Civil Litigation Filing Levy Pilot - ALIA

Pilot Overview

The Alberta Lawyers Indemnity Association (“ALIA”) has implemented the Civil Litigation Filing Levy (the “CLFL”) effective July 1, 2021. The terms of the CLFL are set out in the Transaction and Filing Levy Schedule.

In the 2021-2022 policy year (July 1, 2021 to June 30, 2022), the CLFL reduced the professional liability assessment (“Part A Levy”) of every member who participates in Alberta’s mandatory lawyer indemnity program (“Subscriber”), through the application of a credit of $528 per Subscriber.

Because amounts collected under the CLFL will help offset some of the claim costs of the indemnity program, the CLFL is expected to continue to generate credits to be applied against the Part A Levy in future policy years.

ALIA’s Board of Directors approved the CLFL as a two-year pilot project commencing with ALIA’s 2021-2022 policy year. The pilot has now been extended into the 2023-2024 policy year.

The first reporting and payment of assessable filings was due October 31, 2021. Reporting and payment of the CLFL is quarterly. For more information on the timing of assessments and invoices, see the FAQs.

ALIA consulted with a sample population of Subscribers and professional organizations to help refine the CLFL pilot project and facilitate its smooth implementation. ALIA will continue to welcome feedback relating to the CLFL prior to and during the pilot project via email.

How-To Guides

For Lawyers: Civil Litigation Filing Levy How-To Guide

For Firm Admin: Civil Litigation Filing Levy How-To Guide

Description

The CLFL is similar to levies that have been in place for many years in Ontario (LawPRO) and Newfoundland and Labrador, where civil litigation transaction levies of $100 and $75, respectively, are charged for commencing and responding to civil actions.

The CLFL involves charging a levy of $75 (plus GST) for commencing and responding to civil litigation (for example, filing statements of claim and originating notices [to the extent they launch an action]) in the Court of King’s Bench of Alberta. Filings that do not commence, or respond to, an action, for example, interlocutory applications, are excluded.

This amount was determined to be appropriate based on ALIA’s cost/risk analysis and comparing rates charged in other Canadian jurisdictions for similar levies. ALIA conducted extensive research and due diligence and an analytical/risk rating process in developing the CLFL.

The CLFL does not apply to self-represented litigants who do not use lawyers to file commencements or responses. It also does not apply to Alberta lawyers who do not participate in the mandatory indemnity program, such as in-house counsel.

Many actions where Subscribers are counsel of record are exempted from the CLFL on an access to justice basis or for other appropriate reasons. These exemptions are set out in the Transaction and Filing Levy Schedule and include the following:

Actions pertaining entirely to family law.
Actions commenced or responded to through pro bono or public legal clinics (including actions funded by them) as designated by the Law Society of Alberta (the “Law Society”) or otherwise approved by ALIA’s President and Chief Executive Officer, to the extent the applicable document is filed, or caused to be filed, by a Subscriber who is acting for a party through the pro bono or public legal clinic.
Actions under the Adult Guardianship and Trusteeship Act (Alberta) or to which Alberta’s Office of the Public Guardian and Trustee are party.
Statements of claim filed by Subscribers to collect outstanding accounts from their clients.
Actions that are fee reviews or assessment hearings before a review officer or assessment officer, including any appeal.
Arbitration, which is not included unless an application to the Court of King’s Bench is made in respect of the arbitration.
Criminal law matters.
Governmental or regulatory boards or tribunal matters that are not commenced in the Court of King’s Bench, Federal Court or the Tax Court of Canada.
All matters in the Alberta Court of Justice. (Appeals of Alberta Court of Justice decisions to the Court of King’s Bench of Alberta will be included.)
All matters in the Alberta Court of Appeal.
Filings that do not commence or respond to an action, for example, interlocutory applications.

Additional guidance pertaining to exemptions is also set out in the CLFL Information Chart.

The CLFL credit for the 2021-2022 policy year was $528 per Subscriber, based on a total credit of approximately $3.84 million expected to be collected through the CLFL for the 2021-2022 policy year. This reduction was made on an actuarial basis as part of setting the Part A Levy for the 2021-2022 policy year. The CLFL is ultimately intended to be revenue neutral to ALIA and is expected to continue to generate credits to be applied against the Part A Levy in future policy years.

Subscribers who are required to pay the CLFL may charge it to their client as a disbursement.

