The plaintiff was unable to recover for losses suffered as a result of her lawyer’s negligence because (1) the lawyer was not practicing law and thus was not insured at the time the loss was discovered, and (2) the lawyer did not report the potential loss to the insurer while the policy was in effect. The Alberta Court of Queen’s Bench held that there was a reasonable and appropriate gap in coverage, and the Master’s decision was upheld.

[2015] A.J. No. 239

2015 ABQB 132

Alberta Court of Queen's Bench

J. Strekaf J.

February 26, 2015

In the underlying actions, the plaintiff retained counsel with respect to two motor vehicle claims in which she was a defendant. Her lawyer failed to file a statement of defence in either of the actions, and default judgment was granted against her. The plaintiff brought an action against the lawyer for the losses she suffered as a result of his negligence and obtained default judgment against him. The plaintiff then brought an action against the Canadian Lawyers Insurance Association (“CLIA”) and the Alberta Lawyers Insurance Association (“ALIA”), to recover this amount directly from the lawyer’s insurers. The action was summarily dismissed by a Master. The plaintiff appealed the decision.

The lawyer was an insured under a professional liability policy issued by CLIA and administered by ALIA from July 1, 1995 to July 1, 1997. The policy provided that all claims against an insured must be made during the insured’s policy period. An insured reporting a possible claim against themselves during the insured’s policy period would also be deemed a claim made during the policy period.

In this case, no notice of the claim was given to the insurer until 2000, which was well after the expiry of the policy period. The plaintiff argued that her new counsel serving the lawyer with the praecipes noting the plaintiff in default could constitute a “circumstance which may reasonably give rise to a claim” such that there would have been coverage if the lawyer had reported those circumstances to his insurers. However, because the lawyer did not report the potential claim, there was no coverage and that relief from forfeiture was not available. The plaintiff also argued that there were good public policy reasons to protect the public from lawyers’ negligence. The Court made it clear that the Court’s role was limited to applying the insurance policies in place in accordance with applicable legal principles, and that a consideration of public policy concerns was beyond the scope of the appeal.

The Court also noted that, because the Law Society of Alberta had opted to have ALIA provide a “claims made” rather than an “occurrence based” insurance policy, gaps in coverage may arise. For instance, where a lawyer practices law for a time and causes a client to suffer a loss, then ceases practicing law, the lawyer will likely no longer be insured. If the client does not discover the loss or if the lawyer fails to report the loss or potential loss to the insurers while the policy is in effect, the client will not be able to recover from the insurer. Ultimately, the Court determined that this was a reasonable and appropriate coverage gap and was not an issue to be determined by the court on the application.