My Insurance Policy: Questions and Answers

This summary of the policy’s professional liability insurance for negligence (Part A) is intended only to assist lawyers. Coverage for a claim or potential claim is determined by the policy wording. Key policy provisions are referenced at the end of each section. Although some of the questions answered below are also relevant to the claims process, more information is available in My Claim: Questions and Answers

This summary also explains how much insurance is available and what claims and activities the policy covers. You will want to talk to your broker about buying additional insurance to protect yourself from the risk of claims that exceed the policy limits or are not covered. More information is available in Excess insurance: Protection for claims that exceed $1 million and Other commercial liability insurance: Protection for claims that our policy does not cover.

Some basics
What’s covered and what’s not
My responsibilities


Some basics

What does my policy pay for?  

If a negligence claim is made against you, the policy provides two types of financial relief.  If you make a mistake in your practice – or someone says you have – the policy pays:

  • Indemnity: If your mistake causes a loss to your client or someone else, the policy will pay compensatory damages awarded against you, including interest, or fund a settlement. Sometimes, we are able to take repair steps that will avoid or reduce a loss. The policy will pay for those steps as well.
  • Expenses: If the policy will pay for the loss claimed, we will also pay the costs of your defence.   

In taking care of your defence, we will either defend the claim ourselves or retain counsel experienced in lawyer malpractice to act on your behalf. If you are sued outside of North America, we may elect to have you investigate and defend, and reimburse you for the costs you incur. Of course, the policy only provides financial relief if you pay the annual insurance fee (with the exception of certain pro bono services) and the claim is covered

The policy does not pay for your own losses like loss of income.   

Policy:  Insuring Agreements A 1, A 2 and A 3

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How much will my policy pay each year? 

The policy pays up to:

  • $1 million for all claims arising out of either a single error or more than one "related" error, regardless of how many claims, claimants or firm lawyers are involved, or the number of different capacities in which the lawyers act. 

    About "related" errors or mistakes:

    • These most commonly occur in relation to the “same or similar underlying facts, events, transactions, activities or undertakings, including accidents, investment programs or schemes, loan agreements, offerings of ownership interest or debt, corporate reorganizations, tax plans, estates, real estate developments, leases, licences, commercial ventures and litigation matters.” 
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    • They are not "related" just because they are identical or cause losses to the same client. For example, repeating the same drafting error in every will prepared for different clients, or making mistakes in both a motor vehicle claim and a conveyance for the same client, will not, without more, make the mistakes related.spacer
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    • It doesn’t matter if the mistakes are made by you or other lawyers at your firm working on the same matter. The mistakes are related.  
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  • $2 million for all claims made against you in any given year. 

These limits include defence costs or other expenses we pay.

Policy:  Definition of "error"; Condition 1.3; Declarations

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What about excess insurance?

Buying excess insurance may be a very good idea. Learn why.


What are the financial consequences if a claim is made against me?

None, if a claim is defended successfully.  However, there are generally three consequences if we pay a settlement or judgment, or pay repair costs trying to fix a mistake:

  • You pay a deductible of $5,000, or $10,000 for mistakes reported within three years of each other. Your firm may agree to pay a deductible for you – that is a matter between you and your firm.  If we are unable to collect from you, partners at your firm when the mistake was made are also liable for the deductible;
  • You pay a surcharge of $1,000 on your insurance fee for five years. The total surcharges will not exceed the amount we pay in indemnity;
  • You lose eligibility for the part-time discount for five years.  

These consequences are waived if the payment relates to certain pro bono services or a real estate lawyer’s advice given pursuant to the Conveyancing Protocol

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What if I am no longer in private practice?

We will still protect you. As long as the mistake occurred when you were paying the insurance fee, you are insured even if you are no longer in private practice  when the mistake is discovered. In addition, while you’re still a Law Society member, the policy insures you for certain pro bono activities even if you’ve left private practice and no longer pay the insurance fee. 


Am I eligible for the part-time discount?

Find out here 

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What if someone else makes the mistake, not me?

Assistants, paralegals, designated paralegals and articled students 

If your legal assistant, paralegal, designated paralegal or articled student makes a mistake in helping you on a matter, you are liable. The policy will respond as if the mistake was yours, not theirs. As you are required to effectively supervise staff and students, they are indirectly protected. You will enjoy coverage and we will not subrogate or claim over against them. 

