that the apology might be used subsequently as a battering ram to impose liability against the person making the apology.

An Insurer’s Perspective
Irene Bianchi, RSA

A large loss is an ordeal for everyone involved, especially the claimant. When a large loss is suffered, it’s always in the best interest of the organization responsible to step up and take accountability for getting people back on track. If taking accountability includes making an apology, this can only benefit all parties in terms of demonstrating good faith and intentions. When a company doesn’t act quickly enough to take responsibility, there is a much higher chance this will lead to an adversarial recovery process, usually involving litigation. Anyone who has been involved in litigation would agree it’s a process best avoided. It significantly hampers the speed at which people can start moving forward and rebuilding what was lost.

Ironically, the perceived legal implications of making an apology are what can often lead to litigation. Apology legislation helps to allay these concerns by facilitating a corporation’s ability to do the right thing without fear of reprisal. It can help put everyone’s mind at ease in situations in which several parties within a company – i.e. the executives, communications and legal departments – can’t agree on a message or a course of action because of the potential backlash. Swift action is of essence in any crisis situation, so this legislation lets a company act quickly instead of getting bogged down (internally) in the ramifications of what is said or done in the process of trying to do right by the people affected.

In the instance of an insurance claim, when a customer shares responsibility for an error or omission, it’s still our job to help them recover their loss. Insurers take this role seriously. Acting in the best interest of a customer should
always be the priority.

It may well be a reflection on the state of society that we need legislation in order to make it ‘okay’ to apologize. However, in my 25 years of experience, I’ve never seen an instance in which an apology has backfired on a company in terms of a disproportionate settlement related to a perceived ‘admission of guilt.’ Nonetheless, there is a peace-of-mind element to the legislation that encourages all internal parties to focus on the claimant as a priority and less so on potential legal problems down the road.

In fact, if an apology is not made or accountability not taken quickly enough, this can significantly affect the health of the organization. Failure to act quickly sends the wrong message to all stakeholders about the company’s integrity and corporate citizenship. Also, it creates a perception that the company is not able to stand by the quality of products or services that customers can and should expect. Ultimately, this can result in far more damage to financial and reputational health than the cost of settling a claim quickly, with ease, and outside of a courtroom.

Apology legislation also helps to provide a sense of relief to brokers. It allows brokers to help their clients get back on their feet without worrying about repercussions related to an apology.

Ultimately apology legislation helps everyone focus on doing their jobs; at the end of the day, that means putting the customer first. Each organization should feel free to use the language it deems appropriate in a given situation; if that means an apology, it should only help to make the process a little less painful. Hopefully, this legislation reassures companies that there’s no need to deliberate over how quickly to take accountability on a claim and makes it okay to say, ‘I’m sorry.’