LLPs and adequate insurance coverage

by Carman Overholt

Globalization has profoundly changed the way in which business is conducted and the practice of law.

In light of these changes, consideration must be given to the likelihood that lawyers will increasingly become subject to claims arising from their own work and the work of their partners not only in British Columbia but in other jurisdictions.

At the June meeting of Provincial Council, I was authorized to deliver to the Government a Brief that was prepared by the CBABC Limited Liability Partnership Legislation Committee that includes draft legislation and other materials relevant to its recommendation that this legislation should be introduced in BC. Provincial Council also authorized our continuing efforts to lobby the Government for the enactment of limited liability partnership legislation in BC.

The purpose of the legislation is to protect “innocent partners” from all claims for which they have no responsibility. This legislation will not protect those lawyers who participate in a wrongful act or who are willfully blind.

I am confident that BC lawyers will enjoy the protection of limited liability partnership legislation in the near future. While the previous NDP government showed little interest in such legislation, the Liberals have indicated their support in principle. When enacted, BC would then join Ontario, Alberta and Quebec where such legislation has already been introduced. I wish to emphasize that the introduction of such legislation alone is not sufficient to adequately protect our members.

I am increasingly aware of the inadequacy of the insurance made available to us through the Law Society of BC’s Lawyers’ Insurance Fund. Innocent partners are subject to the staggering burden of legal fees in the event that the Lawyers’ Insurance Fund decides that a claim is not covered even where such a decision is challenged.

An innocent partner faces substantial legal fees and the prospect of liability for claims made against their firm because of the work of a partner that in the view of the Lawyers’ Insurance Fund is not eligible for its coverage. This is even the case where the innocent partner has taken reasonable steps to ensure that their firm does not do legal work for which insurance coverage is not available. This is not the case in Ontario where innocent partners have insurance coverage. BC lawyers deserve the same protection.

In my respectful view, the current insurance coverage neither adequately meets the needs of our members, nor sufficiently protects the public interest. I urge all of you, whether you work in office-sharing arrangements or as partners in firms, to take steps to ensure that you are aware of the limitations of the current insurance coverage available to you through the Law Society’s Lawyers’ Insurance Fund. As well, I urge you to raise this matter with your colleagues to ensure that you and your dependents are not being exposed to a potential liability that you did not agree to accept when you entered into a partnership or other form of business relationship.

In addition to continuing to lobby for the introduction of limited liability partnership legislation in this jurisdiction, I intend to lobby the Law Society of BC to provide better insurance protection for our members. Not only is limited liability partnership legislation and adequate insurance necessary to protect our members and their dependants, it is integral to maintaining a strong and independent bar in BC.

This article was published in the October 2001 issue of BarTalk. © 2001 The Canadian Bar Association. All rights reserved.