Law Times

October 5, 2009

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A. NEUMAN ASSOCIATES INC. McKELLAR STRUCTURED SETTLEMENTS INC. 1-800-265-8381 $3.55 • Vol. 20, No. 31 ckellar_LT_Jan14_08.indd 1 1/8/08 3:03:02 PM Claims, interest rates, and HST force increase LawPRO rates to spike at least 20% BY ROBERT TODD Law Times A toxic mix of higher claim costs and a struggling economy has forced Ontar- io's legal liability insurance provider to boost its base premium by $500 for 2010. On top of that, a special levy due to the new harmonized sales tax also might be in the works. Th e $500 boost works out to a 20-per- cent increase excluding any special harmo- nized sales tax fee, a concern for people like County & District Law Presidents' Asso- ciation chairman Randall Bocock. "Any time you have an increase off the top to the cost of practice, it causes people who are already on the cusp of determining whether it's worthwhile to stay in practice or not to leave the practice," he says. Bencher James Caskey, a member of the Lawyers' Professional Indemnity Company's board of directors who rolled out the compa- ny's annual report at September Convocation, said 2009 "challenged LawPRO like no other year before it, and all signs point to an equally invigorating or challenging year ahead." He added, "Th e impact that the credit crunch has had on our bottom line is one of the many factors which, in concert, create what we call in the report 'an ugly cacophony of challenges.'" Th e base premium will go up $500 to $2,950, versus $2,450 in 2009. LawPRO said it will collect an extra $200 per lawyer for rising claims costs, $150 for the decline in investment income, and $150 for the HST. $55 million and $60 million to resolve claims in a single year, that number is expected to rise to more than $88 million. Meanwhile, investment income took a dive in late 2008 and early this year, LawPRO reported. Historically low interest rates meant the insurer's investments brought in only $1.8 million in the fi rst six months of 2009. Meanwhile, the province's plans to har- Bencher James Caskey says the harmonized sales tax will increase LawPRO's legal bills and operat- ing costs by eight per cent. An additional $450 one-time special levy may also be charged when the new tax is offi cially rolled out, said the insurer. Some lawyers, however, could pay as little as $1,595 depending on the type of coverage they opt for and their practice areas. In terms of the increased cost of claims, LawPRO noted that while it once paid between monize the fi ve-per-cent GST with the eight- per-cent PST on July 1, 2010, will drastically bump up the fees connected to the investiga- tion, defence, and indemnity of claims, said LawPRO. It pegs that added expense at $3.2 million for 2010. Th e new combined tax will also increase program administration costs by about $250,000 per year, LawPRO reported. "Th is is hard to believe, but true — the immediate impact of the HST will be to increase LawPRO's legal bills, as well as our operating costs, by eight per cent, about $3.5 million in the year 2010," said Caskey. Th e insurer said the special HST levy would help pay for a review of existing claims liabilities and would depend on the province's provision of transitional relief from the new blended tax. Caskey said the insurer is in talks with the government on that. LawPRO reported that it held nearly $365 million of unpaid claims liabilities on its books as of June 30, 2009. It said most of those claims will not be resolved before July 1, 2010, when the HST takes hold. Th e $450 levy would go toward the estimated $10.2 million in additional costs the HST is expected to add to this unpaid claims Conflicting interests a 'growing problem' BY TIM NAUMETZ For Law Times OTTAWA – When two litigators started a new life after McCarthy Tétrault LLP wound down its Ottawa offi ce, they drew atten- tion to a costly, complicated, and growing headache for Canada's largest law fi rms. Tom Conway and Colin Baxter chose a boutique litigation partner- ship as their next fi rm, citing a de- sire to avoid the inevitable problem of confl icting interests that arise in some large enterprises. Th e issue is that litigators in large fi rms are sometimes unable to accept retainers from certain clients because other partners in the same fi rm already have clients whose interests confl ict with those of the litigators' prospective fi les. Errol Mendes, who has refl ected about the growing issue from his professorial perch at the University of Ottawa, says that as the confl ict potential has grown, along with the size of many fi rms, he has become more sympathetic to the plight of the big fi rms. In fact, Mendes no longer believes the simplest solution, turning down certain clients, is a practical option. "I don't think that is an alterna- tive because, obviously, the fi rm's viability depends on it," Mendes tells Law Times. "We have to look at it from their TitlePlus_LT_Mar9_09 2/27/09 11:23 AM Page 1 perspective," he adds. "One of the big challenges they face is when a law fi rm gets big, it is almost inevita- ble there will be confl icts on almost anything that comes along because lawyers have so many clients. "Because the country is rela- tively small, and the base of po- tential clients is not that big com- pared to the United States, this is a growing problem." A 2008 report from a Canadi- an Bar Association task force that conducted an exhaustive study on confl icting interests contains data that reveals the size and complex- ity of the issue. At the outset, the report says the raw numbers suggesting there is a lawyer for every 415 residents of Canada indicate a confl ict would be easy to avoid. But it quickly addresses a very diff erent reality. Although there are roughly 75,000 lawyers in Canada, only 50,000 are in private practice. Ninety-one per cent of them prac- tise in British Columbia, Alberta, Together we have all the tools To ensure your clients get the most comprehensive coverage in one title insurance policy, take a look at the TitlePLUS Program , your Bar-related real estate partner! 1 ® PROTECTION AS GOOD AS IT GETS 1-800-410-1013 ® TitlePLUS, the TitlePLUS logo, OwnerEXPRESS and LAWPRO are registered trademarks of Lawyers' Professional Indemnity Company. ® BAR-RELATED Mark is a registered Mark of North American Bar Related Title Insurers used by LAWPRO under License. 1 Please refer to the policy for full details, including actual terms and conditions. The TitlePLUS policy is underwritten by Lawyers' Professional Indemnity Company (LAWPRO®). Contact LAWPRO for brokers in Saskatchewan, Manitoba, Alberta and Québec. TitlePLUS policies issued with respect to properties in Québec and OwnerEXPRESS® policies do not include legal services coverage. ® Ontario, and Quebec. Furthermore, nearly half of the lawyers practise in Vancouver, Cal- gary, Toronto, and Montreal. Of the 3,500 law fi rms in the country, 11 have more than 400 lawyers and have offi ces in sev- eral of the largest cities, a devel- opment that took place over the past two decades. Th e task force, led by Scott Jolliff e, chairman and chief ex- ecutive offi cer of Gowling Lafl eur Henderson LLP, came up with 21 major recommendations in its book-length report. Th e recommendations in- cluded eight proposals for amend- ments to the CBA code of profes- sional conduct. Among them was a call for more precise defi nitions of confl icting See More, page 3 Covering Ontario's Legal Scene ntitled-3 1 Forensic Accounting & Damage Quantifi cation Specialists Turn Crisis into Opportunity (416) 223-5991 October 5/12, 2009 9/28/09 12:30:15 PM Inside This Issue 2 New Mentoring Program 6 Withdrawal 9 Focus On Litigation Quote of the week "We have the same problems that a lot of other businesses have. Law fi rms are typically composed of Type A person- alities who are very aggressive and driven and want to put as much into a business day as possible." See Fraud, page 3 — John West, senior partner at Ogilvy Renault LLP, See Cellphone, page 4 Click here to subscribe today to LAW TIMES

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