Group Policy Changes - ALIA

Addition of Late Notice Provision

Effective as of July 1, 2020

As of the above date, ALIA amended the Group Policy to include a late notice provision for claims, and for circumstances that could reasonably be expected to give rise to a claim, however unmeritorious (“potential claims”), that are first made against a member of the Law Society of Alberta who participates in the indemnity program (a “Subscriber”) or of which a Subscriber first becomes aware after June 30, 2020.

It remains a requirement of the Group Policy that all claims and potential claims must be reported to ALIA during the policy period in which they are first made against a Subscriber or a Subscriber first becomes aware of them. If they are not reported within the applicable policy period, coverage is denied.

There may be times when a Subscriber fails to report a claim or potential claim in a timely manner. The Group Policy amendments include a late notice provision to address this. Under this provision, a Subscriber may provide late notice of a claim or potential claim if the Subscriber establishes that the late notice has not prejudiced 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.

The 2020-2021 Group Policy, which will came into effect on July 1, 2020, contains the late notice provision; however, it does not apply to claims or potential claims that were first made against a Subscriber or of which a Subscriber first becomes aware on or before June 30, 2020.

Restrictions on Foreign Law Coverage

Effective as of July 1, 2021

As of the above date, the Group Policy excludes claims arising from professional services provided from an office or other location outside of Canada unless the professional services are in respect of Alberta or Canadian law and are incidental to the Subscriber’s Alberta practice.

The indemnity program had significant exposure to lawsuits against Subscribers and firms in foreign countries, most notably the United States. The largest of these claims over the past several years involved firms that also had excess insurance for these foreign law claims.

ALIA’s Board approved revisions to the Group Policy to help limit the indemnity program’s exposure to foreign law claims, which are paid for by all Subscribers through the annual levy. These changes came into effect for the 2021-2022 policy year and are intended to limit the exposure of all Subscribers to errors made by some Subscribers in non-Canadian matters.

Under these revisions, there will still be coverage for Subscribers and firms who are sued outside of Canada in respect of Canadian legal advice, but these claims will be sub-limited to $250,000 per Occurrence (as opposed to the general $1,000,000 limit for Occurrences). Firms who expose themselves to greater foreign law risk should purchase excess insurance if they do not already have it. Those who do have it should take steps to ensure the revisions to the Group Policy are contemplated in their excess insurance.

Coverage will also require that the claim involve domestic law or areas of law that are expressly authorized by a foreign governmental or regulatory authority and approved by ALIA as set out in a general endorsement to the Group Policy. This latter provision recognizes that some practice groups – immigration lawyers and patent and trademark lawyers – are able to practice before United States governmental agencies pursuant to the rules of those agencies.

The new foreign law provisions were introduced in the 2021-2022 Group Policy, which was released in June 2021 and came into effect on July 1, 2021. ALIA gave Subscribers one year’s notice for those who have material exposure to foreign claims to arrange alternate coverage or amend existing commercial coverage for foreign law exposure. If you have questions about how to proceed, there are a number of commercial insurance brokers who should be able to assist. Subscribers with excess insurance from the Canadian Lawyers Insurance Association (“CLIA”) may also want to consider their coverage in relation to foreign law matters. Generally speaking, CLIA does not cover the practice of foreign law or claims involving foreign lawsuits.

FAQs – Change in Late Notice Provisions

To avoid a potential denial of coverage, claims or circumstances that could reasonably be expected to give rise to a claim, however unmeritorious, must be reported within the policy period in which a claim is first made against a Subscriber or the Subscriber first becomes aware of either the claim or potential claim. Under the prior Group Policy, if a claim or potential claim was reported outside the policy period, coverage would be denied regardless of prejudice. Under the new Group Policy, there is a late notice provision. Under this provision, a Subscriber may provide late notice of a claim or potential claim if the Subscriber establishes that the late notice has not prejudiced ALIA. If the late notice has prejudiced ALIA, coverage will be denied.

Please note that under the new provisions, claims that are reported late will still be denied if ALIA is prejudiced by the late report. If a Subscriber reports a claim late, they are not only jeopardizing their own coverage, but also coverage for other Individual Subscribers involved in the occurrence and Additional Subscribers, such as Law Firms and Partners, who would have had coverage with respect to the occurrence. Subscribers may also jeopardize their excess coverage or their firm’s excess coverage.

ALIA strongly recommends that Subscribers continue to report claims and potential claims under the Group Policy as soon as possible and within the policy year in which the claim or potential claim is first made against them.

Under the Group Policy, present or former partners of the Individual Subscriber, any Law Firm through which the Individual Subscriber has practised law, and a present or former partner of any Law Firm through which the Individual Subscriber has practised law are considered Additional Subscribers.

Under the prior Group Policy, if a claim or potential claim was reported outside the policy period, coverage would be denied to the Individual Subscriber and the Additional Subscriber(s), regardless of prejudice. Under the 2020-2021 late notice provision, a Subscriber may provide late notice of a claim or potential claim if the Subscriber establishes that the late notice has not prejudiced ALIA. If ALIA accepts the late notice, the Additional Subscriber(s) is/are also covered subject to the exclusions and conditions of the Group Policy.

