Law Times

Law Times • may 9, 2011 NEWS PAGE 3 Lawyers warned about 'new era' of LawPRO claims Profession needs to take responsibility for rising costs, vice chairman says BY MICHAEL McKIERNAN Law Times M embers of the pro- fession need to start taking responsibility for increasing the number and cost of negligence claims, the outgoing vice chairman of the LawPRO board says. According to Law Society of Upper Canada Bencher James Caskey, solid 2010 results masked underlying problems for the insurer. As he noted, changes to fi nancial practices could make its job even harder in the coming years. Delivering the insurer's an- nual report to Convocation on April 28, Caskey, who opted not to run again in the 2011 bencher election, said LawPRO had entered a "new era" of claim costs, one that shows no sign of ending in the near future. Th e projected cost of claims per year has jumped to $88 mil- lion in 2010 from around $60 million at the beginning of the last decade. As well, the 2,231 claims in 2010 made for the fi fth consecutive year that the total had topped 2,000. Real estate was the largest area for claims, accounting for 42 per cent of claims cost, followed by litigation at 23 per cent. "Frankly, it is alarming to the LawPRO board the num- ber of claims presented annu- ally as a result of the negligence of our members," Caskey said. "Th ere's only so much LawPRO can do to try and stem this tide. It is my view that individually, members of the practising bar have to start taking responsibil- ity for this high level of claims that are reported and the costly mistakes that are being made by our practitioners." He added: "At the end of the day, once the prospective law- yers have fi nished articling and written bar exams, LawPRO takes on all comers. Everyone is in, the good and the bad, and that's a serious problem for any underwriter." Both Caskey and LawPRO president and CEO Kathleen Waters warned benchers the base premium for lawyers in the scheme, already at its highest level since the 1990s, may have to go up even further next year. Base premiums are currently $3,350, up $400 over last year. According to Waters, invest- ment income can off set some of the costs of running the program. "But we certainly cannot aff ord to see that $88 million move any higher or the count of claims move any higher," she said. LawPRO actually made a profi t of $15.2 million in 2010. However, the bulk of that total came from a one-time adjustment of claims reserves that freed up $8 million after actuaries found LawPRO had been putting away too much money over the last de- cade for unpaid claims. "Th e message I would really like to drive home to my fel- low members of Convocation and through you to the profes- sion is that the solid results of 2010 have nothing to do with an improved claims picture in terms of how lawyers are actu- ally practising today and going It's what's inside that counts! ISSUE DATE FOCUS SECTION May 30 Criminal Law June 6 June 13 June 20 June 27 July 11 July 25 August 8 August 22 Internet/E-Commerce Law Real Estate Law Family Law Municipal & Planning Law Legal Specialists & Boutiques Forensics/Private Investigators Corporate/Commercial Law Health/Life Sciences Law September 5 Class Actions September 12 Human Rights Law September 19 Business/Competition Law September 26 Intellectual Property/ Trademark Law Litigation October 3 October 17 Insurance Law To advertise In an upcoming issue of Law Times, contact our sales team: Karen Lorimer 905-713-4339 karen.lorimer@thomsonreuters.com Kimberlee Pascoe 905-713-4342 kimberlee.pascoe@thomsonreuters.com www.lawtimesnews.com CLL - 1-4 page - 3X.indd 1 What's Inside 2X.indd 1 5/5/11 5:05:08 PM 2/17/11 4:35:34 PM CANADA LAW BOOK® forward," Caskey said. New international fi nancial reporting standards for accoun- tants coming into force could quickly eat up the $8-million adjustment anyway as LawPRO moves money to fi ll holes left by the tighter rules on account- ing for future claims, according to Caskey. New practices in the fi nan- cial fi eld that will change the way one key performance in- dicator is measured will make LawPRO's task even harder. Th e minimum capital test measures the ratio of an insurer's assets to its liabilities. In 2010, LawPRO's number stood at 226 per cent, up from 206 per cent previously. But LawPRO's regulator, the Financial Ser- vices Commission of Ontario, is changing the way it calculates the ratio, which is expected to force the insurer's number back down to below 210 per cent. Th e accounting changes could also negatively aff ect the minimum capital test, said Caskey, who added that if LawPRO's fi nancial perfor- mance had been any worse in 2010, its future number risked plunging to levels that would start alarm bells with the regu- lator about the insurer's long- term viability. Caskey paid tribute to LawPRO's Avoid a Claim blog, which he said had helped cut the number of claims with a fraud component by more than half since 2008. In 2010, there were 37 fraud claims compared with 79 in 2008, but that's just a drop in the ocean of overall 'There's only so much LawPRO can do to try and stem this tide,' says James Caskey. claims. "Some of the good work LawPRO is doing in support of the profession is being eroded in part by the unfortunate actions of some of our practitioners," Caskey said. According to Caskey, small- fi rm and sole practitioners are disproportionately represented among LawPRO claimants. As a result, Bencher Th omas Heintzman wanted to know whether LawPRO could do more to address the diffi culties they face. "My concern from being on a small-fi rm task force would be that those lawyers are subject to pressures that are unimaginable," Heintzman said. "I could never practise as a single practitioner." But Caskey said LawPRO was limited in its options be- yond off ering advice for avoid- ing claims and tracking what types of practitioners make them. "I don't think there is anything that LawPRO can do to change that environment. A lot of those wonderful single practitioners are not single practitioners by choice. Th ere are a lot of people that, if they had their druthers, would be in a fi rm with mentoring and with all of those aids available to them to avoid the pitfalls. Th ey simply don't have that as- sistance, and as much as we can allow LawPRO to track where the claims are coming from, I don't think there is any mecha- nism that we have." Bencher Judith Potter, her- self a sole practitioner in Lon- don, Ont., said the law society risks treating her colleagues as "second-class" members by focusing on their mistakes. Lawyers at large fi rms have far greater resources available to them and are better able to cover mistakes, she noted. "Most smalls and soles want to be there. Th ey are willing to trade off income and some oth- er things in order to give them the fl exibility of running their own practices and being in control of their lives. We have to guard against making smalls and soles feel like they are be- ing targeted." Caskey said the lack of sup- port for sole practitioners helps explain their overrepresenta- tion both among LawPRO claimants and lawyers in dis- cipline. "Preponderance is that people that practise on their own prefer to practise on their own. But that is not a licence to be negligent." 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• Cover
• LawPRO Warning
• Final Remarks
• Focus On E-Discovery