Sure it can happen. The difficulty is adjusted every 2016 blocks, which normally means every two weeks.
Let's say the most recent difficulty adjustment has just passed, and the total network hash power suddenly drops by a factor of two. That means each block takes twice as long to find, so now you have to wait four weeks for it to correct itself. And during those four weeks, if the hash rate continues to drop, the adjustment gets further and further away.
Basically, if hash power drops by 5% per day for a sustained period, the network can't recover fast enough.