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ALIA often receives general questions from Subscribers regarding the Alberta Lawyer’s Professional Liability and Misappropriation Indemnity Group Policy (the “Group Policy”). To assist Subscribers, ALIA has created a list of those questions most frequently asked and responses to those questions.
Subscribers should always review the Group Policy, to confirm their obligations in any circumstance. The Group Policy can be read here.
Under Part A (Professional Liability)
Members of The Law Society of Alberta (“LSA”) who are required by the Rules of The Law Society of Alberta (the “Rules”) to pay the professional liability assessment (Part A Levy) and have paid the levy prior to the error (“Subscribers”).
Former Subscribers who have left the private practice (e.g., retired, judicial appointment, moved in-house) for errors that occurred while they were Subscribers to the Group Policy and paying the Part A Levy. To read more on coverage for former Subscribers, visit the “Am I covered if I retire or leave private practice?” FAQ.
Present or former partners of the Individual Subscriber.
Any law firm through which the Individual Subscriber has practiced law.
A present or former partner of any law firm through which the Individual Subscriber has practiced law.
Note: Provided that the Additional Subscriber did not commit or is not alleged to have committed the error.
Legal Services Organization Lawyer and LSA Members Doing Pro Bono Work
Employees and member volunteers who are not Subscribers (e.g., LSA members who are in-house) who are employed or volunteering at an approved legal services provider of pro bono services.
A list of approved legal service providers can be found here.
Students, paralegals, and other law firm employees are not covered because they are not Subscribers. However, their errors (not theft / misappropriation) may be covered indirectly, as Subscribers would typically be responsible for errors made by these individuals.
Under Part B (Misappropriation)
LSA members who are required by the Rules to pay the misappropriation assessment for indemnity (Part B Levy) and who have paid such assessment.
A Subscriber who has committed or is alleged to have committed a Misappropriation.
Present or former partners of the Subject Lawyer.
Any law firm through which the Subject Lawyer has practiced law.
A present or former partner of any law firm at which the Subject Lawyer has practiced law.
Note: Provided that the Innocent Subscriber did not conceal, acquiesce, or participate in the conduct of the Subject Lawyer that gave rise to a covered loss.
The Group Policy has two areas of coverage: Part A (Professional Liability) and Part B (Misappropriation).
Part A coverage is for damages and defence costs and protects Subscribers for errors in the rendering of professional services subject to the limits, conditions, and exclusions under the Group Policy.
Damages generally are proven damages that are paid to the Subscriber’s client or the individual(s) who suffered a loss caused by the Subscriber’s negligence. Damages also include repair costs. Repair costs are those costs incurred to attempt to correct an error to prevent a claim from being advanced (i.e., legal costs paid to repair counsel).
Damages do not cover such items as fines or penalties, punitive or exemplary damages, or billed or unbilled legal fees (i.e., fee disputes).
Defence costs are those costs incurred by ALIA to defend or settle a claim (i.e., legal costs paid to defence counsel).
Coverage is restricted to claims that involve domestic law or areas of foreign law where the Subscriber’s practice is expressly authorized by a foreign governmental or regulatory authority and the area is approved by ALIA as set out in a general endorsement to the Group Policy. Coverage is not provided for cybercrime or social engineering.
Part B coverage provides protection to members of the public arising from misappropriation by a Subscriber. Misappropriation coverage includes money, securities, or property that are entrusted to or received by the Subscriber. Part B coverage does not cover theft by employees or anyone who is not a Subscriber.
To see what activities are covered and not covered under the Group Policy, visit the “What activities are covered and not covered under the Group Policy?” FAQ.
Part A – Professional Liability Indemnity Coverage
Occurrence Limit – $1,000,000
Aggregate Limit – $2,000,000
Sublimit – $250,000 for lawsuits in a foreign jurisdiction
Subscribers have up to $1,000,0000 coverage for an occurrence. An occurrence means an error in the rendering of professional services or two or more errors that are the same or are related.
Subscribers have up to $2,000,000 in the aggregate for multiple occurrences. This means that the maximum amount payable by ALIA for claims reported during the policy period is $2,000,000 per Subscriber regardless of the number of occurrences reported to ALIA.
For example, if in the policy year 2021-2022 ALIA pays a total of $1.5 million on two claims for a Subscriber and a third claim is reported in that same policy year by that same Subscriber, the Subscriber would have $500,000 available for the third claim and any other claim reported in that policy year.
Limits are subject to the $5,000 deductible.
ALIA recommends that Subscribers purchase excess insurance for coverage above the Group Policy limits. Excess insurance is available from Canadian Lawyers Insurance Association (CLIA) and from insurance brokers.
Part B – Misappropriation Coverage
Misappropriation Limit – $5,000,000
Profession-wide Annual Aggregate Limit -$25,000,000
For each occurrence, the maximum amount payable by ALIA collectively is for damages, repair costs, and defence costs less any applicable individual deductible.
