ALIA has again reduced the base levy payable by Subscribers. As compared to last year:

• due to increased claims, the professional liability / negligence (Part A) levy increased by 3.19%, or $71, from $2,229 to $2,300;
• the misappropriation (Part B) levy was reduced by 45.88%, from $388 to $210; and
• the combined levy was reduced by 4.09%, or $107, from $2,617 to $2,510.

The combined levy is the lowest it has been in 20 years, with the exception of the 2008-2009 policy year.

The reduction in the Part A levy was supported by:

• the application of capital funds of approximately $12.3 million, or $1,662 per Subscriber – the highest reduction using surplus capital since 2007-2008 – in accordance with ALIA’s Board-approved capital target calculations, largely because of investment returns in the past year that were unexpected, significant, and unlikely to be repeated next year; and
• the application of an additional $266 per Subscriber credit based on the revenue ALIA received from the new CLFL.

The reduction in the Part B levy was supported by:

• lower expected misappropriation claims costs; and
• the reallocation of administrative expenses from Part B to Part A.

Although ALIA was able to reduce the levy again this year, Subscribers must remain vigilant in attempting to avoid negligence claims by implementing proactive loss management strategies to reduce claims.

ALIA’s board of directors (the Board) establishes the annual levy after considering relevant information, including claims history, trends, costs of the stop-loss insurance ALIA purchases, investment income and actuarial projections. The Board also considers the recommendations of the Board’s Executive Committee, professional advisors (including its external appointed actuary, Willis Towers Watson), and ALIA’s management.

The actuary’s recommendation is based largely on their annual calculation of the costs of operating the Program, including defense costs and payment of claims, which form the largest component of the levy, and which is why increased claims costs usually necessitate a higher levy.

In the levy-setting process, the Board first determines the “theoretical levy”, which is essentially the cost of covering claims, including defending Subscribers, repairing errors, compensating the public, and operating the Program. The theoretical levy is the amount that would have to be paid by each Subscriber in the absence of any upward or downward adjustments. Those potential adjustments are changes to the theoretical levy that the Board deems appropriate for reasons that include building or reducing the Program’s capital to ensure the financial health of the Program, maintaining the stability of the levy over time, and guarding against the need for a special levy (like a cash call).

In deciding each year whether the Program’s capital is at the right level, the Board receives the recommendation of ALIA’s management and the Program’s actuary. The Board uses a capital target tool specifically developed for the Program by its actuary. If the Board determines the capital is higher than is required, it applies the excess amount to reduce the theoretical levy. However, if the capital is lower than it should be, the Board increases the levy and uses the difference to replenish the capital. The result is the actual levy required to be paid by each Subscriber for the indemnity coverage ALIA provides.

Part A – Negligence

For the 2022-2023 policy year (July 1, 2022, to June 30, 2023), after considering all relevant factors, the Board accepted the recommendation of ALIA’s management and the Program’s appointed actuary and set the theoretical levy for Part A (professional liability / negligence) at $3,962. Absent any adjustment, that theoretical levy would have been the actual levy that each Subscriber would have paid. However, the Board authorized the use of ALIA’s capital to reduce that amount by $1,662 per Subscriber. This reduction, the highest reduction using surplus capital since 2007-2008, resulted in a Part A base levy assessment of $2,300.

This reduction was implemented despite an 8% increase in the projected claim costs for damages and defence costs due to increasing severity in claims settlements. ALIA’s ability to provide this levy reduction was due to several factors, including:

• an increase in Program capital due to positive investment returns allowing for a larger capital contribution;
• ALIA’s ability to resolve some historical claims for less than the reserved amount of those claims;
• ALIA’s actuary applying a risk philosophy appropriate for a mandatory non-profit program;
• applying the CLFL credit based on revenue from qualifying filings;
• ALIA’s continued focus on enhancing its operating efficiencies; and
• a projected increase in the number of Subscribers.

The major components of the base levy include the following:

• 76% Claims Costs
• 12% Salaries
• 9% LSA Management fee
• 3% Admin

Part B – Misappropriation

The levy for Part B (Misappropriation) was reduced from $388 to $210 per Subscriber for 2022-2023. ALIA was able to achieve this due to lower expected claims costs and the reallocation of administrative expenses from Part B to Part A.

The 2021–2022 levy amount is $2,300 for Part A and $210 for Part B (for a total of $2,510), plus GST, for a total of $2,635.50 including GST.

You can expect to receive communications regarding the invoice for your base levy (and any applicable surcharge based on your individual claims history) by mid-May.

Payment of the levy is due by June 30, 2022. Payments can be made in a single payment or by two instalments. Invoices will be made available online through the Law Society of Alberta’s Lawyer Portal.  For information on how to make a payment to ALIA, view Making A Payment to ALIA.

Payments can be made electronically. Please visit the Law Society’s website for payment option details

In short, it does not. The combined base levy (Part A plus Part B) has been reduced by ALIA each year for the past five years and those reductions have brought the combined levy to a 14-year low this year. In fact, other than the 2008-2009 policy year, the combined base levy is the lowest in 20 years. It should be noted that the reduction in base levy has been possible by active cost reductions, including restructuring the indemnity program, and higher than expected returns on investments, and not by Subscribers reducing their claims, as such claims have continued to rise.

