LAWPRO 2011 Annual Review: Claim Numbers & Costs Reach New Highs

At the end of this week Ontario lawyers will be receiving our third annual review of LAWPRO operations.

The big story in 2011 is claims. The number of claims reported is up 11 per cent to 2,468. And based on actuaries’ projections, claims costs in the E&O program could top the $90 million mark for 2011.

What’s driving the increase in claims?

As is more fully explained in the article, no matter how we slice and dice the numbers, the trend is up:

  • It’s a more complex business environment in which you’re handling more complex files that seem to result in more complex and costly claims.
  • It’s a more litigious world in which clients have higher expectations.
  • There are more claims involving self-represented (and in some cases, vexatious) litigants – a worrisome and often expensive trend that puts tremendous pressure on our court system and on the defendant lawyer.
  • Disturbing practice trends – such as lawyers abandoning practice to non-lawyers who are not supervised; or lawyers who (perhaps unthinkingly) deal with an intermediary rather than with the actual client and who are surprised when the client ends up unhappy and suing the lawyer (or worse still, the intermediary turns out to be a fraudster).
  • The “law of multiples” which can take many forms such as multiple lawyers doing the same type of work (or based on the same guidance) that leads to class action potential when there’s an allegation that they all did it wrong; or the same lawyer is sued over doing the same (alleged wrong) thing multiple times; or a lawyer undertakes many mortgage transactions without considering that there are red flags that need to be brought to the attention of the lender – such as a significant increase in the value of the property in a very short period of time or inexplicable credits.
  • Over the last decade, the number of lawyers in practice has increased 28 per cent. But the number of claims reported is up 34 per cent.
  • The claims you’re reporting cost more to resolve: The average cost per claim file is up 37 per cent from $31,000 in 2001 to $42,000 in 2009. Put another way, the number of claims in the $100,000+ category has gone up 115 per cent to 275 in 2009 from 132 in 2001.

For more information on the claims trends we’re seeing, read the full article. The full issue of the magazine can be found at www.practicepro.ca/lawpromag

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