Payments of the CLFL will be due quarterly throughout the year based on self-reports of Subscribers or their firms on an “honour system” basis. Over the course of the two-year pilot period, ALIA will continue to work on methods to ensure compliance with reporting and payment obligations. These may include the Law Society’s audit procedures and remedies under the indemnity program’s group policies for intentional avoidance of reporting assessable court filings and payment of the related CLFL.

The quarterly self-reports of assessable court filings will be submitted through a prescribed electronic form and require Subscribers and firms to list Court of King’s Bench action numbers for compliance purposes. The self-reporting forms are accessed through the Law Society’s Lawyer Portal.

Additional information on the foregoing is contained in the FAQ.

Please review the FAQs below for more information on the Civil Litigation Filing Levy (CLFL). View the How-To Guides for Lawyers and Firm Admin for steps on filing a levy in the Lawyer Portal, editing a filing submission and reviewing invoices.

The ALIA Board approved the CLFL in response to civil litigation generating more claims and costs than any other area of the indemnity program. As of the approval of the CLFL in late 2020:

For the five years ending with the 2018-2019 policy year, civil litigation was responsible for 45% of the total losses of the indemnity program, the largest proportion of any practice area, costing Subscribers an average of $9.9 million a year.
For the five years ending with the 2018-2019 policy year, civil litigation was responsible for 37% of the number of claims of the indemnity program, again the largest proportion of any practice area.
The average amount of each civil litigation claim (i.e., its severity) has steadily increased over the past 15 years. Civil litigation had the highest number of claims in each policy year since 1999, other than for three years (2007-2008 through 2009-2010) when mortgage fraud increased the number of real estate claims.

A key purpose of the CLFL is to reallocate some of the higher cost/risk associated with civil litigation. Since claim costs are a key driver in establishing the base levy payable by Subscribers, the higher costs of civil litigation are disproportionately shared by all Subscribers. Filing levies collected from transactions in high-cost / high-risk areas are expected to lower each Subscriber’s Part A Levy from what it otherwise would have been on an ongoing basis, because amounts collected under the CLFL (CLFL credits) will help offset some of the claim costs of the indemnity program. This is intended to make funding of the indemnity program fairer to all Subscribers.

Civil Litigation Filing Levy FAQs

The terms of the CLFL are set out in the Transaction and Filing Levy Schedule. The CLFL Information Chart provides guidance to determine filings to which the CLFL applies. The chart is updated from time to time based on questions received from Subscribers.

The CLFL will be self-reported and paid on a quarterly basis as described in the FAQ below titled “How will civil litigation filings be reported and the CLFL paid?”

Self-reports and payments may be made by individual Subscribers or their law firms. Self-reports for a quarter must be made within 30 days of the end of that quarter, and invoices must be paid to the Alberta Lawyers Indemnity Association by the following remittance dates:

April 30 (for remittances covering the three-month period ending March 31);
July 31 (for remittances covering the three-month period ending June 30);
October 31 (for remittances covering the three-month period ending September 30); and
January 31 (for remittances covering the three-month period ending December 31).

Filings should be reported based on the date of the Court Clerk’s stamped filing date. ALIA recognizes there may be a delay between the date stamped on the filed document and the date on which the Subscriber or their firm receives confirmation of the filing. If confirmation does not occur until a subsequent reporting period, then the filing may be reported in that subsequent reporting period in which the Subscriber or firm becomes aware that the document is filed, although the date to be reported should still be based on the Clerk’s date stamp. Alternatively, the filing could be added to the self-report for the current reporting period, if confirmation of the filing is received prior to payment of the invoice for that period. Once the invoice is paid, further entries for the reporting period cannot be added.

The self-report is completed and filed electronically through the Law Society’s Lawyer Portal on the page titled “Civil Litigation Reporting” located under the tab titled “ALIA Filing Levies.” The self-report lists the Subscriber, their filings, the date each was filed, the Court of King’s Bench action numbers of their filings, and the amount due (which equals $75 [plus GST] multiplied by the number of filings being reported). The Court of King’s Bench action number will be used for audit and compliance purposes.

Subscribers or their firms may report the filings and pay the applicable CLFL.

Completing the self-report generates an electronic invoice on the page titled “ALIA Transactional Levies” located under the tab titled “Returns”. For Members, the invoice is generated through the Law Society’s Lawyer Portal on the “My Account” page, located under the tab titled “My Profile”. For firm administrators, the invoice is generated through the Law Society’s Lawyer Portal on the page titled “ALIA Transactional Levies” located under the tab titled “Return Sheets”. Payments will be remitted electronically using one of the Law Society’s approved payment options.

