This Insurance Issues:
- reviews the state of the insurance program
- summarizes minor changes to the wording of the 2002 compulsory policy
- provides details of extended insurance coverage for approved pro bono services and
- provides details of optional business "innocent insured" coverage.
Claims and potential claims reported
As illustrated by the charts on page 3, stability remains the hallmark of the program. Although the number of reports has declined, so has the growth in the number of insured lawyers. Further, although the average cost of claims appears to have jumped in both 2000 and 2001, the figures are based on actuarial estimates, and past experience indicates the average cost is likely to decrease over 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 (incidents).
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
Assessment remains at $1,500
The Benchers have set the annual insurance assessment at $1,500 - the lowest premium in the program's history - for the third consecutive year. This level of assessment has been possible thanks to a stable loss experience and effective management of the Lawyers Insurance Fund, but is expected to reduce the Fund surplus and may not be sustainable in the long term.
Policy wording
A consolidated policy was issued in 2000, incorporating wording changes from the previous two years, along with further revisions. Minor amendments to the policy wording were made in 2001 by endorsement. In 2002, further amendments were made by endorsement, a copy of which is enclosed in this mailing.
The 2000 consolidated policy and the 2001 and 2002 endorsements are also available in the Resource Library section of the Law Society website at www.lawsociety.bc.ca.
The most significant changes to the policy wording relate to the extension of coverage for approved pro bono services. These changes are discussed in more detail on page 2. The remaining changes for 2002 are minor, as noted:
- The definition of "Additional Insured" (d) was amended last year by adding the words "and in a supporting role to." The definition is amended slightly for 2002 by adding the words "and not independent of" to further clarify that only those employees acting in a supporting role to and not independent of the Individual Insured, as well as under the Individual Insured's supervision and within the scope of their duties, are included as Additional Insureds under the policy.
- Exclusion 6.2 is amended by replacing "by, against, arising out of, or in connection with" with "by or in connection with." This revision does not alter the application of the exclusion in any way, but is intended to simplify the language, thereby making the wording easier to interpret.
- Exclusion 6.2.3 was amended last year by replacing "the Individual Insured's law firm, law firm's partners or law firm's associates" with "the partners or associates of the Individual Insured or of the Individual Insured's law firm." The definition is amended slightly again for 2002 by replacing the words "the partners or associates" with "the partners, associates or associate counsel." This simply clarifies that 6.2.3 of the Exclusion extends to all partners, associates and associate counsel.
2002 coverage
The program continues to provide each insured lawyer with $1 million of coverage for each error, with 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.
Coverage enquiries and advance rulings
Although the compulsory policy provides broad coverage for lawyers' errors and omissions, lawyers may face potential liabilities arising from circumstances in which coverage under the policy is not triggered, or is excluded.
The Insurer responds to a variety of questions regarding coverage, and often provides "advance rulings" that advise of its position on coverage under the policy. Lawyers are encouraged to contact any one of the following "advance ruling" advisors with their enquiries: Margrett George, Program Administrator, at (604) 443-5761 (email: mgeorge@lsbc.org), Kerry Sheppard at (604) 443-5743 or Lenore Rowntree at (604) 605-5314 (email: lrowntree@lsbc.org).
Approved pro bono services
The 2002 compulsory policy now provides coverage for the performance of "sanctioned services" by exempt, non-practising and retired lawyers who are members in good standing of the Law Society, without those lawyers paying an insurance fee.
The 2002 endorsement defines sanctioned services as "pro bono legal services provided to an individual known to you only as a result of performing these services through a pro bono legal services program, provided that both the services and the program are approved for the purposes of this policy by the Law Society, and that the services are provided solely through the program."
A lawyer who has not paid the annual insurance fee, but who provides sanctioned services, is brought within coverage by an amendment to Condition 3.2 of the policy. In the past, that Condition has extended coverage only to claims arising out of errors that occurred during the individual coverage period (defined in the policy as the period during which the lawyer has paid the annual insurance fee). The 2002 endorsement revises the Condition to include those claims that arise out of errors that occurred in relation to sanctioned services performed during the deemed individual coverage period, defined as "any period after January 1, 2002, 12:01 a.m. P.S.T. during which the Individual Insured was a member and was performing sanctioned services."
For lawyers providing sanctioned services, the consequences of a paid claim (deductible, surcharge, loss of eligibility for the part-time discount) will be waived. Lawyers who have paid the annual insurance fee will also receive the benefit of a waiver of these consequences of a paid claim for any sanctioned services. Further, insured lawyers claiming the part-time discount need not include any of the hours spent engaged in sanctioned services in their calculation of hours for the part-time discount.
Although the coverage is now available as a result of the 2002 endorsement, the Law Society - through the Lawyers Insurance Fund and the Pro Bono Committee - is still in the process of developing criteria for determining which services and programs will be approved. For further information on this initiative, please see the last Benchers' Bulletin.
The optional Business Innocent Insured Coverage ("BIIC") policy
As reported in the September-October, 2001 Benchers' Bulletin, the Benchers decided that the Lawyers Insurance Fund should provide, for an additional fee and on an optional basis, $1 million of insurance coverage to protect innocent partners in law firms who may face claims that are otherwise uninsured because the business interests of another lawyer in the firm trigger Exclusion 6.2 of the compulsory policy, the "business exclusion" clause. That exclusion operates to exclude from coverage a claim by or connected with any organization in which the lawyer, his or her family or law firm partners or associates had effective management or control or a greater than 10% ownership interest at the time of the error: see Exclusion 6.2 of the compulsory policy.
The optional BIIC policy became available for purchase by B.C. law firms at the beginning of the year, and offers the limits of coverage provided by the compulsory policy, subject to a deductible of 10% of the total amount of any defence costs or indemnity payments made.
If a firm opts for this coverage, the BIIC policy must be purchased for all partners in the firm. The fee for 2002 is $400 per insured lawyer in the firm. The coverage will apply when partners are unaware, despite reasonable and regular enquiries, that another lawyer in the firm was providing legal services when the business exclusion would apply. The BIIC policy does not provide any insurance coverage for claims excluded by Exclusion 6.1 of the policy, the "benefit exclusion."
Full details regarding the BIIC policy are available from the Lawyers Insurance Fund. If you are interested in receiving an application and more detailed information, please contact Margrett George, Program Administrator, at (604) 443-5761 (email: mgeorge@lsbc.org).
2002 and beyond
The Lawyers Insurance Fund continues to pay out between $8 and $10 million in damages and defence costs every year. As always, the most effective means of controlling or reducing these costs remains each lawyer's careful practice and effective loss prevention. With that in mind, the staff of the Lawyers Insurance Fund wish you a productive, prosperous and claims-free 2002.