Law Times

PAGE 2 NEWS march 22, 2010 • Law Times LSUC gets $8M from insurance battle Regulator settles with accountant, actuary following long-standing dispute BY TIM NAUMETZ For Law Times OTTAWA — Th e Law Society of Upper Canada will get $8 million from its former liability- insurance fund accountants and actuaries following a lawsuit that began eight years ago over the fund's $67-million defi cit. In a mediated settlement this month with no liability admitted, accounting fi rm Ernst & Young and the actuary, Tillinghast (a company of Towers Perrin Inc.), have agreed to pay restitution stemming from the massive defi - cit the fund faced in 1991. Th e law society took the fi rms to court with a claim that they had failed to report or mis- represented the true fi nancial state of the lawyers' insurance program, which the LSUC said had caused it to incur liabilities and costs it otherwise would not have had to face. Both fi rms rejected the claim, saying the LSUC increased members' levies to pay off the defi cit and therefore suff ered no real damages. But the law society said the failure to know the true extent of liabilities and costs in the insurance program had deprived it of the opportu- nity to drop insurance coverage for lawyers' mortgage-brokering activities between 1992 and 1995. It also contended it could have reduced costs to members by $30.4 million. Th e LSUC claimed that con- tinuing vicarious-liability cover- age of $1 million between 1992 and 1995, instead of reducing it to $250,000, caused the Law- yers' Professional Indemnity Co. — now called LawPRO — to incur liabilities of $7.1 million. Ernst & Young and Towers Perrin vigorously contested the law society's claims, including a position that had it known about the $67-million defi cit in advance, it would have raised additional revenue that might have yielded in excess of $29 million in interest. Th e two fi rms argued that rule 50 of the Law Society Act made members responsible through the payment of fees and levies for anything that might happen to the insurance fund. "Th e lawsuit by the Law Society of Upper Canada and LawPRO against their for- mer auditors, Ernst & Young, and former actuaries Tilling- hast has been settled following a judicial mediation," Susan Tonkin, an LSUC communica- tions adviser, tells Law Times. "As a result of the settlement, the law society will receive payment of $8 million from the defen- dants," she added in an e-mail. "Th e lawsuit related to the cal- culation and reporting of claims liabilities incurred in the period 1991 to 1994 in the law soci- ety's insurance plan. No party made any admission of liability The law society will receive $8 million from a settlement with Ernst & Young and Tillinghast following a long-standing legal battle. as part of the settlement." Th e LSUC declined to pro- vide information about the assignment of costs in the set- tlement and said it was commu- nicating the terms of the agree- ment to its members. Th e Ontario Bar Association declined to comment about the settlement, as did LawPRO, which referred questions to the law society. In the midst of all the legal wrangling, LawPRO reported in its latest annual report that it "weathered the economic storm quite well." Chairman Ian Croft said in the 2008 annual report that LawPRO, which provides liabil- ity insurance to about 21,000 LSUC members and more than 1,400 law fi rms, posted a net in- come of $7 million for the year. Th at was attributed "in part" to a reduction in costs for claims from the previous year. In terms of actual investment income, the fi gure fell by about $5 mil- lion to $20.7 million on invest- ment assets of $411.6 million. Premium income was also Inside you will find: • an up-to-date alphabetical listing of more than 57,000 barristers, solicitors and Quebec notaries, corporate counsel, law firms and judges in Canada; • contact information for the Supreme Court of Canada, the Federal Court of Canada, Federal Cabinet Ministers, departments, boards, commissions and Crown corporations; • legal and government contact information related to each province for the Courts of Appeal, Supreme Courts, County and District Courts, Provincial Courts, law societies, law schools, Legal Aid, and other law-related offices of importance. More than a phone book Hardbound • Published February each year • On subscription $146 • P/C 0600140999 One-time purchase $162 • P/C 0600010999 • ISSN 0084-8573 down by $6.8 million because of a $300 decrease in the 2008 base premium to $2,300 per insured lawyer. LawPRO's cur- rent auditing fi rm is Deloitte & Touche LLP. LT For a 30-day, no risk evaluation call 1.800.565.6967 Canada Law Book, a Thomson Reuters business. Prices subject to change without notice, to applicable taxes and shipping and handling. www.lawtimesnews.com CLL ad - new.indd 1 1/7/11 9:41:55 AM

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