May 7, 2021
Reminder – Changes in foreign law coverage are coming to help keep the base levy low
As announced on June 30, 2020, ALIA is revising the Group Policy to narrow coverage for foreign law matters effective July 1, 2021 to reduce the indemnity program’s exposure to foreign law risk and to help keep the base levy low.

Currently, 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. This coverage is generous compared to some other provinces.

The indemnity program has significant exposure to lawsuits against Subscribers and firms in foreign countries, most notably the United States. These claims can be very costly and may increase the base levy for all Subscribers. The largest of these claims over the past several years involved firms that also had excess insurance for these foreign law claims.

The new revisions will help limit the indemnity program’s exposure to foreign law claims, which are paid for by all Subscribers through the annual levy. These changes will come 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 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 that expose themselves to greater foreign law risk should purchase excess insurance if they do not already have it. Firms that do have it should ensure the revisions to the Group Policy are addressed 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.

To read ALIA’s previous announcement on these changes, click here.
Retiring? Leaving private practice? ALIA has you covered
Retirement should be a time to enjoy the next phase of your life and not worry whether you have coverage for a professional liability claim that might arise. Unfortunately, it can take several years for errors made by lawyers in private practice (“Subscribers”) to arise. As a result, a claim may arise after a Subscriber has retired or left private practice.

Fortunately, ALIA provides “run-off tail coverage” for Subscribers who have retired or left private practice for errors that occurred while they were active and indemnified. ALIA provides up to full limits of the Group Policy at no cost. Not all Canadian law societies provide this additional coverage free of charge, and purchasing it on the commercial market can be costly.

The following is an example of how the coverage works: A Subscriber retires on January 1, 2019, and on March 1, 2020 they receive notice of a claim for the first time. The alleged error occurred on November 1, 2018, when they were paying the levy and were not aware of the error or of circumstances that could reasonably be expected to give rise to a claim. As a result, the 2019-2020 Group Policy will respond to their claim subject to the deductible, limits, exclusions and policy conditions.

The Group Policy requires that all claims and any circumstances that could reasonably be expected to give rise to a claim, however unmeritorious (“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 may be denied.

Excess insurance operates differently. Lawyers who are leaving private practice should speak about excess coverage either with their firm or their excess insurance provider.

The Law Society of Alberta has resources available to lawyers who are planning to retire, including a checklist on their website.
Basic Group Policy FAQs now on the ALIA website
ALIA often receives general questions from Subscribers regarding the Group Policy. The Group Policy is posted on ALIA’s website; however, to assist Subscribers, ALIA has updated its website to include responses to common, basic policy questions, such as basic coverage information, who is covered, what the Group Policy limits are, and coverage for Subscribers who have left private practice.

You can review the Group Policy and commonly asked FAQs on ALIA’s website here.
Any summary of the Group Policy contained above is provided for general information purposes only and not as legal advice and is qualified in its entirety to the terms and conditions of the Group Policy. Subscribers should always review the Group Policy to confirm their obligations in any circumstance. 

ALIA does not provide legal advice. ALIAdvisory notices, ALIAlerts and the content on ALIA’s website, notices, blogs, correspondence and any other communications are provided for general information purposes only and do not constitute legal or other professional advice or an opinion of any kind. This information is not a replacement for specific legal advice and does not create a solicitor-client relationship.

ALIA may provide links to third-party websites. Links are provided for convenience only; ALIA does not vet or endorse the information contained in linked websites or guarantee its accuracy, timeliness or fitness for a particular purpose.

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