As noted in our ALIAdvisory of October 19, 2021, you are not required to make any report or payment in respect of a quarter if you have no Civil Litigation Filings (i.e., filings to which the Civil Litigation Filing Levy applies) that were filed during the quarter. Please refer to section 3.6 of the Transaction and Filing Levy Schedule.

No. Only filings in respect of which the CLFL is payable need to be self-reported.

Until the self-report for a quarter is completed and the invoice paid, additional filings may be added to the self-report in the Law Society’s Lawyer Portal. Once the invoice is paid, further entries for the reporting period cannot be added.

If you need to have further entries added, please contact ALIA.

Yes. Section 3.6-3 of the Code of Conduct of The Law Society of Alberta and accompanying commentary permit the billing of disbursements and other charges, provided they are “fair and reasonable” and have been “disclosed in a timely fashion”.

The Law Society has confirmed the CLFL may be passed on to clients as a disbursement (as opposed to an “other charge”). Accordingly, if you are required to pay the CLFL, you may charge it to your client as a disbursement.

The Code of Conduct requires full disclosure in all financial dealings between lawyers and clients. One of these requirements is that a lawyer should provide to the client, in writing, before or within a reasonable time after commencing a representation, as much information regarding fees and disbursements, and interest, as is reasonable and practical in the circumstances, including the basis on which fees will be determined.

Lawyers should be sure to address the CLFL in writing with their clients in accordance with the Code of Conduct, for example, in their retainer letter.

Alberta’s Assessment Offices have confirmed to Alberta Lawyers Indemnity Association (“ALIA”) that the CLFL would be allowed on a review of lawyer’s charges, on the basis that the Law Society has confirmed it to be a disbursement. They have also confirmed they will treat it as recoverable by successful litigants, whether as disbursements for Schedule C costs or for solicitor and client or solicitor and own client costs. However, the Assessment Offices do not review all cost matters, some of which are reviewed on a desk application basis by Clerks of the Court of King’s Bench of Alberta.

Civil litigation and real estate levies are charged in Ontario (LawPRO) and Newfoundland and Labrador. In addition, a personal property transaction levy is charged in Newfoundland and Labrador. Transaction levies are not currently charged in other Canadian jurisdictions.

LawPRO’s civil litigation transaction levy is $100 (including GST) for commencements and responses, and Newfoundland and Labrador’s are $75 (plus HST).

LawPRO and the Newfoundland and Labrador program use an “honour system” to collect the amounts. Lawyers and firms are required to make quarterly declarations of the number of commencements and responses filed in the quarter and submit the required amount within 30 days of the end of the quarter.

Both programs exempt several matters from their civil litigation transaction levies. Subscribers who wish to review the details of these exemptions may refer to the respective program websites for further information.

Each year, ALIA’s Board of Directors set the levy for professional liability coverage (the “Part A Levy”) and misappropriation coverage (the “Part B Levy”) under ALIA’s group policy. The levy is set in two steps. The first step is calculating the “theoretical levy”, which is the net levy requirement determined on an actuarial basis to address existing and anticipated claims and to fund ALIA’s operations. The second step is determining the actual levy paid by Subscribers, which involves an actuarial adjustment of the theoretical levy based on ALIA’s capital levels. The theoretical levy and the actual levy are recommended by ALIA’s actuary and approved by ALIA’s Board.

Claim costs are a substantial portion of indemnity program costs, and as such, have a large bearing on the theoretical levy. Although the Part A Levy for the 2020-2021 policy year levy was approximately $800 lower than the prior year, this was not because the projected claim costs were lower (which would have lowered the Part A theoretical levy); it was because ALIA was able to make a larger reduction to the Part A theoretical levy by using ALIA’s existing capital reserves. The Part A theoretical levy was reduced more in 2020-2021 than in 2019-2020 due to strong investment returns and a one-time $316 adjustment to help provide relief for Subscribers facing cashflow issues with the onset of COVID-19. Without the one-time COVID-19 adjustment, the Part A Levy in 2020-2021 would have been approximately $500 lower than it was in 2019-2020 (versus $800 lower).

For the 2021-2022 policy year, the Part A Levy was reduced by $304 from the 2020-2021 policy year. This was a result of the application of capital funds ($1,212 per Subscriber) and an additional $528 per Subscriber credit based on forecasted CLFL revenue.

Without the CLFL, the Part A Levy would have increased for the 2021-2022 policy year. That said, the purpose of the CLFL is not to provide financial relief; it is to make the Part A Levy fairer to all Subscribers by reallocating some of the higher cost/risk associated with civil litigation to that practice area.

