Compensation claims will be decided first under trust protection coverage

Since May 1, 2004, the Law Society’s compulsory liability insurance policy has provided coverage, not only for lawyer negligence (Part A), but for claims arising from the theft of money or property by a BC lawyer relating to his or her practice of law (Part B or “trust protection” coverage). Claims made on or after May 1, 2004 fall under Part B of the policy and are handled by the Lawyers Insurance Fund.

The Special Compensation Fund has remained responsible for determination of all claims prior to May 1, 2004 (including those relating to former lawyer Martin Wirick). Moreover, the Fund will continue to exist under the Legal Profession Act. With the co-existence of trust protection coverage and Special Compensation Fund coverage, there is potential for confusion in the eyes of the public on how to apply for compensation.

To provide greater certainty, the Benchers have confirmed that claims for compensation arising from lawyer defalcation must be decided first under Part B trust protection coverage, and that the Special Compensation Fund should be a fund of last resort. Most, if not all, claims for compensation arising from lawyer misappropriation are expected to be resolved entirely under Part B.

A new Rule 3-33 implements this policy as follows:

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 the claimant has made a claim under Part B of the policy of professional liability insurance and the claim has been denied in whole or in part.

The Special Compensation Fund Committee, which had raised these process issues for Bencher consideration, also looked at whether a cap or limit on Fund payments was advisable. In raising this issue with the Benchers in April, the Committee recommended against placing an annual global cap or “per-claim” cap on Special Compensation Fund payments, on the basis that a judicious use of discretion was the best way to manage Fund payouts. At the Benchers’ suggestion, the Committee will study the question of a cap further, as well as guidelines on payments from the Fund.

Rule 3-33 and housekeeping amendments to Rules 3-40 and 3-41 relating to the Special Compensation Fund are reflected in the enclosed Member’s Manual amendment package.