If a Subscriber reports a claim late and there is prejudice to ALIA, coverage will be denied to the Individual Subscriber and the Additional Subscriber(s). It is good practice for Law Firms and Partners to have the appropriate risk management in place to assist with identifying claims or potential claims within their law firms.

It is important to note that the late notice clause 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 Individual Subscriber or the Additional Subscriber(s), regardless of prejudice.

As part of a Law Firm’s risk management, it is recommended that Law Firms speak to an insurance broker to discuss their insurance needs with them.

If a Subscriber reports a claim or potential claim, and it is not necessary for ALIA to attempt to rectify the error or defend a legal proceeding, the deductible will not be triggered and there will not be any surcharge to the Subscriber’s levy.

Click here to read more about ALIA’s Surcharge Protocol.

Subscribers should always provide notice of actual or possible mistakes as soon as they become aware of them.

The Group Policy requires that all claims and any circumstances that could reasonably be expected to give rise to a claim, however unmeritorious, must be reported to ALIA during the policy period in which they are first made against a Subscriber or a Subscriber first becomes aware of them.

Under the 2020-2021 late notice provision, a Subscriber may provide late notice of a claim or potential claim if the Subscriber establishes that the late notice has not prejudiced ALIA. If the late notice has prejudiced ALIA, coverage will be denied. To avoid a potential denial of coverage, it is best that a Subscriber report the claim or potential claim as soon as they become aware of it.

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 a Subscriber is in doubt, they are strongly encouraged to report the claim or potential claim. ALIA is here to help and can assist in determining how to move forward. Subscribers should not try to take steps on their own to repair a potential claim. Such steps may make the situation worse and could jeopardize coverage. If a Subscriber reports a claim or potential claim, and it is not necessary to attempt to rectify the error or defend a legal proceeding, the deductible will not be triggered and there will not be any surcharge to their levy.

Click here to read more about when to report a claim and examples of common claims or potential claims that should be reported immediately.

FAQs – Change in Foreign Law Coverage

Foreign law coverage was addressed in the 2021-2022 Group Policy, which became effective on July 1, 2021, as follows:

Coverage under the Group Policy is limited to domestic law (i.e. the law of Canada and its provinces and territories) and foreign law to the extent the area of law is identified in general endorsements to the Group Policy. Initially, this would be the practice of United States immigration law and patent and trademark law further to United States regulatory authorizations as discussed below. In the future, these areas could be expanded pursuant to Subscriber requests.
The Group Policy will be clarified that claims arising from the unqualified practice of law in a foreign jurisdiction (including the provision of domestic law advice) will be excluded.
Lawsuits initiated in a foreign jurisdiction will continue to be covered, but only to a sub-limit of $250,000.

ALIA is concerned that all Subscribers have significant exposure to foreign claims, because the indemnity program is funded by all Subscribers. Litigation, particularly in the United States, can be expensive, and in previous years ALIA has paid defence costs in United States actions to the limits of its coverage. While many Subscribers are not exposed to foreign law risk – or, if they are, it is limited – other Subscribers may routinely practice in matters in which they may be sued in foreign countries, including the United States.

ALIA recognizes that some foreign law risk may be inevitable, and as such will continue to cover that risk up to a sub-limit of $250,000. Firms having higher exposure to foreign law claims – some of which already have excess coverage for foreign matters – should consider commercial insurance to cover that increased risk. This benefits all Subscribers, who will now have a more limited exposure to funding foreign claims.

At the same time, the revisions will mean that coverage for foreign practice will be clearer, because exclusions will no longer be tied to the location from which a Subscriber provides legal advice, as was the case in the prior Group Policy.

ALIA is aware that some Alberta lawyers routinely practice before certain United States agencies pursuant to United States regulatory permissions. This practice has been low risk to the indemnity program and coverage would continue through an endorsement to the Group Policy.

It is expected that the endorsement would initially involve authorizations provided to Canadian lawyers to practice immigration law before the United States Department of Homeland Security; practice before the United States Patent and Trademark Office (“USPTO”) to the extent expressly permitted by them; and international trademark applications and subsequent country designations made directly or indirectly to the International Bureau of the World Intellectual Property Organization (“WIPO”) under the so-called “Madrid Protocol”, but specifically exclude advice or other professional services provided in respect of the actions of any particular country designated in respect of such application or any patent or trademark registered therein.

If Subscribers believe there are other areas of foreign practice that should be included in coverage, they will be able to approach ALIA to request an expansion to the general endorsement. ALIA would then be able to vet the endorsement (including with its insurers) by dealing with these on an essentially annual basis.

If you are practicing domestic law (i.e. Canadian law or the law of any Canadian province or territory) and the claim is made in Canada (for example, you are sued in Alberta by an Alberta client), your coverage will not change, and it will not matter whether you provided the advice from Alberta or from some location outside of Canada. However, if you are sued in a court outside of Canada, the $250,000 sub-limit will apply.

The $250,000 sub-limit will also apply for foreign lawsuits resulting from domestic advice given from inside Canada.

Qualified practices in foreign jurisdictions are a foreign matter, and ALIA does not cover them. This rationale applies equally to unqualified practices, where the foreign jurisdiction should take the lead in protecting the public. If there is a question of coverage arising from whether the Subscriber was in fact engaging in unqualified practice in a foreign jurisdiction, the Subscriber will be required to prove the practice was qualified (as opposed to ALIA being required to prove it was not).