Did you know? ALIA covers theft by Participating Lawyers, not by law firm staff or others.
Following recent thefts of client funds by law firm staff, ALIA is reminding lawyers who participate in the indemnity program (“Participating Lawyers”) that not all thefts of funds entrusted to lawyers are covered under the Alberta Lawyers' Professional Liability and Misappropriation Indemnity
(the “Group Policy”) and recommends Participating Lawyers, or the law firms with whom they practice, obtain employee theft coverage for their practices.
The Part B Misappropriation Indemnity (formerly known as Trust Safety coverage) under the Group Policy was designed to protect the public from misappropriation of “Money, Securities or Property” entrusted to a lawyer, either by that lawyer or another lawyer in the same firm.
It is not intended to, nor does it, cover misappropriation by employees of a lawyer or law firm (e.g., a paralegal or an administrative employee). Insurance covering that type of theft can be purchased through an insurance broker and is known as employee theft or dishonesty coverage or fidelity bond coverage.
ALIA is aware of recent thefts where substantial sums of money were stolen by long-term employees of law firms. The recurring profile is that of a small and often successful firm where the partners are busy practising law or are experiencing a significant life event, and management of trust accounting has been abdicated to a single staff member trusted by one or more of the firm’s lawyers.
Many of the thefts are not sophisticated and could have been prevented by
relatively simple internal controls
. Lawyers can delegate certain tasks to firm employees, but any delegation must be made with an appropriate degree of oversight.
ALIA stresses that it is the responsibility of the lawyer, not the bookkeeper, paralegal, office manager, or accountant, to safeguard client funds. Lawyers and their partners to whom client funds are entrusted may be personally liable for the loss of client funds stolen by their employees.
ALIA strongly recommends that both sole practitioners and law firms obtain employee theft or fidelity bond coverage through an insurance broker. ALIA has been advised that Lawyers Financial (CBIA) also provides coverage. Please contact them for further details.