June 11, 2010 by Canadian Underwriter
Ontario lawyers in 2009 faced the largest number of errors and omissions (E&O) claims since 1995, according to the Lawyers’ Professional Indemnity Company (LawPro).
The province’s lawyers had their base premiums hiked by $500 in 2010 – up to $2,950 per lawyer – after LawPro reported a total of 2,272 E&O claims in 2009 at a projected cost of more than $85 million.
One trend is the increased cost of claims in the corporate, bankruptcy and security practices, which LawPro attributes to “the more complex practice environment and the high underlying values associated with alleged errors in these areas.”
The 2009 claims numbers represented a 4.5% increase from the 2,175 claims reported in 2008, LawPro noted in its 2009 annual report.
“Despite a concerted and successful effort on the part of the company’s claims group to close more files than the previous year, the number of open files managed by the claims team now stands at almost 3,200 – the highest it has been in the last decade,” LawPro states in its annual report. “Claims expenses increased to close to $101 million in 2009, almost a 40% increase from just under $73 million the previous year.”
Two “unusual” developments in 2009 contributed to the lawyers’ insurer reporting a net loss of $6.4 million in 2009 (compared to a net income of $7 million the previous year).
“To reflect the anticipated impact of the implementation of a harmonized sales tax (HST) in Ontario, a one-time re-evaluation of existing reserves by $10.7 million was necessary, as the HST will increase legal fees on outstanding claims liabilities by 8%.
“As well, a significant decrease in the discount rate resulted in a $7 million increase in claims liabilities.”