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Issue 57 | May 2019

LIANSWERS

This newsletter includes information to help lawyers reduce the likelihood of being sued for malpractice. The material presented is not intended to establish, report, or create the standard of care for lawyers. The articles do not represent a complete analysis of the topics presented, and readers should conduct their own appropriate legal research.
Benefits of voluntary excess liability coverage from CLIA

As you know, LIANS’ mandatory errors and omissions program though the Canadian Lawyers Insurance Association (CLIA) provides limits of $1M per claim, with a $2M annual aggregate limit per insured lawyer. For those lawyers / firms that need it, CLIA also offers an excess insurance program.

The Voluntary Excess Program (VEP) provides limits of up to $9M per claim with a $9M annual aggregate. The options available under the VEP (excess of the $1M mandatory coverage) are $1M, $2M, $3M, $4M and $9M.                                                                                                                           

Excess insurance provides security should your defence and indemnity costs exceed the primary mandatory limits. If you do not currently have excess insurance, the following may assist you in determining if you should consider obtaining it.

Matters you should consider in assessing the adequacy of existing insurance limits for you or your firm:

  • the type of transactions you do and their potential impact on the client;
  • the size of the transaction(s) and the frequency of large transactions;
  • regarding past employees and partners, the possibility that their present insurance is either inadequate or excludes their past activities;
  • the time horizon of advice, as the impact of that advice may continue to grow over time as may the potential liability; and
  • your risk tolerance.

VEP premiums

The premium depends on the amount of excess coverage purchased, the level of excess insurance being based on the potential risk exposure. The total premium is based on the total number of lawyers in a firm and the level of coverage purchased. If a member is a partner or associate in a firm and the member requires excess insurance, the excess policy must be purchased for the firm as a whole.

Retired lawyers

It is important to remember that lawyers who retire from practice continue to be responsible for work they performed prior to retirement. Though retired lawyers will continue to be covered for the work they did pre-retirement under the mandatory errors and omissions program, the same cannot be said for excess insurance whether purchased though CLIA or elsewhere. If you have excess coverage through CLIA at the time of your retirement, CLIA has an option whereby retired lawyers can purchase excess coverage on an individual basis to address any unforeseen circumstances that may develop after retirement. Again, to purchase this coverage you must be retiring as a current member of CLIA’s VEP, either as a sole practitioner or as a member of a firm.

Claims-made policy

Excess insurance policies are generally claims-made, which means that it is not when the work was done that triggers coverage but when the claim was known to the insured and reported to the insurer that triggers the policy. If you have stopped carrying excess insurance at the time the claim is made, the excess policy will not respond.

Why buy your excess liability coverage from CLIA

Though you are free to obtain excess insurance (if you need it) from any commercial market, CLIA specializes in legal liability Insurance. CLIA is different from typical commercial insurers:

  1. As a reciprocal, CLIA can only insure its members (in this case the lawyers who are licensed by a Law Society). CLIA is financially supported by its members through premium collected. The members are the shareholders and there are no commissions charged;
  2. CLIA can tailor insurance products to meet the needs of its membership and ensure availability of coverage, independent of conventional market cycles;
  3. CLIA is structured such that the funding of claims is based on loss experience of the program and not directly affected by the volatility of commercial insurance markets; and
  4. Discounts may be provided to subscribing members in the form of premium credits. Firms that have been with the program for a number of years may be eligible to receive additional credits based on the length of their participation in the excess program.

What are CLIA’s rates?

Each year effective July 1st, CLIA conducts its annual Voluntary Excess Program application and renewal process. If you already have the coverage, it is an opportunity for you to review your risk portfolio and determine if you have enough coverage for the upcoming year. The rates (net) for 2019 (both new applicants and renewals) are as follows:

LIMIT

RATE / LAWYER

$1M xs $1M

$312

$2M xs $1M

$458

$3M xs $1M

$535

$4M xs $1M

$568

$9M xs $1M

$794

If you are renewing coverage, it is important that you do so before the end of the policy year to avoid gaps that may leave you unnecessarily exposed to risk of uninsured liability.

CLIA has been working on improving the application process to make it quicker and easier for you to apply for insurance. This year the online application process will open on June 3rd, 2019 to ensure that you have time to complete the application and submit premium payments prior to the July 1st policy renewal.

If you have any questions as you are completing the application process this year you can contact the CLIA office online at renewals@clia.ca or by phone at (306) 347-3057 (Cindy), and (306) 347-3055 (Sheila).