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2001: No. 5 September-October
Table of contents Lawyers Insurance Fund to offer
optional "innocent insured" coverage
In October the Benchers decided that the Lawyers Insurance Fund should
provide, for an additional fee and on an optional basis, $1 million of
insurance coverage to protect innocent partners in law firms who may face
claims that are otherwise uninsured because the business interests of
another lawyer in the firm trigger the "business exclusion"
clause in the mandatory liability insurance policy.
The business exclusion clause excludes from coverage a claim by,
against, arising out of or in connection with any organization in
which the lawyer, his or her family or law firm partners or associates
had effective management or control or a greater than 10% ownership
interest at the time of the error: see section 6.2 of the policy.
This exclusion was incorporated into the insurance policy 10 years ago
to avoid exposing the program to significant losses and claims expense
that could result from lawyers acting for clients in which they have an
interest. The Benchers have now reviewed the business exclusion, and
considered whether to modify the wording or whether to offer new coverage
to innocent partners.
After canvassing the options, the Benchers decided to maintain the
business exclusion clause in the insurance policy. This decision appears
in keeping with the views of most lawyers in private practice, almost
three-quarters of whom support the exclusion according to a Law Society
survey. Dropping the exclusion would increase risk for the insurance
program and also be at odds with a lawyer's ethical obligations under
Chapter 7 of the Professional Conduct Handbook that "a lawyer
may act as legal advisor or as business partner, but not both."
The Benchers have decided, however, it would benefit both the
profession and the public for the Lawyers Insurance Fund to offer a new
category of coverage to protect innocent partners in these situations.
The new "innocent insured" coverage will be available for
purchase by B.C. law firms for 2002, and will provide $1 million of
protection, both against claim defence costs and indemnity payments,
subject to the usual deductibles. If a firm opts for the coverage, the
firm must purchase it for all partners in the firm. The coverage
will apply when partners are unaware, despite reasonable and regular
enquiries, that another lawyer in the firm was providing legal services
when the business exclusion would apply.
Details on the "innocent insured" coverage have yet to be
finalized. The annual fee will be determined after consideration of the
risk factors involved, including the number of lawyers in the firm, and is
expected to be in the range of $400 per lawyer.
The Lawyers Insurance Fund will set out, as part of this coverage, the
steps for law firms to take in monitoring that no lawyers hold a greater
than 10% interest in a client. This may include requiring new lawyers to
sign statements declaring their interests and requiring all lawyers to
confirm their interests annually.
This optional coverage will offer greater protection to partners in
firms that choose to purchase it, as well as to the public. The Benchers,
however, decided against making the additional coverage mandatory, as such
coverage would of be no value to some lawyers, in particular sole
practitioners, and would increase insurance fees for all lawyers in the
program.
Law firms can expect more information on the new coverage by year-end;
in the meantime lawyers should feel free to contact Margrett George,
Program Administrator [(604) 443-5761 or mgeorge@lsbc.org]
or Su Forbes, Director of Insurance [(604) 443-5760 or sforbes@lsbc.org]
at the Lawyers Insurance Fund .
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