Changes to the Transaction Levy – Effective 1 January 2016
Benchers approved the adoption of a Transaction Levy, in principle, on 29 January 2004. Using this method to collect a portion of the insurance premium was intended to (a) remind practitioners about the insurance-heavy implications of the transaction; (b) place a portion of the insurance burden on the higher risk transactions, and (c) provide a capital pool to use for the benefit of the insurance program and to address insurance problems.
Utilizing a Transaction Levy is more equitable than charging the same premium to all lawyers, regardless of the risk associated with their practice, because it better reflects the activity (risk) and the volume (exposure to the risk) of individual lawyers. While every lawyer pays the same base premium, this only covers part of the risk. The Transaction Levy covers the rest.
Despite approval in principle in early 2004, formal implementation of the Transaction Levy did not take place until around 1 May 2005. Since that time, Benchers have continually monitored the need for and the appropriate use of the Transaction Levy and have routinely sought and relied on actuarial advice in making decisions with respect to the Transaction Levy.
The Transaction Levy has now been in place for 10 years and continues to be charged to members of the Law Society for the same purpose, that is, to assist in the proper funding and sustainability of an Insurance Program that protects the public interest. Enough cumulative data has been collected during this period to allow our actuary, Andre Normandin, to recommend changes to the way the Transaction Levy is charged. These changes are intended to ensure that a greater proportion of the cost associated with certain risks be borne by those practising in those riskier areas.
Our Law Society’s claims’ experience from 2006 to 2015 shows that 40% of the claims arise from real estate transactions while 35% arise from civil litigation transactions. A significant number of these are missed limitations – a completely controllable loss and an area where our claims are significantly higher than in other jurisdictions. The actuary has recommended that 70% to 80% of the cost of claims in these higher risk areas be paid for by the levy charged in those areas. Since the volume of real estate transactions on which the levy is collected exceeds the volume of civil litigation transactions on which the levy is collected by a factor of about 7 to 1, the levy charged on real estate transactions must go down while the levy charged on civil litigation transactions must go up.
As a result of the actuary’s recommendations, at the 6 October Convocation, Benchers decided the following:
- The Transaction Levy payable on real estate transactions will be reduced to $30.00, effective 1 January 2016; and
- The Transaction Levy payable on civil litigation transactions will be increased to $75.00, effective 1 January 2016.