The 2003 Lawyers Insurance Fund program
This Insurance Issues:
- reports on the 2003 compulsory program and policy
- reviews statistics on claims and potential claims within the program
- details new website information available from the Lawyers Insurance Fund - such as new initiatives on coverage and optional coverage available to BC lawyers
- comments on the insurance aspects of the new national mobility agreement of the Federation of Law Societies
The 2003 Lawyers Insurance Fund program and policy
Assessment remains at $1,500
2003 represents the fourth consecutive year in which the Benchers have set the insurance assessment at $1,500, the lowest premium since 1986. This premium is supported by longstanding stability in the program, in conjunction with effective management by the Lawyers Insurance Fund. Long-term sustainability of the premium will depend, in part, on the level of the Fund surplus above the stipulated reserve for contingencies.
Compulsory policy wording
The 2002 compulsory lawyers professional liability insurance policy (the "policy") is renewed, for 2003, without further change.
As a result, the 2003 policy wording consists of:
- the consolidated policy issued in 2000, incorporating wording changes from the previous two years, along with further revisions;
- the renewal endorsements issued in 2001 and 2002, including minor amendments to the policy wording; and
- a second endorsement issued in 2002, allowing lawyers employed by legal aid and public advocacy groups to purchase the policy.
A copy of the 2003 renewal endorsement is enclosed in this mailing. A consolidated policy is planned for 2004.
The 2000 consolidated policy and all subsequent endorsements, along with explanatory text, are available on the Lawyers Insurance Fund section of the Law Society's website (see below).
Coverage under the 2003 compulsory policy
The program continues to provide each insured lawyer with $1 million of coverage for each error, to an annual maximum of $2 million for all errors reported during the year. The deductible remains at $5,000 for a paid claim, increasing to $10,000 for each subsequent paid claim reported within three years. Lawyers can also increase the limits of their coverage by purchasing excess insurance privately.
A review of reports of claims and potential claims
The program's continuing stability is illustrated by the charts on page 3. In a reversal of the trend of recent years, 2002 saw a slight increase in the average number of insured lawyers and in the number of reports. The upward trend in the average cost of claims over the past 10 years has been gradual and suggests that significant adverse developments are unlikely. It is useful to note that the apparent increase in the average cost of claims in 2001 is based on actuarial estimates that tend to fall with the passage of time.
The chart Percentage growth in reports and insured lawyers shows the percentage growth over the past six years. Insured lawyers include both full and part-time lawyers and reports include both claims and potential claims.
Percentage growth in reports and insured lawyers
The chart Number and frequency of reports shows the number of reports and the frequency of reports (reports divided by insured lawyers) over the past six years.
Number and frequency of reports
The chart Average cost of claims shows the average cost per report over the last 10 years, based on the actuary's estimate of expected losses.
Average cost of claims
Lawyers Insurance Fund website information
The Lawyers Insurance Fund section of the Law Society's website is an excellent resource for information about the policy and the insurance program. The site is divided into the following five sections:
1. Compulsory insurance
Information about the compulsory policy is provided, along with copies of the 2000 consolidated policy and all subsequent endorsements. General information about the services of the Lawyers Insurance Fund is also available, including:
- reporting guidelines for lawyers wishing to report claims or potential claims;
- a list of Claims Counsel for the Fund and the practice areas they handle (Lawyers who would like to discuss a claim or potential claim that has not yet been reported are invited to contact Claims Counsel); and
- the names of Claims Counsel who are "advance ruling" advisors, able to advise on the Insurer's position on coverage under the policy in the absence of a claim or potential claim.
2. Optional insurance
This section contains information about the optional Business Innocent Insured Coverage Policy available from the Lawyers Insurance Fund. This optional insurance coverage is designed to protect innocent lawyers in firms who may face claims that are otherwise uninsured because the business interests of another lawyer at the firm trigger Exclusion 6.2 of the compulsory policy, the "business exclusion" clause.
