Practicing lawyers in Ontario are required to carry professional liability insurance. This mandatory insurance is a safeguard that ultimately is designed to protect the public. However, there is no protection for plaintiffs when a defendant lawyer in a solicitor’s negligence action has either been denied coverage or has failed to report a lawsuit to the Lawyers’ Professional Indemnity Company (“LawPRO”). In other words, LawPRO is not an insurer that can be added to a claim as a party under section 132 of the Insurance Act. This often proves tragic for clients who have been victimized by lawyers who do not have personal assets to satisfy a judgment. The dilemma has existed since at least 1984 when the Court of Appeal for Ontario released its decision in Perry et. al. v. General Security Insurance Co. of Canada et. al. At that time, the Associate Chief Justice of Ontario, in dismissing an appeal of a decision that refused to add LawPRO as a party, wrote that the legislature could step in to allow such relief. In fact, Associate Chief Justice MacKinnon, as he then was, “hoped that a prompt solution is provided by legislation or otherwise.” Unfortunately, more than thirty-five years later, LawPRO still cannot be added as a party by plaintiffs.
The practice of law is difficult. Barristers and solicitors require a certain psychological fortitude to carry out their assigned tasks. Clients are often living in a state of both existential and actual crisis when they consult with a litigator or corporate solicitor. Lawyers in medium sized and larger firms face the added pressures to bill significant hours and compete with colleagues. Advocates in smaller firms, or sole practitioners for that matter, can experience social isolation and administrative burdens that are taken care of by others in larger firms. Moreover, whether in small, medium, or larger firms, statistics suggest that lawyers suffer from significant rates of depression, anxiety, and addiction. It is no wonder that this exists given the adversarial and/or time sensitive nature of the work. As such, what happens when a lawyer has more or less collapsed under the weight of personal or professional demons? Depending on the situation, an action in solicitor’s negligence is generally not far behind. Further, if the lawyer’s personal and/or professional circumstances are serious, he or she may well freeze or fail to report a claim to their professional insurer at the right time. Only minimal safeguards exist for clients in this scenario, as is discussed in more detail below. After all, if a plaintiff is unable to add LawPRO as a party following a decision to deny coverage, a lawyer with no personal assets will be unable to satisfy any judgment.
The reason that LawPRO cannot be added as a party stems from the wording of section 132 of the Insurance Act itself. In Langman et al. v. Luhowy, the plaintiff moved to amend the statement of claim to add LawPro as a party, after the defendant lawyer had been denied coverage for representing himself in the action up to one month prior to trial. Not long after reporting the claim so late in the process, the lawyer subsequently made an assignment into bankruptcy. These circumstances resulted in a motion to add LawPro to the action. In denying the motion, Justice Shaughnessy held that section 132 of the Insurance Act only allowed the plaintiff to add an insurer as a party when a person “incurs a liability for injury or damage to the person or property of another.” Relying on the dreaded Perry decision, as was required by the doctrine of stare decisis, the Court ruled that “the scope of s. 132 of the Insurance Act cannot be interpreted to mean economic loss unrelated to physical damage to property.”