Damages generally are damages suffered by the claimant subject to certain exclusions in the Group Policy. The definition of damages also includes repair costs.
Repair costs are costs incurred by ALIA in attempting to correct an error to prevent a claim from being advanced (i.e., legal costs paid to repair counsel).
Defence costs are costs incurred by ALIA to defend or settle a claim (i.e., legal costs paid to defence counsel).
The misappropriation limit is the maximum amount payable by ALIA collectively for all losses and defence costs in respect of any misappropriation regardless of the number of claimants, claims made, or Subscribers involved.
The Profession-wide Annual Aggregate Limit is the maximum amount payable by ALIA collectively for all losses and defence costs resulting from all misappropriation claims made and reported in the policy period.
Subscribers have several obligations under the Group Policy, including the following:
Notifying ALIA of all claims and any circumstances that could reasonably be expected to give rise to a claim, however unmeritorious (“potential claims”), during the policy period in which they are first made against a Subscriber or of which a Subscriber first becomes aware. Failure to report the claim or potential claim on or before the June 30 deadline (i.e., the last day of the policy year) can result in denied coverage. Starting with the 2020-2021 Group Policy, late reports of errors occurring on and after July 1, 2020, do not result in denied coverage where the Subscriber can prove the late report did not prejudice ALIA. The amendment is not retroactive. If a Subscriber was aware of a claim or potential claim on or before June 30, 2020, and does not report it by June 30, 2020, there will be no coverage for the claim regardless of prejudice.
Cooperating with ALIA, which includes but is not limited to assisting ALIA with investigating, repairing, defending, or attempting settlement of the claim or potential claim. ALIA can withdraw coverage if a Subscriber does not co-operate. However, if a Subscriber is unable to co-operate by reason of death or mental or physical incapacity, then ALIA may, at its option, take the place of the Subscriber to ensure compliance.
The individual deductible is $5,000 per occurrence.
The deductible applies to defence costs, damages, and repair costs. The deductible is not an ‘at fault deductible’; the Subscriber is responsible for the first $5,000 of an occurrence.
ALIA invoices Subscribers for the deductible through the lawyer’s portal. Where there is more than one Individual Subscriber in a law firm who is alleged to have made the error, ALIA may determine which Subscriber is responsible for the deductible.
The deductible is not applicable if the claim is covered by the Western Law Societies’ Conveyancing Protocol and the Subscriber fully complied with the requirements of that Protocol.
Part A of the Group Policy provides coverage to Subscribers for claims arising from errors in the rendering of professional services.
Professional services include services normally provided or supervised by a lawyer within the scope of a usual solicitor-client relationship and services rendered as an arbitrator or mediator. Certain Incidental services substantially related to professional services are also covered. These include a Subscriber’s activities as an executor, administrator, trustee, personal representative, committee, guardian, or patent or trademark agent.
There is no coverage for ancillary activities, which are activities of a quasi-legal or non-legal nature that are ancillary to or independent of the practice of law. These activities include providing financial, investment, accounting, or brokerage advice or services and carrying on a business or undertaking that is not the provision of professional services, whether the Subscriber receives compensation or not.
It is important to note that any incidental services must be tied to professional services. For example, there is no coverage for a lawyer acting as a trustee or a personal representative of an estate in a personal capacity where no legal services are provided.
ALIA has received inquiries regarding the coverage for Subscribers providing services as a Notary Public or Commissioner for Oaths. Again, whether there is coverage for this as an incidental service depends on whether the lawyer is providing professional services. The Group Policy will not respond where a lawyer makes an error solely in his or her capacity as a Notary Public or a Commissioner for Oaths.
For example, generally there would be coverage for a lawyer who makes an error in commissioning an affidavit for a client of their firm in a litigation or other matter for which the firm is providing professional services. However, there is no coverage for an error in notarizing or commissioning a document for a non-client (for example, a family member or non-client walk-in) where no professional services are provided.
A claim arising from the mere receipt and distribution of funds by a Subscriber without the provision of professional services is also not covered.
The policy also excludes certain types of activities and claims.
ALIA provides “run-off tail coverage” for Subscribers who have retired or left private practice for errors that occurred while they were active and indemnified. ALIA provides up to full limits of the Group Policy at no cost. Not all Canadian Law Societies provide this additional coverage free of charge, and purchasing it on the commercial market can be costly.
The following is an example of how the coverage works: A Subscriber retires on January 1, 2019, and on March 1, 2020 they receive notice of a claim for the first time. The alleged error occurred on November 1, 2018, when they were a Subscriber and paying the levy and were not aware of the error. As a result, the 2019-2020 Group Policy will respond to their claim subject to the deductible, limits, conditions, exclusions and policy conditions.
Excess insurance operates differently. Subscribers who are leaving private practice should speak about excess coverage either with their firm or their excess insurance provider.
