Paralegal Insurance Requirements

Paralegals must ensure that they comply with subsection 12(1) of Part II of By-Law 6 and carry appropriate professional liability insurance unless they are eligible to claim an exemption under subsection 12 (2) of By-Law 6.

By-Law 6 outlines the minimum requirements for professional liability insurance for paralegals:

• Policy limits of at least $1 million per claim and $2 million in the aggregate per year
• A maximum deductible amount that is reasonable in relation to the financial resources of the paralegal
• Coverage for liability for errors, omissions and negligent acts arising out of the provision of legal services authorized under a paralegal licence
• Individual paralegals must be named as an insured on the policy, or by way of endorsement
• A provision granting an extended reporting period of 90 days from the date of cancellation of the policy
• A provision naming the Law Society as an additional insured for the purposes of reporting claims and receiving notice of cancellation or amendment of the policy
• A provision that the policy may not be cancelled or amended without at least 60 days written notice to the Law Society

Subsection 12 (1.1) of By-Law 6 requires paralegals who are partners with lawyers in a law firm and paralegals who are shareholders in a professional corporation that also has lawyers as shareholders to purchase their professional liability insurance from the Lawyers’ Professional Indemnity Company.

All other paralegals can purchase professional liability insurance directly from an insurance company or through a broker, but they must ensure that the policy they purchase meets the requirements outlined in By-Law 6.

Exemptions

Paralegals who work in situations set out in subsection 12(2) of By-Law 6 may be exempt from the requirement to maintain insurance against professional liability.

Proof of Compliance with Section 12 of By-Law 6

Starting on July 18, 2022, paralegals must use the Insurance section of the LSO Portal to report compliance with the requirements of By-Law 6.

Section 13 of By-Law 6 requires paralegals to provide evidence to the satisfaction of the Law Society that the licensee is in compliance with section 12:

• Immediately after the licensee is issued a paralegal licence
• Prior to the commencement of the provision of legal services
• Prior to any change in the circumstances in which the paralegal provides legal services where the change in circumstances
  • would result in the paralegal being required to maintain insurance
  • would entitle the paralegal to claim an exemption
  • would entitle the paralegal to claim a different exemption than the one previously provided
• Prior to the expiry of an insurance policy previously provided
• On the anniversary date of the last time the paralegal provided evidence of compliance
• Immediately after being required by the Law Society to provide evidence

Reporting Insurance through the LSO Portal

Licensees must use the Insurance section of the LSO Portal to provide proof of insurance or claim an exemption. As of July 18, 2022, Insurance Companies and Brokers are no longer able to provide the Law Society with insurance information on behalf of a paralegal. The paralegal must provide details of their insurance coverage and upload their Certificate of Insurance through the portal. 

Please see the FAQs about the Insurance section of the LSO Portal for further information.

Consequences of Non-Compliance

Paralegals who do not enter proof of insurance or claim an exemption through the LSO Portal may have their status changed to “Not Eligible to Provide Legal Services - No Proof of Insurance”, which will be displayed on the paralegal’s public listing on the Lawyer and Paralegal Directory.

Paralegals who are listed as “Not Eligible to Provide Legal Services - No Proof of Insurance” must login to their LSO Portal account and upload proof of professional liability insurance before providing legal services.

A paralegal’s licence to provide legal service can be administratively suspended pursuant to subsection 47.1(1) of the Law Society Act by Order of a person appointed for the purpose by Convocation for failing to comply with the requirements of the by-laws with respect to indemnity for professional liability.

Paralegals working under the direct supervision of a lawyer

It is the position of the Law Society that persons providing legal services must carry insurance; however, the Law Society's professional liability insurance program coverage for lawyers covers the professional services of both the lawyer and the persons that the lawyer supervises.

If you are acting under the supervision of a lawyer and providing legal services on behalf of the lawyer/law firm, the lawyer's/firm's professional liability coverage would satisfy the By-Law 6 requirement for mandatory insurance. However, you are not an insured under the policy. The policy only responds to the vicarious liability of the lawyer for your services. No coverage would be provided for your personal defense if you were a defendant in the proceedings and it may be possible for legal proceedings to be brought against you by third parties or the firm itself. Other examples would be if the clients belonged to you rather than the lawyer; and/or you were acting outside of a lawyer's direction; or you perhaps contracted your services to one or more lawyers/law firms, you would need to carry your own professional liability insurance.

