June 25, 2021
Assurance Fund Rule Amendments Approved
Since 2014, the Alberta Lawyers Indemnity Association (ALIA) has provided its subscribers with mandatory coverage for lawyer misappropriation as part of its Group Policy. The Law Society of Alberta (the Law Society) is also required under the Legal Profession Act to maintain an Assurance Fund to respond to lawyer misappropriation claims.

The Law Society recently completed a review of the Assurance Fund and the Board approved amendments to the Assurance Fund rules on June 18, 2021. The amendments confirm and reinforce that ALIA’s Group Policy is the primary source of recovery in the event of lawyer misappropriation. The new rules confirm that the Assurance Fund will not respond to claims arising from theft of funds by non-lawyers who are employed by law firms and clarify the Assurance Fund is to be a fund of last resort for lawyer misappropriation claims.

“We believe it is important to amend the Assurance Fund rules to provide clarity to the public and to lawyers who may not realize exactly what is protected by lawyers’ assurance funds, or by standard professional liability policies,” says Darlene Scott, QC, President of the Law Society of Alberta.

Part B of the ALIA Group Policy and the Assurance Fund has never covered misappropriation by employees or contractors. It only covers misappropriation by lawyers. Lawyers should familiarize themselves with ALIA’s coverage and the Assurance Fund rules.

We strongly recommend that firms obtain separate insurance coverage for employee/contractor theft or dishonesty. The coverage is voluntary and is available through commercial brokers or Lawyers Financial Advisory Service Inc. (LFAS), a subsidiary of the Canadian Bar Insurance Association (CBIA). For more information or to assess if you or your firm is at risk of employee theft, read this article Employee Theft on the Rise: Are You at Risk? – Law Society of Alberta.

New Rule Amendments

In 2014, the Law Society introduced the mandatory indemnity program we have today. Lawyer misappropriation claims arising on or after July 1, 2014, are submitted to ALIA and are considered under Part B of the Group Policy. This has not changed. In the event of a Part B claim, ALIA will consider other potential sources of recovery, including assurance or compensation programs operated by other law societies. In addition, Part B acts as excess coverage where there are other available insurance or indemnity programs that may cover the loss.

The new rules clarify that the Assurance Fund is only available as a fund of last resort for lawyer misappropriation claims, and claimants may only access it after they have exhausted all other remedies and sources of recovery. These sources of recovery include Part B and other applicable insurance and assurance programs, as well as any parties who are responsible for the loss.

In addition to clarifying that the Assurance Fund is a fund of last resort, new rules were added to address the sustainability of the Assurance Fund and to confirm some existing restrictions on recovery. Some of the new rule amendments include:

  • Adding financial limits on recovery from the Assurance Fund, including limits per occurrence and aggregate limits for claims caused by an individual lawyer and across the profession;
  • Confirming that no compensation is payable for interest, costs or disbursements or other heads of damage that are claimed or may have been incurred in connection with a theft;
  • Introducing a two-year limitation period for Assurance Fund claims; 
  • Confirming that the Assurance Fund will not respond to theft by lawyers who are non-practicing, or who work in-house or with government, and who do not typically hold trust funds for members of the public; and
  • Confirming that the Assurance Fund only responds to misappropriation by lawyers, and that misappropriation by non-lawyers who are employed by, or who contract with, law firms will not be covered.

The rules were also amended to clarify hearing and appeal processes and the role of the Law Society’s Tribunal Office. In addition, the new rules state that Assurance Fund hearings will be private, bringing the rules in alignment with current practice.

For more information, read our FAQ.
Keeping Trust Funds Safe
With an estimated $138 billion flowing through lawyers’ trust accounts in Alberta in a 12-month period (2020), the legal profession must be vigilant to keep trust funds safe.

The Law Society is committed to providing continuing education and risk management tools to support lawyers in keeping trust property safe.

New risks to the safety of trust property are constantly emerging. To maintain adequate accounting systems and procedures, lawyers must be wary of these risks and committed to continually assessing the safety and effectiveness of their accounting procedures. For more information, visit Trust Accounting & Safety – Law Society of Alberta.

We know that many lawyers rely heavily on their bookkeepers and other staff to handle their firm accounting. As part of firm practice management, delegating accounting responsibilities to trained staff is ideal, but doing so without proper oversight leads to increased risk.

Lawyers are responsible to educate themselves and protect their firms against fraud and theft. The responsible lawyer is accountable for:

  • The controls in relation to and the operation of all law firm trust accounts and general accounts.
  • The accuracy of all reporting requirements of the law firm and ensuring all reporting and filing requirements of the law firm are met. 
  • Ensuring all payment requirements of the law firm are met.
  • Overseeing anyone who is delegated any or all these tasks.  

For more helpful tips on how you can protect yourself, read the Guide for Effectively Managing Trust Safety Risk.
National Well-Being Study Deadline Extended
As mentioned in our June 10 eBulletin, The Federation of Law Societies of Canada (FLSC) has partnered with the Canadian Bar Association and the Université de Sherbrooke on a unique research study on the mental health and well-being of legal professionals in Canada.

The information collected in this survey will be used by both the FLSC and the Law Society to help develop and support a more sustainable and healthy practice of law in Alberta. By participating in this anonymous survey, you are supporting wellness in the legal profession.

Participants now have until July 30 to complete the survey. The survey should take between 30 and 45 minutes to complete, and responses will remain anonymous and strictly confidential.
Court of Queen's Bench Announcement

The court has outlined new judicial dispute resolution booking procedures for the fall term (September - December 2021). Read about the new procedures here.
Upcoming Events
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