Please note if a retired Subscriber is practicing law in any manner after they retire, which includes giving legal advice to family/friends or doing pro-bono work, they would need to change their status with The Law Society of Alberta, and they would need to pay the levy to ensure they are covered. ALIA’s run-off tail coverage does not cover errors in professional services made after the Subscriber retires.
The Law Society of Alberta has resources available to Subscribers who are planning to retire, including a checklist on their website.
Lawyers who participate in the mandatory indemnity program (“Subscribers”) are covered under Part A of the Group Policy for claims arising from errors in the rendering of professional services, which would include pro-bono professional services subject to the terms and conditions of the Group Policy (including deductibles and surcharges).
Coverage for Members of the Law Society of Alberta who are exempt from the mandatory indemnity program is limited to services through approved pro bono legal services providers. Exempt members can contact the Law Society of Alberta or refer to the information here for requirements.
Articling students are not covered because they are not Subscribers to the Group Policy, which is the mandatory professional liability indemnity program for lawyers in private practice in Alberta. However, the Group Policy provides coverage to principals (or other supervising lawyers) for the articling student’s errors (not theft/misappropriation) to the extent that they are liable for the activities of the articling student under their supervision and control. Please note the Group Policy does not apply to in-house or government lawyers. Therefore, if any part of the student’s articling involves an in-house position, the student must ensure they are indemnified or insured for errors and omissions by the employer or under the principal’s or supervisor’s insurance policy.
The Group Policy requires that all claims and any circumstances that could reasonably be expected to give rise to a claim, however unmeritorious (“potential claims”), must be reported to ALIA during the policy period in which the Subscriber becomes aware of them. Failure to report the claim or potential claim on or before the June 30 deadline (i.e., the last day of the policy year) can result in denied coverage.
Starting with the 2020-2021 Group Policy, late reports of errors occurring on and after July 1, 2020, do not result in denied coverage where the Subscriber can prove the late report did not prejudice ALIA. The amendment is not retroactive. If a Subscriber was aware of a claim or potential claim on or before June 30, 2020, and does not report it by June 30, 2020, there will be no coverage for the claim regardless of prejudice.
If you are in doubt, you are strongly encouraged to report your claim or potential claim. ALIA is here to assist and can help you determine how to move forward. Do not try to take steps on your own to repair a claim or potential claim. These steps may make the situation worse and could jeopardize your coverage. If you report a claim or potential claim and it is not necessary to attempt to rectify the error or defend a legal proceeding, your deductible will not be triggered, and there will not be any surcharge to your levy.
To help Subscribers determine when to report a claim or potential claim, ALIA offers the following examples of common claims or potential claims that should be reported immediately. ALIA considers these examples to be either claims or circumstances that could reasonably be expected to give rise to a claim, however unmeritorious:
- You receive notice of an application where your client’s claim could be dismissed or summarily decided as a result of an error or alleged error on your part. Please do not attempt to handle these matters on your own, as this may result in a denial of coverage either as a late report or having caused prejudice to ALIA.
- Notice of a 4.31/4.33 application, regardless of whether you believe the application has merit.
- An application for summary dismissal based on a missed limitation period (including liens, litigation, and claims against insurers or governments).
- You are served with a Statement of Claim or receive a courtesy copy of a Statement of Claim alleging negligence or an error by the Subscriber/firm.
- A client has asserted that you or your firm made a mistake or alleges you or your firm has caused a financial loss.
- You receive a demand letter outlining negligence allegations against you.
- The other party alleges a specific defence based on something you have done (e.g., failing to name the correct party in an action).
- You fail to serve pleadings within the required time.
- You fail to properly register security, which may result in lost priority or entitlement (e.g., personal property security interest (Personal Property Security Act, mortgage).
- You receive notice of a LSA complaint in which your client alleges negligence or that you have caused a financial loss.
To read about Late Notice Provisions, click here.
ALIA recommends that Subscribers purchase excess insurance for coverage above the Group Policy limits and foreign law matters. Although the policy limit of $1,000,000 per occurrence per policy period and $2,000,000 in the annual aggregate offers generous financial protection for the majority of claims Subscriber’s face, it may not be enough to protect you and your firm. Excess insurance provides Subscribers and Law Firms with an additional layer of insurance protection should defence, and damage payments exceed the ALIA policy limits. Additionally, coverage under the Group Policy is restricted to claims involving domestic law or areas of foreign law approved by ALIA as set out in a general endorsement to the Group Policy. Therefore, Subscribers who have foreign law exposure should purchase excess insurance for this exposure.
Excess insurance can be purchased through Canadian Lawyers Insurance Association and commercial brokers. If you have foreign law exposure, you should discuss your insurance requirements with a commercial broker. Generally speaking, CLIA does not cover the practice of foreign law or claims involving foreign lawsuits.
You can read the Group Policy and Policy FAQs on ALIA’s website.
The above descriptions are provided for information purposes only. The Group Policy contains other terms and conditions that may affect coverage. Subscribers should always review the Group Policy, to confirm their obligations in any circumstance. The Group Policy can be read here.