Paralegals and lawyers supervising them may wish to refer to the Rules of Professional Conduct, Rule 6.1 Supervision, as well as the LAWPRO's Q&A on coverage, for more information.

2009 insurance decision from CANLII

If you are working under the direct supervision of a lawyer and believe that you do not need your own insurance policy, you must select this option in the Insurance section of your LSO Portal account.

Paralegal Professional Liability Insurance – Warning Bulletin about Switching Coverage

Paralegals who provide legal services to the public must maintain professional liability insurance that meets minimum requirements set out in By-Law 6 of the Law Society’s by-laws. Rule 8.04 of the Paralegal Rules of Conduct also sets out requirements regarding insurance.

Paralegals must arrange for their own professional liability insurance policies through the insurance market in Ontario. Most choose to do so through insurance brokers. Numerous policy coverage options are available on the market, and paralegals should educate themselves on these options to find coverage that best meets their needs and also meets the requirements of By-Law 6.

In this market with multiple providers, paralegals may choose to switch their professional liability insurance coverage from time to time. Paralegals should pay careful attention to the risks that may be created by gaps in coverage when switching between policies.

Risks of Gaps in Coverage when Switching Between Policies

Where a paralegal switches from one insurance policy to another, there is a risk that insurable events may not be covered by either the new or the prior insurer. These risks are present even where coverage under a new policy begins immediately upon the expiration of the prior policy.

Most professional liability insurance policies in the paralegal market in Ontario are called “claims-made”: that is, they require that the claim both be made and reported to the insurer within the period of time that the policy covers (the “policy term”). These policies also generally exclude coverage for any claim arising from acts or omissions that occurred prior to the policy term, if the insured paralegal reasonably should have foreseen that such a claim would be made.

This means that, if a paralegal switches to a new insurer, they may not be covered under their prior policy for claims that were not made or reported until after the expiry of the policy term (even if the event on which the claim is based occurred during the policy term), and they also may not be covered under their new policy for any claims arising from insurable events that occurred during the prior policy term but had not yet been reported.

Similar risks exist if a paralegal decides to no longer provide legal services to the public (and ceases their insurance coverage) or if a paralegal switches between a “claims-made” policy and an “occurrence basis” policy (under which insurable events are covered if they took place during the policy term, regardless of when the claim is made).

Mitigating the Risks

Paralegals considering switching their coverage from one insurer to another should discuss this risk with their insurance broker before completing the switch, and should carefully consider any opportunities to mitigate the risk.

One option for mitigating this risk is to add a longer-term “extended reporting period” endorsement (sometimes called “tail coverage”) under the paralegal’s existing policy prior to switching coverage. This extends coverage to future claims made within that extended period if the claims are based on events that occurred during the prior policy term. Pursuant to s. 12(1)(4) of By-Law 6, all approved policies must include an extended reporting period provision of at least 90 days from the date of the policy’s cancellation. Beyond this standard short-term extended reporting period, many providers offer the option of purchasing longer-term extended reporting period coverage. Paralegals considering switching their coverage should carefully weigh the costs of this supplemental coverage against the risks associated with going without it in their individual circumstances. 

Another mitigation option is to include a “discovery clause” in the insurance policy. This option would provide coverage for events that occur during the policy term but have not resulted in a claim by the expiration of the policy. Therefore, after switching insurance providers, coverage may still apply under the paralegal’s prior policy. Discovery clauses usually require that the insured give notice of the occurrence (e.g. reporting circumstances or incidents that have taken place but have not yet given rise to a formal claim) to their insurer before the policy that includes this provision expires.

Discovery clauses do not typically come standard with paralegal professional liability insurance policies. Paralegals interested in adding this coverage should inquire with their broker or provider.

The risks of gaps in professional liability insurance coverage can also be mitigated by strict compliance with the Law Society’s rules and by-laws. Rule 8.04(2) requires reporting all potential incidents promptly. Rule 8.04(1) requires maintaining adequate coverage at all times while providing legal services; therefore, practising paralegals must avoid letting a current policy expire without having a new policy in place. Avoiding the cancellation of a current policy by adhering to its terms and conditions can also help to mitigate these risks.

Questions

Paralegals with questions about their insurance requirements can contact Membership Services by calling 416-947-3315 or toll-free 1-800-668-7380 ext. 3315 and asking to be transferred or by email at parains@lso.ca.