One of the goals established by the ALIA Board is to lower then bring stability to the levy. As illustrated in the graph below, the Board has been successful in that goal.

The Program runs on a non-profit basis. Therefore, there is a direct link between the amount the Program pays out to defend Subscribers and satisfy claims against them and the total amount of the levy assessed on Subscribers. Where possible, ALIA uses excess capital to reduce the theoretical levy. However, as ALIA’s capital fluctuates over time and capital reductions may not always be possible, Subscribers must remain vigilant in claims prevention, as future levies can be reduced by lowering the frequency and severity of claims made against Subscribers.

No. The number of Part A (Professional Liability / Negligence) claims reported to ALIA increased by 14%, and while not all of the claims reported result in payments, the cost to settle paid claims continues to grow. This troubling increase in claims and severity caused the actuary to increase the claim cost projections by 8% for the upcoming levy year.

ALIA was able to lower the Part A theoretical levy by applying capital to further reduce the levy payable by Subscribers as a result of:

• an increase in Program capital due to positive investment returns allowing for a larger capital contribution;
• ALIA’s ability to resolve some historical claims for less than the reserved amount of those claims;
• ALIA’s actuary applying a risk philosophy appropriate for a mandatory non-profit program;
• applying the CLFL credit based on expected revenue from those filings;
• ALIA’s continued focus on enhancing its operating efficiencies; and
• a projected increase in the number of Subscribers.

ALIA and the Law Society are working to avoid or reduce claims in various ways, including the following:

• providing ALIAlerts to warn Subscribers about current fraud schemes that are targeting lawyers and their firms;
• conducting educational outreach sessions to Subscribers on claims and loss prevention;
• auditing new and legacy law firms to ensure responsible practices are in place;
• enhancing our electronic trust transaction review capabilities and ongoing risk assessments to identify and address unacceptable practices;
• providing information and resources, such as ALIAdvisory education articles; and
• supporting the Alberta Lawyers’ Assistance Society (Assist) program to make additional support resources available to Alberta lawyers and families.

Looking forward, ALIA continues to investigate opportunities to reduce the levy by enhancing loss prevention activities and assessing options for future Program funding.

Most types of negligence are avoidable, such as missed limitation claims and dismissal for delay claims. Surprisingly, this is the largest area of losses for the Program and, accordingly, the largest contributing factor to the levy. There is an opportunity for Subscribers to lower the levy by reducing costs for all types of claims over the coming years.

As the frequency and severity of claims directly affect the levy, ALIA continues to stress the importance of loss prevention and asks Subscribers to avoid or minimize claims. ALIA’s claims funding model ensures that money saved on claims will result in lower levies in future years.

Yes. Although participation in the Program is mandatory for Alberta lawyers in private practice, several categories of lawyers are exempt from the Program and the levy assessment.

Alberta lawyers employed by a government, by a corporate or similar organization (other than a professional corporation), or in another similar employment or independent contractor relationship, as exempted by the Law Society’s Executive Director or the ALIA President and Chief Executive Officer, are not assessed the levy. These lawyers are not covered by the Program and, accordingly, they, their employers, or their private insurers (if they purchased insurance) would be responsible for any losses.

Additionally, some Alberta lawyers are indemnified at no charge for pro bono services through approved organizations as set out in Rule 148 of The Rules of the Law Society of Alberta. The Rules of the Law Society of Alberta also set out several other exemptions.

Finally, for a time, lawyers who had practiced for over 50 years were exempted from paying the levy as long as they remained claims free. Although this exemption has been removed, those lawyers who received it at the time have been grandfathered.

ALIA does not offer pro-rated refunds. Instead, ALIA allows lawyers to pay in two installments. For example, if a lawyer leaves private practice before the second installment is due, then the second installment is not payable, and the lawyer only paid 50 per cent of the levy.

All Subscribers historically shared the burden of incurred losses equally by paying the same levy. However, some Subscribers may be subject to special assessments (called “surcharges”) in addition to the base levy due to their individual claims history. Surcharges are made pursuant to The Rules of the Law Society of Alberta and are set at rates approved by the Board. More information on the Enhanced Surcharge Protocol can be found on the Enhanced Surcharge Protocol FAQs.

The CLFL also came into effect starting July 1, 2021, for what is currently a two-year pilot project. The terms of the CLFL, including the obligation to self-report and pay the CLFL commencing October 31, 2021, are contained in the Transaction and Filing Levy Schedule. For more information on the CLFL, view the Civil Litigation Filing Levy Pilot.

Yes. Although ALIA does not sell excess coverage, it recommends that all Subscribers investigate purchasing optional excess coverage for additional protection and periodically review their excess coverage to ensure it is proportionate with the risk and value of transactions undertaken by the Subscriber and their law firm.

Although excess coverage may be purchased through various brokers, ALIA works with the Canadian Lawyers Insurance Association (CLIA) to assist Subscribers in the purchase of excess coverage. Applications are available on CLIA’s website or by contacting ALIA.

The Group Policy is posted on ALIA’s website. To assist Subscribers, ALIA has updated its website to include responses to frequently asked general policy questions, such as basic coverage information, under Group Policy FAQs.

If you have questions or comments regarding the levy, please contact ALIA.