The 2008 program and policy
The Lawyers Insurance Fund manages the Law Society’s insurance program for BC lawyers. The program provides:
- professional liability insurance to protect lawyers if they are liable for negligence and ensure that clients receive compensation to which they are entitled (Part A of the policy); and
- trust protection coverage to ensure that innocent members of the public do not suffer a financial loss through theft by a BC lawyer (Part B of the policy).
In managing the program, we are guided by our mission statement:
The Lawyers Insurance Fund protects the profession and the public from the risks associated with the practice of law by providing high quality professional liability and defalcation insurance. We draw on our knowledge and skill as experienced lawyers to deliver professional and cost-effective claims and risk management, and underwriting services. Through hard work and best practices, we ensure the continuing excellence of the insurance program and maintain the confidence of the profession.
The Benchers have set the annual insurance assessment for Part A professional liability insurance at $1,400, maintaining for a second consecutive year the lowest assessment in the program’s history. The highest assessment was $2,600 in 1990. The reduced fee is supported by longstanding stability in claims in conjunction with effective claims management by the Lawyers Insurance Fund. However, this level of assessment is expected to reduce the level of the Fund surplus, and may not be sustainable in future years.
No fee will be charged or assessment levied for Part B trust protection coverage in 2008.
Compulsory policy wording
For 2008, the consolidated policy issued in 2007 is renewed by endorsement. This year brings only a few changes to the policy wording:
In order to obtain prompt, full and candid disclosure from lawyers, it is Law Society policy that claims information provided to the Lawyers Insurance Fund cannot be disclosed to other departments of the Law Society. The only exception to this policy is evidence of dishonest appropriation, fraud or criminal activity. To reflect the insurer’s practice of disclosure of matters that fall within the exception, including Part B reports and claims information, Condition 5.4 is amended by specifically including the Law Society as a party to whom claims information may be disclosed.
Part A (insurance for negligence)
The definition of “unauthorized practice” is revised to include practice in breach of an undertaking given to the Law Society or in contravention of a condition or limitation of practice imposed by or agreed to under the Rules. Condition 3.3 is added to require a lawyer to reimburse the society for any payments made in relation to a claim that relates to that lawyer’s unauthorized practice. As a result of these changes, if a lawyer makes a mistake while practising in contravention of any Law Society practice requirements, the lawyer must reimburse us for any settlement or defence costs.
Lawyers employed by non-law firms are exempt from the obligation to buy the policy, and coverage for most of these employees is excluded. In some situations, the lawyer is technically a dependant contractor with, rather than an employee of, the non-law firm. As this relationship is tantamount to employment, Exclusion 7 is revised to clarify that coverage for these dependent contractor lawyers is excluded. For more information on employed and dependant contract lawyers in the private sector, see “Coverage Enquiries & Rulings” in the Lawyers Insurance Fund section of the Law Society’s website at lawsociety.bc.ca.
Part B (insurance for theft)
The policy is revised to further clarify that, if a BC lawyer is also a member of another jurisdiction’s law society or bar and misappropriates funds in that capacity, Part B will not respond.
The 2008 renewal endorsement is enclosed in this mailing. The 2007 consolidated policy, as well as other policies and endorsements issued since 1999, are available in the Lawyers Insurance Fund’s section of the Law Society’s website.
Coverage under the 2008 compulsory policy
The limits of coverage remain unchanged.
Part A (insurance for negligence)
The policy 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. Although the limits offer sufficient financial protection for the majority of claims faced by lawyers, lawyers can increase the limits of their coverage by purchasing excess insurance privately. We recommend that all firms consider both the financial and “sleep-easy” benefits offered by excess insurance, and encourage lawyers to contact a broker experienced in such insurance to assess their own needs.
Part B (insurance for theft)
The policy continues to provide a profession-wide aggregate limit of $17.5 million for Law Society members, and a per claim limit of $300,000. Although there is no deductible, lawyers are obliged to reimburse the insurer in full for any paid claims.
A review of claim and potential claim reports
Part A (insurance for negligence)
The program is stable, as illustrated by the charts on pages 2-4. 2007 saw little change in either the number of insured lawyers or the number of reports. Although our own case reserves show an increase in activity for the past three years, the average cost of claims is based on LIF estimates, and tends to decrease over time as more information becomes available. Changes in the average cost of claims over the past 10 years still remain gradual, suggesting that significant developments are unlikely.
The chart Percentage growth in insured lawyers shows the percentage growth over the past five years. Insured lawyers include both full- and part-time lawyers and reports include both claims and potential claims.
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 five years.
The chart Average cost of claims shows the average cost per report over the last 10 years.
Part B (insurance for theft)
Since Part B, or trust protection coverage, was introduced in May 2004, there have been 87 reports of claims and potential claims involving 41 lawyers. However, in many of these reports the claim is without merit, and our claims experience continues to reflect that of the Law Society historically: only a very small number of lawyers are involved in misappropriations.
