Notice from the Canadian Lawyers’ Insurance Association Regarding CLIA’s “Claims Made” Insurance Policies
This memorandum is intended to explain and clarify the “claims made” nature of the mandatory (Part A) and voluntary excess (Part B) insurance programs with CLIA.
There is a significant difference between a “claims made” and an “occurrence-based” insurance policy. A claims-made policy covers claims that occur and are reported within the specific time period set by the policy. An occurrence-based policy protects the firm from any claim that happens during the policy period, regardless of when a claim is reported.
The CLIA mandatory $1M professional liability insurance policy is a hybrid of “claims made” and “occurrence-based” coverage. Members who are insured under the CLIA mandatory (Part A) policy, are insured on a “claims made basis.” Any claim or potential claim must be reported within the policy period in which the insured had knowledge of the claim or potential claim. This is set out in Section 4.2 of the CLIA policy. When a policy period expires, the Insurer is free of liability for any occurrences except those the insured had knowledge of and was reported prior to the expiry of the policy period.
The mandatory (Part A) policy becomes an “occurrence-based” coverage for members who are no longer insured at the time that a claim is made. This could apply to those who have retired, resigned, died, or been disbarred from the law society. In these cases, pursuant to the definition of “Individual Insured,” the policy will cover any claims that arise (subject to policy exclusions) as long as the occurrence took place during the period in which the member was insured.
The Voluntary Excess Program insurance policy (Part B) is a “claims made” policy only. Each year CLIA prepares and distributes marketing information for the Voluntary Excess Program (VEP). Included in this information is a paragraph that describes CLIA’s Lawyers Professional Liability Insurance Group Policy as a “claims made” policy. Each year CLIA’s policy expires and is renewed for the next policy year.
Year over year throughout the renewal process we are recognizing that there are a considerable number of firms that make coverage limit decisions based on the work that they are involved in for the coming year. We spend a significant amount of time and effort educating firms purchasing excess insurance through CLIA, that the CLIA policy is a “claims made” policy and it is important for the firm to have appropriate insurance in place at the time that a claim is made, not when the work is being conducted.