3. Insurance Issues
This section of the site gives online access to recent editions of the Insurance Issues.
4. Alert! bulletins
Alert! is published by the Lawyers Insurance Fund and distributed to all lawyers and articled students in the province to encourage preventive action to avoid liability claims. Recent issues of the publication are available online.
5. Initiatives involving the insurance program
To respond to the needs of BC lawyers, the Law Society has embarked on a number of initiatives developed or supported by the Lawyers Insurance Fund. This section of the site describes some of the more recent initiatives, and offers direct links to further information. The initiatives include:
(a) Public legal services lawyers
As of August, 2002, lawyers employed by not-for-profit community law offices or public advocacy associations that provide legal services to the public at no cost are able to purchase the compulsory policy.
(b) Approved pro bono services
The compulsory policy provides insurance, at no cost, to lawyers who are not otherwise insured (generally, in-house counsel, retired and non-practising lawyers) for any of their pro bono services that are "sanctioned services." For the purpose of coverage, "sanctioned services" require, in part, that a lawyer provide the services through a pro bono program and that both the services and the program are approved by the Law Society.
(c) Solicitor property sales
The coverage provided by the compulsory policy includes coverage for errors made by lawyers in acting for buyers and sellers in the purchase and sale of real property and business assets. The extent of any coverage depends, in part, on the exact nature of the activities undertaken.
(d) Western Law Societies Conveyancing Protocol
This protocol allows lawyers in certain circumstances to advise an institutional lender client that it need not obtain an up-to-date building location survey as a condition of funding a mortgage loan, provided there are no known building location defects.
For more information on any of these initiatives, please visit the Law Society website or contact the Lawyers Insurance Fund.
Mobility and the policy
The Law Society is now a signatory to the Federation of Law Societies new national mobility agreement. Once the agreement is enshrined in the rules of the various signatory law societies, a lawyer in a common law jurisdiction in Canada will be entitled to practise temporarily in another Canadian common law jurisdiction for a cumulative period of up to 100 days in a calendar year. (The current Federation protocol entitles lawyers to practise in another province for up to 10 matters over 20 days in any 12-month period.) Under proposals for admission on transfer from another province or territory, transfer examinations would be replaced with a prescribed reading requirement.
There are several insurance aspects to the new mobility agreement. First, there is a requirement that the home jurisdiction of a lawyer must extend insurance coverage under its compulsory policy to that lawyer's temporary practice in another jurisdiction and that the coverage must be similar in amount and scope to the other jurisdiction's own compulsory policy. Second, if a lawyer is a member in more than one jurisdiction, the lawyer need purchase only one compulsory policy and can claim an exemption from the otherwise mandatory requirement to purchase insurance in another jurisdiction.
Although certain minor changes to BC's compulsory policy wording are anticipated to ensure conformity among the insurers in the various jurisdictions, no substantive changes are necessary. The compulsory policy already extends coverage to a BC lawyer's practice of any type of law anywhere in Canada (and in many circumstances, anywhere in the world). The Law Society also already allows lawyers who have insurance in other jurisdictions that extends to their practice in BC to claim an exemption from compulsory coverage under the BC policy.
Once the Law Society Rules are revised to adopt the new mobility regime, any policy wording changes will be made through an endorsement to the policy. An Insurance Issues detailing the changes will also be published.
2003 and beyond
Change may be the only constant in the practice of law today: change in the law, the practice of law and, perhaps most critically, the world in which that practice is carried on. As change has created different insurance needs for lawyers, the Lawyers Insurance Fund has responded with new initiatives — such as expanded coverage under the compulsory policy for pro bono services and the optional Business Innocent Insured Coverage Policy.
Whatever changes the future may bring, the Lawyers Insurance Fund expects to continue to pay out between $8 million and $10 million in damages and defence costs each year. Careful practice and effective risk management remain the most effective tools for controlling these costs.