Partners and apparent partners (includes space-sharers)

If your partner makes a mistake, you and your firm may also be sued. As long as your partner paid the insurance fee at the relevant time, your partner’s coverage under the policy will extend to protect you and the firm. That protection exists regardless of whether you attract liability as an actual or apparent partner.

You may want to enter into a space-sharing or other arrangement with other lawyers without attracting liability for their mistakes. As a useful starting point, talk to a Practice Advisor or review the information in "Lawyers Sharing Space." You may also find the decisions in Kent v. H.A.D. Oliver et al and Westfair Foods Ltd. v. Coopers & Lybrand useful as you research the issue of partnership liability. And although you are protected under the erring lawyer's coverage if you do attract liability, that protection may not be enough. As a space-sharer, you may not be aware of or have any control over the business activities of other lawyers in the office. If the erring lawyer loses cover under the policy's business or benefit exclusion, there is no coverage for anyone. You will also want to consider if excess insurance is appropriate. Be sure to let your broker know about the space-sharing arrangement.

Non-lawyer professionals at your firm

Patent and trademark agents, immigration consultants or other non-lawyer professionals at your firm may be providing services either independently of any of the firm lawyers or in a non-legal area of expertise. There is no cover for you or anyone else under the policy for any mistakes made by these individuals. You will want to either ensure they have arranged cover with their own liability insurer or talk to your broker. You may also want to consider if practising in a multi-disciplinary partnership is of interest, as non-lawyer partners of MDPs do participate in the compulsory program.  

Outside service providers

You may contract with registry agents or others outside your firm to help you on a matter. If that individual makes a mistake, you may still be liable to your client. Although the policy will then respond as if the mistake was yours, we will generally subrogate or claim over against them. 

Policy:  Definition of "additional insured"

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What if my firm or law corporation is sued for my mistake? 

If we would defend and indemnify you, we’ll defend and indemnify your firm or law corporation. 

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What’s covered and what’s not

What exactly is my basic coverage?

Your policy is an e & o – errors and omissions – policy that responds to negligence claims in your private practice as a lawyer. The vast majority of claims against lawyers seek damages for losses caused by a lawyer’s negligent act or omission, including negligent breach of fiduciary duty. We pay those claims. 

Policy:  Insuring Agreement A 1

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What other claims does my policy cover or exclude?

Business or personal interest claims

We will not pay a claim if:

  • the payment in any way personally benefits you, your family or your law firm; or
  • it is by or in any way connected to any commercial entity in which you, your family or your law firm colleagues, alone or together, in any way had effective management or control or beneficial ownership greater than 10% at the time of the mistake. 

Learn more about how the exclusion operates and about the optional Business Innocent Insured Coverage that provides some protection for partners. 

Policy:  Exclusions 6.1 and 6.2

Cyber and other data breaches, malware transmission

The policy is not intended to respond to the business risk of data breaches. A data breach might result in the theft of a client’s identity or confidential information advantageous to a competitor. A third party might gain access to confidential information by hacking a server, stealing your laptop or a client file left in your car, planting malware on your computer or rummaging through some unshredded garbage. Regardless, any claims arising out of or connected to the collection, use and/or disclosure of any information by that third party are excluded.

Malware can cause additional problems through inadvertent transmission to others, and the policy will not protect you from any claims you might face as a result.

Insurance can be purchased to protect against these risks, and some excess policies provide some aspects of this coverage. You will also want to take appropriate steps to safeguard confidential information, whether paper or electronic, and ensure your professional obligations relating to protecting information are met. For due diligence and risk management information about the use of technology and third party data storage and processing, see the Law Society’s cloud computing due diligence guidelines and Cloud Computing Checklist, as well as the relevant articles under “Fraud risk management”.

The exclusion does not apply to every claim that arises from disclosure. For instance, if you compromise your client’s legal position by inadvertently sending an email intended for your client to opposing counsel or by losing your client’s original documents, the policy will respond.

Policy:  Insuring Agreement A 1; Exclusion 12

Defamation

Sometimes, lawyers are sued for defamation while representing clients. The policy will pay for your defence, even if your conduct is alleged to be malicious. In the unlikely event that your conduct is found to be intentional or malicious, we will not pay any damages awarded against you.