In 2007, seven claims were paid on behalf of four different lawyers, totalling approximately $39,000. This compares with three paid claims in 2006 totalling approximately $6,300, and no paid claims in 2004 or 2005. Details of the paid claims follow:
- Vance Goulding:* A payment of $3,050 was made based on the circumstances described in Law Society of BC v. Goulding, 2007 LSBC 16 and in which a finding of misappropriation was made. Goulding received funds as a retainer and to pay as filing fees on an immigration matter. He kept all of the funds although no account was rendered nor work done to justify a fee. For full details, go to the Law Society’s Hearing reports and admissions database at http://www.lawsociety.bc.ca/hearing_decisions/reports.cfm.
- A payment of $3,000 was made on behalf of a lawyer who was retained to pursue a civil litigation matter. The lawyer withdrew the retainer funds from trust although no account was rendered nor work done to justify the withdrawal. In 2006, a claim in the amount of $2,511.55 was paid on behalf of that same lawyer.
- Three claims totaling $4,504.43 were paid on behalf of a lawyer. In the first two, the lawyer was retained to proceed with a sponsorship application in an immigration matter. In both, the lawyer paid himself the retainer funds although no account was rendered nor work done to justify a fee. In the third, the lawyer received funds to pay an expert for a report that assisted in the defence of the lawyer’s client. Rather than paying the expert, the lawyer kept the funds. In 2006, a claim in the amount of $3,199.84 was paid on behalf of that same lawyer.
- A payment of $26,718.27 was made on behalf of a lawyer who received mortgage proceeds for a client, and was instructed by the client to pay a portion of the proceeds to satisfy a debt. The lawyer neither paid the debt nor otherwise accounted for the funds.
- A payment of $1,747.76 was made on behalf of a lawyer who received cash to be used for filing fees in an immigration proceeding. The lawyer did not pay the filing fees or otherwise account for the funds.
* The Law Society Rules permit disclosure of the name of a lawyer or former lawyer and the circumstances of Part B claims when a discipline hearing panel finds misappropriation.
None of the lawyers involved remain as members of the Law Society, and all are obliged to reimburse the society for the amounts paid on their behalf.
Two claims were withdrawn or abandoned by claimants, and three matters reported as potential claims did not develop into claims. Four claims did not fall within the terms of coverage for Part B, and no payments were made. In these claims, the lawyer either did not misappropriate property at all, or did not do so in his or her capacity as a lawyer. In the remaining reports, the claimants are not actively pursuing a Part B claim, or we are not yet in a position to determine if the claim is properly payable or, in some instances, to whom. On some matters we must wait until the conclusion of the discipline process to complete our assessment of the claim. In others, although the potential claim likely falls outside of coverage, we are not able to finalize this position until a claim is advanced.
For a full description of Part B trust protection coverage, including claims management and coverage, see Insurance Issues No. 2 May – June 2004. Frequently asked questions designed specifically for the public are available in the Regulation & Insurance/Trust Protection Coverage section of the Law Society’s website at lawociety.bc.ca.
Lawyers Insurance Fund: Exceptional service continues…
Claims counsel provided support intellectually and emotionally, and was always there when I needed him. I felt as though he was truly “in my corner.”
The approach, expertise and assistance of claims counsel could not have been better or more appreciated.
Claims counsel was exemplary. She provided very knowledgeable service and
was, at all times, responsive and courteous. We appreciated her work very much.
These comments are just a few of the nearly 300 “kudos” received last year from insured lawyers in Service Evaluation and Risk Management Forms sent on file closing. In addition to asking specifically for both positive (“kudos”) and negative (“grumbles”) comments, the form asks the lawyer to rate his or her satisfaction on a scale of 1 (“not at all”) to 5 (“a lot”) in a number of areas relating to our performance.
The return rate is excellent (almost 60%), and our insureds continue to express high satisfaction overall with the services we provide. In 2007, 96% of survey respondents gave a high approval rating (4 or 5 on a scale of 1 to 5) on the services provided by defence counsel and on the outcome of their claims, 97% on the handling of their claims, and 95% on the services provided by LIF Claims Counsel.
… and our door is always open
We also received a comment from an insured lawyer that he felt reluctant to approach the Lawyers Insurance Fund. This information was surprising to us given the overwhelming feedback we receive from insured lawyers that we are approachableand supportive. One lawyer described his experience with us as “unequivocally positive.” Another stated, “I felt relieved after speaking with claims counsel.”
If you are feeling any reluctance about contacting us, we hope that these comments from your colleagues will help ease your concerns. And although the policy requires you to report claims and potential claims in writing, you are always welcome to call us first. Whether you’re unsure if you need to report, require some assistance on what to do next or are feeling angry, upset or frustrated, we want to be the first voice you hear.
