Answers to Ontario Lawyers’ Questions About LAWPRO’s New Enhanced Fraud Coverage

[A post for Ontario lawyers only.]

We have received various questions and comments on the enhanced coverage for counterfeit certified cheques and bank drafts that we are providing under the 2010 LAWPRO insurance program and policy. To respond to those questions and comments, we’ve prepared an extensive list of FAQs (Frequently Asked Questions) that help explain this new enhanced coverage>, and also to provide some tips and guidance on how to make the coverage requirements work in your law practice.

These FAQs should help answer your questions as some recent media coverage about this new enhanced fraud coverage was not accurate as to what is and is not covered.

Any assertion that lawyers “effectively have no insurance coverage for such fraud” is incorrect. Lawyers DO and always have had coverage in situations where funds of legitimate clients were inadvertently paid out to fraudsters before the lawyer discovered that the instrument was counterfeit. Moreover, you do not need to make any changes in the way you practise for this protection to continue be in effect.

LAWPRO is now enhancing the existing protection: If your trust account is in an overdraft position because of a counterfeit certified cheque or bank draft, and the shortfall is strictly between the bank and you (no legitimate client funds are taken, or the amount of funds disbursed exceeded that belonging to legitimate clients), you will now have protection – at no additional cost – under the insurance program, provided that you comply with certain coverage requirements. (See FAQ #4 for information about these requirements.)

Moreover, this coverage is intended to help protect ALL segments of the bar; it was not, as has been suggested in the media, introduced to only address the particular challenges faced by the real estate bar. Fraud is very much a reality for all members of the bar. Litigators are being targeted on sham collection matters. Business lawyers are being targeted on bogus commercial loan matters. This enhanced coverage attempts to better protect all lawyers against the reality of fraud.

But at the same time, LAWPRO has a mandate to operate in a commercially reasonable manner and risk rate the insurance program. Hence the coverage requirements (e.g. waiting 8 business days before disbursing funds as instructed): These practice requirements help ensure that we moderate the risk to which the insurance program is exposed through this enhanced coverage. They also help equalize the likely impact on the insurance program arising from the different practice areas.

Making this enhanced coverage work is itself a work in progress, and we look forward to working with the profession to help lawyers avoid being victimized by fraudulent clients.

Call LAWPRO immediately at 1-800-410-1013 (416-598-5899) if you’re an Ontario lawyer (or your own malpractice carrier if you are in another province) and suspect you have completed or are acting on a matter that appears like it might be a fraud. We will talk you through the common fraud scenarios we are seeing and help you spot red flags that may indicate you are being duped. This will help you ask appropriate questions of your client to determine if the matter is legitimate or not. In the event the matter you are acting is a fraud and there is a potential claim, we will work with you to prevent the fraud and minimize potential claims costs.

As always, we welcome your questions, comments and suggestions.

Cross posted at Avoid A Claim