Policy: Definition of "personal injury"; Insuring Agreement A 2.7; Exclusion 2. 

Dishonest or intentional acts

Actual or alleged intentional, criminal, dishonest, fraudulent or malicious acts are not covered. Sometimes, a negligence claim makes alternative allegations of dishonest or fraudulent acts. We defend those claims, but must reserve our rights to not pay any settlement or judgment in the unlikely event such conduct is established. On rare occasion, the only claim advanced is one of dishonesty. The policy does not provide you with any defence or indemnity coverage for those claims. If your partners are unaware of the matter but face liability, we will defend and indemnify them. We are entitled to pursue you for any amounts we pay on their behalf.

Defence coverage for allegations of dishonest acts is available as part of an excess policy from some excess insurers, so that the insurer would "drop down" to pay defence costs subject to a deductible. 

Policy: Definition of "error"; Insuring Agreement A 1; Exclusions 1 and 2; Conditions 3.2 and 6.1 

Fees and benefits

You are not covered if the underlying dispute relates to your fees, regardless of how the claim is advanced. It doesn’t matter if the claim seeks the return, reimbursement, accounting for or disgorgement of legal expenses or some other benefit you receive (whether from the claimant or a third party).  

Policy:  Definition of "damages";  Insuring Agreement A 1

Indemnities and dispute resolution agreements

You may be asked to indemnify and hold harmless a client or other party against loss it incurs as a result of your actions. If the indemnity has no effect on our ability to defend any subsequent negligence claim against you, coverage for any such claim will likely not be lost by your agreement (unless you agree to indemnify a client for costs awarded against it in litigation). Separate from any coverage concerns, you may leave yourself exposed to other financial consequences to which the Policy does not respond. You might also be asked by a client to agree to a means of resolving a negligence claim, or agree that the law of a certain jurisdiction will govern any subsequent dispute. Appreciate that such an agreement may interfere with our ability to defend you, jeopardizing coverage. So, before you sign on any dotted line, read through our comprehensive coverage and risk information here.

Policy: Condition 5.3  

Punitive and other damages, sanctions, special costs, costs ordered against you personally

There is no coverage for punitive, exemplary or aggravated damages or  fines, sanctions or penalties. There is also no cover for cost orders made against you as a result of your reprehensible conduct, whether pursuant to a specific Rule or the court’s inherent jurisdiction, or for special costs. 

Policy: Definition of "damages"; Insuring Agreement A 1

Thefts, trust shortages caused by frauds, and losses caused by dishonest employees

The policy provides some insurance for lawyer thefts under Part B, Trust Protection (for dishonest appropriation), and for trust shortages caused by the bad cheque scam under Part C, Trust Shortage Liability (for reliance on fraudulent certified cheques). However, the policy does not otherwise respond to thefts or trust shortages caused by fraud – internal or external.

Your trust account may well be the target of a thief or fraudster. Protect yourself:

    • Insurance that will protect firms from the risks of a trust shortage caused by employee theft or an external fraudster is available on the commercial market. Talk to your broker.
    • Your bank ought to protect you from some trust shortages caused by external frauds, such as a fraudster cashing a forged trust account cheque. Be sure to talk to your bank to ensure you are meeting its requirements to pay the shortage so that you are protected. For instance, there may be a "reverse onus" requiring you to show proper management of trust funds, and other criteria such as timely notice.
    • For help in properly administering and monitoring your trust account, contact the Law Society's Trust Assurance group.
    • Read the Law Society email notices alerting lawyers to frauds and scams.
    • Read the Fraud Risk Management information provided by the Law Society and the Lawyers Insurance Fund.

Policy:  Insuring Agreement A 1; Exclusions 11.1 and 11.2 

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What other activities does my policy cover or exclude?

Acting as a bailee (holding personal property)

You might hold personal property belonging to your client or a third party in relation to legal or other professional services being provided. If a negligence claim then arises because, for instance, you misplace a share certificate being held, the policy will respond. Occasionally, however, someone will choose a lawyer, rather than a safety deposit box, to protect personal property. The policy provides that a lawyer who acts merely as a bailee is not providing professional services. Therefore, there is no coverage for any claim that might arise.   