Proactive claims management – creative solutions
To assist the Law Society in determining whether the Lawyers Insurance Fund is meeting its objective of managing claims in a cost-effective manner that balances the interests of the public, lawyers and the Law Society, an independent claims audit is conducted on a regular basis. The last audit, conducted in 2006, concluded that: … the Lawyers Insurance Fund is in a class of its own among Bar mutual organizations … the level of professionalism and sense of mission achieved by staff (LIF claims counsel) remains unique. In reaching that conclusion, the auditors made the following comment:
Proactive management of files and imagination in resolving and repairing claims is key to LIF’s overall success, with repeated instances of creative solutions brought to fruition at little or no cost to the program.
Sometimes the best course of action for dealing with a potential claim is simply to wait to see what, if anything, develops from the initial report. However, as the auditors noted, other times a more creative approach is needed — requiring reflection and insight to identify the claimant’s underlying and often unstated interests, and then persistence and patience to bring about a positive outcome. The following is just one example:
A lawyer acted for a purchaser of a bare lot in BC, but failed to obtain a road access easement from the owners of the adjoining property. Without access, the property was virtually worthless. Unfortunately, the access problem could not be rectified, and the lawyer was clearly liable to the claimant for the full purchase price.
Rather than simply negotiate and pay the claim, LIF bought the claimant’s lot and then bought the adjoining lot from a third party, through which access to the claimant’s lot could be obtained. The claimant was happy to be rid of the lot and LIF was happy to have it. We had done our due diligence, and knew that it was simply a matter of time before property values would rise, and we would recover every penny spent with interest, and a surplus. And, unlike the claimant who wanted to enjoy the property immediately, we had the luxury of time.
After holding the two adjoining properties for five years, LIF then sold them as a package for more than twice their combined purchase price.
Risk management – new developments
2007 saw the introduction of two new initiatives from the Lawyers Insurance Fund.
Beat the clock
In May, our guide to helping lawyers to prevent missed deadlines and limitations hit the desks of all lawyers in private practice. Beat the clock: Timely lessons from 1600 lawyers contains over 70 risk management tips, as well as a “Limitations and Deadlines Quick Reference List.” Litigators and solicitors, small and large firm lawyers, and legal assistants and articled students, regardless of practice area, are finding this guide useful. As one lawyer comments:
The latest Lawyers Insurance Fund publication is an absolutely wonderful product. Attractive, the right size, and readable, it gives relevant information that is useful in a short, concise format. The booklet is so refreshing and useful that it is being granted a place amongst the important useful books that live behind my desk for easy access and are referred to frequently.
A readership survey shows that nearly 90% of respondents have either already made changes to their practice or plan to in the future as a result of reading Beat the clock. These respondents also ranked the guide an average of 4.5 on a scale of one to five, with five at the high end. And the guide is working. For example, one lawyer noted:
Today I discovered your “Beat the clock” publication in my mail pile, and wanted to thank you for such a useful reference guide. I put it in my “looks useful” pile and within an hour got a call involving an appeal limitation period. I couldn’t find the answer immediately in the statute I thought it was in, so opened the front cover of your publication and instantly found what I needed, and was able to give prompt advice after checking it against the proper statute (which wasn’t nearly as easy because the QP website was out of date). Thanks for this useful publication!
The guide and reference list can be downloaded from the Lawyer’s Insurance Fund/Risk Management section of the Law Society website.
LIF and the Continuing Legal Education Society of BC
A component of the Law Society’s upcoming continuing professional development program will require lawyers to report the number of hours of structured education taken on any one or a combination of the following topics: 1) professional responsibility and ethics; 2) client care and relations; and 3) practice management. In response, CLEBC now includes ethics and loss prevention components in all of its courses. Although LIF has, from time to time, played a role in CLEBC courses, a more formalized process now exists through which CLEBC and LIF work together to identify courses for which LIF has relevant claims or risk management messages. In future, you can anticipate receiving information regarding claims and risks in particular practice areas directly from the LIF lawyers at various CLEBC courses.
2008 and beyond
Stability remains the hallmark of the program, and the Lawyers Insurance Fund continues to effectively manage claims in accordance with its stated mission. However, maintaining stability in both the program’s costs and your annual insurance fee requires every lawyer to practise “safe law.” Read Beat the clock: Timely lessons from 1,600 lawyers and implement changes that will help you avoid missing a limitation or deadline, historically the cause of 25% of the reports we receive. Participate in post-call legal educational activities to remain current in the law while discovering practical tips and strategies for practising defensively. Play an active role in risk management to help control or reduce the $10 million in damages and defence costs paid out by the Fund each year. Make 2008 an error-free year for you, your staff and your firm.