Future of the Special Compensation Fund — what claims will it consider?

Since May 1, 2004 a client who suffers loss by reason of theft by a lawyer can apply for compensation under Part B of the BC Lawyers’ Compulsory Professional Liability Insurance Policy. In light of the Part B coverage, also known as trust protection coverage, the Benchers have decided that the public’s access to the Special Compensation Fund should be restricted in the future.

Under Rule 3-33, as amended on October 14, the Special Compensation Fund will not authorize any payment of a claim made after May 1, 2004, unless a person’s claim for Part B coverage has been denied in whole because the annual, profession-wide limit of the coverage in the policy has been exhausted — that is, more than a total of $17.5 million is paid under the Part B coverage in a single year.

The Special Compensation Fund Committee remains responsible for assessing and deciding on payment of claims made prior to May 1, 2004, which includes all claims relating to Martin Wirick. The Legal Profession Act requires that the Benchers continue the Fund, but its scope has been narrowed, as described in Rule 3-33.

Special Compensation Fund Committee Chair Patricia Schmit, QC told the Benchers in October that the Committee recommended this approach — rather than the option of allowing the Special Compensation Fund to consider any claims that had been rejected in whole or in part under the Part B coverage.

She noted the narrower role for the Fund would provide the Law Society with greater certainty as to total exposure on claims, to settle claims with greater certainty within the insurance limits and to encourage claimants to settle within the limits, instead of planning a further claim to the Special Compensation Fund.

In a written report to the Benchers, the Special Compensation Fund Committee pointed to administrative efficiencies to this approach.

“A decision by the insurer on a claim where the aggregate amount of the insurance has not been exhausted will be determined through an assessment of the merits of each claim and paid, denied or negotiated with the claimant,” the Committee stated. “As with any civil matter, the claimant has full recourse to the courts in the event of a dispute.”

The Committee also said it was more efficient to have all claims handled once by Claims Counsel in the insurance department, without additional staff time and Bencher resources devoted to a Special Compensation Fund regime.

Ms. Schmit noted that the Benchers ultimately retained discretion to make ex gratia payments or, if the Benchers found it necessary, to increase the global limit of the Part B coverage.

The text of Rule 3-33, as amended, is set out below. It will be included in an upcoming Member's Manual amendment package and is available online in the Publications & Forms section of the website at www.lawsociety. bc.ca.

Law Society Rule 3-33, as amended

Limit on payments from the Fund

3-33 Despite Rules 3-31 and 3-32, the Special Compensation Fund Committee, or the subcommittee with the consent of the Committee, must not authorize a payment from the Special Compensation Fund in respect of a claim made on or after May 1, 2004 unless:

(a) the claimant has made a claim under Part B of the policy of professional liability insurance and the claim has been denied in whole

(i) because the limit of liability described in the policy as the Profession-Wide Aggregate Limit has been exhausted, or

(ii) by operation of Exclusion 10 of the policy, or

(b) prior to May 1, 2004, the Society had notice of the possibility of claims to the Special Compensation Fund involving the lawyer against whom the claimant has made the claim.