Policy: Definition of "professional services"

Acting as a conduit for funds 

If you are not providing any legal services to a client who directs a third party to deliver funds to you for deposit into trust, beware. If you later discover that the funds you subsequently disbursed pursuant to your client’s instructions have disappeared as a result of your client’s fraud, you may find yourself a defendant in the litigation that follows – and without any insurance coverage. The policy does not respond if you’ve merely acted as a bank, with no legal reason or purpose to accept or disburse trust funds. Learn more about how to protect yourself from rogues who hope to use your good name – and the apparent safety and credibility offered by your trust account – to promote fraudulent investment schemes.

Policy: Definition of "professional services" 

Arbitrator or mediator (includes family dispute resolution professionals)

You are covered for mistakes made while you act as an arbitrator or mediator – including as a family dispute resolution professional.

Policy: Definition of "professional services"

Custodian, practice trustee/attorney, winding up caretaker or locum

You are covered for mistakes made while you act as a custodian under the Legal Profession Act. In addition, if you agree to act as a practice trustee/attorney, winding up caretaker or locum for another lawyer, you are covered for any mistakes you make while providing legal services to that other lawyer’s clients.

Policy: Definition of "professional services"

Director or officer

Your activities as a director or member of a board, council or committee are excluded, although any legal services you provide are not. The referenced material will help you decide whether or not to accept such a role or, if you do, provide legal advice or services as well. It will also give you information about how to protect yourself, including through insurance. 

Policy:  Definition of "professional services"; Exclusion 5 

Executor or trustee (includes similar fiduciary capacities)

You are covered for mistakes made while you act as an executor or trustee or similar fiduciary capacity, if those services are connected with and incidental to your practice of law.     

Policy: Definition of "professional services"

In-house counsel

The policy generally excludes coverage for your activities if you are an employee or dependent contractor, or a partner, of an organization other than a law firm. As the policy is intended to protect the public from mistakes made by lawyers in private practice, as in-house counsel you are exempt from the requirement to pay the insurance fee. There are two exceptions:

    • If you work for a union, society or public legal service organization (a not for profit organization that provides free legal services to the public), coverage is available for third party claims against you. If you would like that coverage, you may choose to participate in the insurance program, although you are not obliged to do so. 
    • If you "moonlight" or maintain any type of private practice outside of your employment, you must pay the insurance fee in relation to that private practice. You may, however, be eligible for the part-time discount.

Policy:  Exclusion 7 

Investment advice or services

Investment advice or services are not covered, unless they are given because you are already providing certain legal or trustee services. There is no protection available under any circumstances if you provide only investment advice or investment services, including allowing investment funds to flow through your trust account.

Policy:  Definition of "professional services"; Exclusion 10

Miscellaneous

You are also covered for mistakes made when you act as:

    • an agent for any record keeping or filing duty imposed by statute, provided those services are connected with and incidental to your practice of law;
    • a conciliator;
    • a non- lawyer partner in a multi-disciplinary practice, provided those services and are supervised by firm lawyers; and
    • an official administrator.

Policy:  Definition of "professional services"

Patent or trademark agent

You are covered for mistakes made while you act as a patent or trademark agent, if those services are connected with and incidental to your practice of law.

Policy:  Definition of "professional services"

Practice in breach of a Law Society restriction

If you make a mistake while practising in breach of a Law Society restriction, the policy will pay the claim. However, if the claim relates to that restriction, you must reimburse us for any indemnity or expenses we pay. 

Policy: Definition of "unauthorized practice"; Condition 3.3

Practice outside of BC (includes mobility within Canada)

The policy generally provides coverage for your practice of any type of law, anywhere in the world. Coverage is excluded if the claim arises out of your permanent practice in another non-Canadian jurisdiction, or if you are practising in contravention of the rules of any other law society or bar, Canadian or otherwise. Learn more.

If you are interested specifically in mobility within Canada, click here.

Policy: Definition of "unauthorized practice"; Exclusions 8 and 9; Condition 20

Pro bono services

You are covered for mistakes made when you provide legal services whether paid or pro bono. 

Policy:  Definition of "professional services"

Research

As long as you have not claimed an insurance exemption (see below), you are covered for any mistakes you might make in any legal research that you carry out. 

You may choose to exempt yourself from the requirement to pay the insurance fee if you provide legal research only to insured lawyers and have no contact with the clients. Legal research is limited to the provision of summaries or conclusions about the state of the law for the benefit of the insured lawyer and incorporation into their work. You cannot claim this exemption if your work product will be seen by anyone other than the insured lawyer.

