Have You Notified Your Insurer?

Manitoba lawyers recently received a memo from the Law Society’s Insurance Department reminding them that it’s time to pay their 2014/15 liability insurance premium.

That memo also contains the annual reminder to practising, insured lawyers to “Speak now or forever hold your peace” with respect to known or potential claims. The Law Society reminds lawyers that:

Because our Professional Liability Insurance coverage is written on a claims-made basis, if you know of any circumstances which might possibly, at some point in the future, give rise to an insurance claim against you and you want coverage under your Insurance Policy, then you must report these circumstances to the Law Society’s Professional Liability Claims Fund staff before the end of June, 2014 [the end of the policy year].

While this annual reminder is helpful, reporting potential liability claims against you, arising out of your legal practice, shouldn’t be limited to a once-per-year event.

But if you need to be convinced, consider that failing to notify your liability insurer of a potential claim could have consequences beyond potential coverage issues under the policy, including the possibility that you could be found guilty of professional misconduct.

This was made very clear by the Manitoba Court of Appeal in a September, 2011 decision. The Court upheld a decision of The Law Society of Manitoba’s Discipline Panel finding a lawyer guilty of professional misconduct for, inter alia, failing to give notice to the Director of Insurance of the Law Society as soon as practicable after becoming aware of any acts or omissions that might give rise to a claim.

In Luk v. Law Society of Manitoba, the Court found that:

It is clear from the Panel’s reasons that it did consider the excuses put forward by the appellant for failing to notify the insurer once she knew that there was an error. The Panel rejected those excuses as not being reasonable. Its decision to do so was clearly explained and, in our opinion, was a reasonable decision.

Rule 5-36 does not state, nor does it mean, that failure to comply without reasonable excuse is automatically professional misconduct. Rather, it states that it “may”constitute professional misconduct. A panel of the Law Society must, therefore, consider the relevant circumstances before deciding that a failure to comply will constitute professional misconduct.

The requirement for insured lawyers to report potential claims to the insurer as soon as practicable upon becoming aware of circumstances which might result in a claim is not only part of every CLIA liability insurance policy, but also set out in the Law Society of Manitoba Rules and the Code of Professional Conduct. A lawyer’s breach of that obligation could result in not only in denial of coverage but also could potentially result in a finding of professional misconduct.

So, do you still think that failing to report is worth the risk?

 

Based on the article Notify Your Insurer! published by the Canadian Lawyer’s Insurance Association in Issue 53 of the Loss Prevention Bulletin, Autumn 2011.

 

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