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Same base premium…but Ontario lawyers saved $5 million in 2012. How?
Despite claims costs in $100 million territory, LAWPRO kept its base premium stable at $3,350 per lawyer from 2011 to 2012. Not all lawyers, however, pay the base premium. Careful claims analysis allows us to offer discounts to insureds such as newly-called lawyers, lawyers who practice part-time, and lawyers who practice exclusively in the low-claims areas of criminal and/or immigration law.
For the 2012 policy year, we increased the discounts available to these groups, to a maximum of 50 per cent off the total premium.
We also introduced a new reduction in the premium for the Real Estate Practice Coverage Option (REPCO): Down to $250 per real estate practitioner. That’s just half of what this coverage cost when it was first introduced.
What’s more, the lawyers who saved money tend to either be especially vulnerable to tough economic times themselves (because they’re just starting out in practice, or working part-time), or to be able to pass on those savings to clients of modest means (criminal and immigration law clients).
Convenient and responsive service for a diverse and growing bar
A record-breaking 24,012 lawyers filed LAWPRO professional indemnity coverage applications in 2012, with 97 per cent of those choosing to file online. We invite you to visualize the reduction in environmental impact that the shift to electronic filing has made!
But electronic filing has benefits beyond saving paper: prepopulated forms let lawyers complete the process faster with less potential for error; 24/7 access lets them file any time of the day or night; and less manual data entry means we can accommodate an increasing number of filers without adding staff every year (saving you money!).
However, computers will never replace customer service. Our successful transition to electronic filing could not have happened without constant two-way communication. Each year, our customer service department sends out more than a dozen email reminders, and places communications messaging in a wide range of internal and external publications. Customer service representatives receive tens of thousands of inbound telephone calls (29,218 in 2012) each year from insureds, and a similarly large number of written communications. Many inquiries require investigation and follow-up, often with supporting information provided.
LAWPRO’s customer service department is committed to providing timely, comprehensive and courteous support to each online visitor, recognizing that levels of familiarity with online processes vary.
We’re there: Claims for 2012 top $100 million: The new reality
We have been bracing for this reality: 2012 marks the third year in the past four in which claims costs, once internal claims handling costs are included, have exceeded the $100 million mark. What we hoped would turn out to be an anomaly has now solidified into an undeniable trend.
While this is bad news in itself, what gives us even greater pause is that the claims count that underlies these high costs is also growing: by February 28 of this year, 2,560 claims for the 2012 policy year had been reported, compared to 2,468 for 2011.
This growth in claims count is worrisome because it means that the high claims cost for 2012 cannot be dismissed as relating to a handful of specific claims that were exceptionally expensive.
The claims rate story
It may be tempting to attribute the growth in claims count to the year-over-year growth in the number of lawyers in private practice in Ontario. However, that explanation only makes sense if the rate of claims – the number of claims reported per 1,000 lawyers – remains stable over time. There were 108 claims per 1,000 practising lawyers in 2012, compared to 107 in 2011. Five years before, in 2007, the claims rate was under 100 claims per thousand.
In other words, not only are there more lawyers in practice each year, but each lawyer is more likely than ever before to be subject to a claim.
What kinds of claims are sparking the trend?
By now, lawyers should be used to hearing that communication based claims top the list of what we call “causes of loss”. That fact remained true in 2012, with 779 of the 2,560 reported claims attributed to communication errors.
Two causes of loss developments that are giving us cause for concern. The notable spike in the number of claims related to time management errors. These include claims that flow from, for example, expired limitation periods; or the administrative dismissal of actions under Rule 48 of the Rules of Civil Procedure.
A less dramatic but still relevant upward trend in the number of claims based on a lawyer’s failure to know or apply the law.
Claims data takes time to “firm up”
It takes time to resolve a claim. For this reason, the number of claims that LAWPRO has open in any given year usually exceeds by a significant margin the number of claims reported in that year. At the end of 2012, there were over 3,500 claims open in our system.
The time it takes to resolve claims (or even get a good handle on the likely cost) means that we don’t have a clear picture of average claims costs for a particular policy year until well beyond the end of that year.
What about area-of-practice?
As we’ve reported in recent years, real estate and civil litigation continue to be the areas of law with the first and second highest count and cost of claims. The spike in time management claims mentioned above, however, has had a discernible impact on the “spread”. When we compare gross claims costs for 2011 (as at February 29, 2012) and for 2012 (as at February 28, 2013), real estate claims slipped slightly from 35.6 per cent of costs for 2011 to 34.6 per cent for 2012. Litigation claims captured more of the costs “pie”, increasing from 22.9 per cent to 24.5 per cent.
Other areas of claims cost growth? Wills and estates (grew 0.6 per cent) and family (grew 0.1 percent). While we were pleased to see a decrease in claims costs in the corporate/commercial law area (down to 18.1 per cent from 22.4), this may be a temporary slip related to a slowdown in commercial deals and corporate M&A.
Stemming the tide: Claims management track record
LAWPRO requires lawyers to report all claims as promptly as possible, even if the likelihood that the claim will be successful is relatively low. In many cases, early reporting gives LAWPRO a better shot at “repairing” an error and reduces the likelihood of an allegation of late reporting which could jeopardize coverage altogether.
Claims costs: Indemnity costs lower than ever
The claims management efforts of our internal and external counsel led to 44 per cent of claims closed within 2012 to be closed without any payment, and 87 per cent to be closed without an indemnity payment.
Litigation record: Continuing success in the courts
While many claims require the expenditure of defence costs, LAWPRO has an excellent track record in the courts. In 2012, LAWPRO counsel:
- Was successful in all 6 of 6 matters that went to trial and for which a decision was rendered;
- Was successful in 2 of 2 appeals argued; and
- Won 18 out of 25 summary judgmentapplications made.
Over $1.7 million in costs recovered
Whenever chances of success warrant efforts to pursue recoveries, LAWPRO takes active steps to enforce judgments, file writs and pursue their execution, and collect reimbursement from third parties responsible for costs. LAWPRO counsel were successful in 197 such efforts in 2012, recovering over $1.7 million. For more details, and for examples of three such recoveries, see “Recoveries: Large or small, every recovery counts”.