If you choose the insurance exemption but your mistake causes a loss, the policy of the lawyer to whom you provided the research services will pay any claim. However, we will be obliged to look to you for reimbursement as the lawyer who caused the problem. Although we do not receive many reports of claims due to flawed research, you – and anyone else who is vicariously liable for your mistakes – are personally at risk.

Secondment

As a secondment usually involves a lawyer working temporarily in a role akin to that of in-house counsel, you are generally considered to be a dependent contractor and the professional liability insurance policy (Part A) will not respond to any claims that may arise.

Selling real estate

Certain mistakes made while selling property as part of your law practice may also be covered.

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Can I buy other insurance for claims or activities my policy excludes?

In many cases, yes. Learn more.


What happens if I’m sued and some of the allegations or claims aren’t covered?

It depends. Most claims are fully covered and we defend and indemnify you. However, some litigation involves both covered and non-covered allegations or claims. For instance, if you provide legal services to a company and sit as a director, you may be sued both as a lawyer (covered) and as a director (not covered). Or, you may be sued both for damages for negligence (covered) as well as for a return of fees (not covered). In these situations, you would bear some responsibility for the cost of the defence because of the non-covered claims. If we need you to contribute, we may ask you to do so at the start or wait until the claim is concluded. You are also responsible for paying any part of a judgment or settlement relating to the non-covered portion. 

Policy: Insuring Agreements A 2.3 through A 2.6

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Does my policy give me any other coverage besides “errors and omissions” or negligence insurance? 

Yes. The policy also provides some insurance for thefts under Part B, Trust Protection (for dishonest appropriation), and for trust shortages caused by the bad cheque scam under Part C, Trust Shortage Liability (for reliance on fraudulent certified cheques)


What if I have more questions?

The answer may be available in the information we offer about Part A, and FAQs on coverage. For other questions about whether you have coverage in certain circumstances or for a particular activity, contact an advance ruling advisor. Depending on the nature of your question, we may ask you to send us a detailed description of the circumstances, in writing. 

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My responsibilities 

What are my duties as an insured? 

You have two key duties. One is to promptly report claims and potential claims (see below). The second is to cooperate with us, and any counsel we retain, and assist us in investigating coverage, fixing mistakes, defending claims and making settlements. Other duties include obtaining our agreement before taking any steps in relation to a claim or potential claim, including making any admissions or attempting a repair. 

Policy:  Conditions 4.1, 5.1, 5.2 and 5.3 

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When do I have to report claims or potential claims to LIF?

Immediately. If you become aware of an actual or alleged mistake, or any circumstances which could reasonably be expected to be the basis of a claim, however unmeritorious, you must give written notice immediately along with the fullest information available. Report a claim or potential claim.   

You need to report any claim – a demand for money, an action, a claim or institution of proceedings against you – or potential claim. If your client suggests you were negligent, hints at suing you or seems unhappy with a result and asks you to send the file to a new lawyer, report even if you believe there is no merit to any claim that may be asserted. Alternatively, if you think you might have made a mistake, report to us – even if the client doesn’t know. The test for timely reporting has an objective as well as a subjective element. You can’t avoid a finding of a late report by saying that you did not believe that a claim would arise. We will look at what the reasonable person in your position would have anticipated. 

Early notice puts us in the best position to defend and resolve anticipated litigation. It may also allow us to fix a problem or take steps to minimize the financial consequences of a mistake, thereby avoiding losses and saving money. It may also prevent a loss to your client and the stress to you both that results from a malpractice claim. 

You do not pay more for your insurance because you report. However, you risk paying the full cost of any claim entirely out of your own pocket if you do not report immediately and we are prejudiced as a result. Although we will cover your partners who were unaware of the matter, you remain liable for any amounts that we pay on their behalf. If you are not sure whether or not to report, we are happy to help and are only a phone call away

Policy:  Conditions 4.1, 3.2 and 6.1 

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Are my reports kept confidential?

Yes. The Law Society has a long-standing policy that claims information you provide cannot be disclosed to the Law Society’s regulatory departments unless you consent. The only exception to this policy is evidence of dishonest appropriation, fraud or criminal activity. So rest assured that when you report claims and potential claims your information –and your client’s – remains confidential with us. 

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