There may be cases where Subscribers agree with their clients not to pass on the CLFL or otherwise decide not to pass it on as a disbursement. To the extent any Subscriber or firm does not pass on the CLFL, they will absorb the $75 levy, as they would for any other cost that they incur but do not pass on to their clients.

Mathematically, if a Subscriber absorbs this cost enough times, that cost could equal or surpass the reduction of the Part A Levy received by all Subscribers. That potential consequence would involve the only situation in which implementation of the CLFL would increase the total professional liability levy (Part A Levy plus CLFL) paid by a Subscriber, regardless of the practice area.

This result is aligned with one of the basic premises of underwriting: if one engages in higher-risk activities, one is likely to have to pay higher premiums.

Moreover, the CLFL will not necessarily raise the total professional liability levy (Part A Levy plus CLFL) paid by Subscribers practicing in civil litigation. This is one of the benefits of the CLFL for those Subscribers, as opposed to simply increasing the Part A Levy for all Subscribers practicing in civil litigation.

A CLFL credit of $528 per Subscriber was applied to the Part A Levy for the 2021-2022 policy year. This is based on forecasted CLFL revenue for this policy year. The actual amounts raised by the CLFL may be affected by factors such as the number of exempts versus assessable filings, the number of filings by self-represented litigants, and the actual volume of litigation. If actual amounts materially differ from forecasted amounts, adjustments in future levies may be required.

The terms of the CLFL are set out in the Transaction and Filing Levy Schedule. The CLFL Information Chart provides guidance to help determine those filings to which the CLFL applies. The chart is updated from time to time based on questions received from Subscribers.

A detailed list of scenarios can be found in the CLFL Information Chart. While the CLFL will be charged per filing of a commencement or response document, there may be examples where more than one Subscriber would be charged in commencing or responding to an action. For example, if more than one Subscriber in a firm is working for the same party to the litigation in respect of filing the statement of claim, only one CLFL would be charged. However, if different Subscribers represent multiple plaintiffs in different firms, a Subscriber in each firm would be charged. Subscribers and firms will be responsible for determining which Subscriber is responsible for the filing. For more information on how reporting and payment will be made, please see the FAQ above titled “How will civil litigation filings be reported and the CLFL paid?”.

Where more than one Subscriber in a law firm acts on behalf of the same party in respect of which the filing is made, only one of them is required to disclose the filing and pay the applicable CLFL. Accordingly, the Subscribers in the firm that are acting on behalf of the party may determine which one of them will report it and cause the CLFL to be paid.

The Rules of the Law Society of Alberta obligate all members to disclose the member’s transactions and filings and pay the applicable levy. As noted under the CLFL FAQ titled “What steps will ALIA and the Law Society take to ensure Subscribers self-report assessable filings and pay the CLFL”, failures to report an assessable filing or pay the CLFL would result in breaches of the Rules. Accordingly, it is important that the Subscribers in a firm acting on the matter ensure one of them reports the filing and pay the applicable CLFL. Further, failures to pay outstanding CLFL invoices will result in automatic suspensions in the same way and on the same dates as failures to pay the Part A Levy or any Part A Levy instalment. These suspensions would apply to the Subscribers identified in the related self-report as having filed the applicable filing.

The above-mentioned FAQ also notes that during the pilot period, ALIA will consider repercussions under the Group Policy for failure to comply with CLFL obligations. For example, ALIA will consider substantially increasing the deductible for claims against Subscribers involving civil litigation actions in which the Subscribers (or their firms) failed to report the filing and consider requiring the Subscribers to indemnify ALIA for some or all amounts paid out on such claims. If these kinds of repercussions were put into place, they would affect the Subscribers against whom the claim was made (as well as their firms), as opposed to the Subscriber who reported the filing. However, the identity of the Subscriber who reported the filing may be a factor in determining which Subscriber is responsible for paying an increased deductible or for indemnifying ALIA for amounts paid out on a claim. These matters are yet to be determined.

No. A new CLFL would not be charged unless that subsequent firm filed a document that commenced or responded to an action.

Only one CLFL would be payable for a statement of defence and counterclaim filed simultaneously, but a CLFL would be charged on each filing where they are filed separately. Further, a new CLFL would not be payable by a Subscriber who commences an action by a statement of claim which then files a defence to a counterclaim. A detailed list of various payment/exemption scenarios can be found in the CLFL Information Chart.

The CLFL does not apply to applications that commence or respond to surrogate proceedings and are non-contentious under Part 1 of the Surrogate Rules of the Court of King’s Bench, or which are not disputed. However, if the matter is, or becomes, disputed, it would then attract the CLFL.

For example, an application under Part 1 of the Surrogate Rules for any grant would not attract the CLFL. However, if the grant was then challenged, or a claim was brought against the estate and the personal representative did not agree to all or part of the claim, the matter has become disputed, and the Subscribers who had made filings that commenced or responded to the dispute would then be liable to self-report and pay the CLFL in respect of those filings.

The filing by a Subscriber or their law firm in the Court of King’s Bench of Alberta of an application to appoint a receiver by a creditor, and any response to that filed by a Subscriber or their law firm on behalf of a party (including the debtor/borrower), would attract the CLFL. Subsequent actions and reports by existing parties and by the receiver would be interlocutory unless they could be construed as commencing or responding to a new action (for example, the addition of a debtor or creditor).

Bankruptcy and CCAA proceedings would be treated in a similar fashion. For example, the CLFL would apply to the assignment into bankruptcy by a party and any response to that application by a creditor to that application, to the extent they were filed (or caused to be filed) in the Court of King’s Bench by a Subscriber or their law firm. The CLFL would also apply to the application by the company to seek protection under the CCAA and any response filed by a creditor to that application, again to the extent they were filed (or caused to be filed) in the Court of King’s Bench by a Subscriber or their law firm.

The CLFL applies to each filing that a Subscriber or their law firm files, or causes to be filed, with the Court of King’s Bench of Alberta that commences or responds to an action, subject to applicable exemptions. It does not apply to documents filed by self-represented litigants with no counsel of record.

The CLFL is an indemnity program assessment and does not apply to Members of the Law Society of Alberta who are exempt from the indemnity program pursuant to the Rules of the Law Society of Alberta and who do not pay the annual assessment.

Yes. The CLFL applies to each filing that a Subscriber or their law firm files, or causes to be filed, with the Court of King’s Bench of Alberta that commences or responds to an action, subject to applicable exemptions. This would include acting as an agent for another lawyer or firm, for example, a non-Alberta firm.

During the CLFL consultation process, ALIA received feedback that it should take steps to ensure Subscribers comply with their CLFL obligations. This was consistent with ALIA’s view. Steps to ensure compliance may differ between the two-year pilot period and following the pilot period.

Failures to report an assessable filing or pay the CLFL would result in breaches of the Rules of the Law Society of Alberta.

Failures to pay CLFL invoices will result in automatic suspensions in the same way and on the same dates as failures to pay the Part A Levy or any Part A Levy instalment. Payments of the Part A Levy are due on June 30 in each year, or on June 30 and December 31, where the Subscriber chooses to pay in instalments.

Payment defaults lead to automatic suspensions shortly after these due dates. Any CLFL invoice that remains unpaid as of June 30 or December 31 will be treated in the same fashion.

During the two-year pilot period, ALIA and the Law Society will consider additional steps to ensure compliance with the CLFL.

Audit procedures, which may be undertaken by the Trust Safety department of the Law Society, will be developed in the pilot period. These procedures will rely in part on the Court of King’s Bench action numbers listed in the self-report.

ALIA will also consider repercussions under the Group Policy. For example, ALIA will consider substantially increasing the deductible for claims against Subscribers involving civil litigation actions in which the Subscribers (or their firms) failed to report the filing. ALIA will also consider requiring the Subscribers to indemnify ALIA for some or all amounts paid out on such claims. ALIA understands that Subscribers (or their firms) may inadvertently miss reporting a filing and only intends to exercise these remedies in cases where Subscribers (or their firms) were attempting to avoid the CLFL. These remedies, if implemented, will not apply during the two-year pilot period.

ALIA will also consider whether a late fee should be charged where the CLFL was not reported or paid. This will depend on the nature of compliance issues that arise during the pilot period. No late fee will be implemented for the pilot period.

Reallocating the cost of high-risk practice areas has been a strategic topic for ALIA’s Board of Directors for several years. Depending on the success of the CLFL pilot project, ALIA may consider additional transaction levies for other high-risk practice areas, such as real estate.

The CLFL was approved by ALIA’s Board of Directors in November 2020 as a two-year pilot project commencing with the 2021-2022 policy year (July 1, 2021, to June 30, 2022). The intent of the pilot is to refine the CLFL through the two-year period to improve the ongoing implementation of the CLFL.