Case Citation: Pryce v. Lawyers’ Professional Indemnity Company, 2024 ONSC 6195

Overview

In Pryce v. Lawyers’ Professional Indemnity Company, 2024 ONSC 6195, the Ontario Superior Court addressed whether a licensed paralegal was entitled to professional negligence coverage under a professional liability insurance policy issued by LawPro. The case arose from a claim against the defendant, a licensed paralegal, who sought coverage under a LawPro issued policy held by a lawyer with whom they had a working relationship. LawPro denied coverage, arguing that the policy did not extend to independent paralegals. The dispute ultimately centered on the policy’s wording and the definition of an "insured."

The plaintiff, Michael Pryce, a licensed paralegal, sought coverage for a professional negligence suit under a 2019 policy issued by LawPro to Jamie Bruce, a lawyer at Mr. Pryce’s employer. The lawsuit was filed by a former client who had retained the firm for accident benefits and tort claims following a motor vehicle accident. There was no dispute that Mr. Pryce acted within the scope of his employment and provided legal services under Mr. Bruce’s supervision.

LawPro accepted coverage for the claim against Mr. Bruce and the firm, providing them with a defense, but declined coverage for Mr. Pryce, who was separately named as a defendant. Notably, Mr. Pryce already had his own mandatory professional liability insurance through Lloyd’s Underwriters, as required by the Law Society of Ontario.

Court’s Decision

The Court ruled in favor of LawPro, affirming that Mr. Pryce was not covered under LawPro’s policy. The policy in question was specifically designed to cover errors and omissions liability for lawyers, as mandated by the Law Society of Ontario. The judge emphasized that LawPro’s policy clearly defined an "insured" as a lawyer licensed to practice law in Ontario and explicitly excluded non-lawyers, such as paralegals.

In its analysis, the Court focused on three key issues raised by the parties regarding the coverage afforded by LawPro’s policy:

1. Relevant Policy Wording – LawPro’s policy is not a broad liability policy but rather one designed specifically to cover lawyers for claims arising from their professional work. While it extends coverage to law firms, this is only because all lawyers within a firm are separately "insured" under the same scheme. The policy does not include coverage for a paralegal facing an independent lawsuit, as the definition of "insured" explicitly excludes non-lawyers.
2. Commercial Background – The Law Society of Ontario mandates that paralegals obtain their own professional liability insurance from the private market. This regulatory requirement highlights that LawPro’s policy and the mandatory paralegal insurance policy are distinct components of a structured insurance framework. Just as multiple lawyers within a firm rely on their individual policies for professional negligence claims, paralegals must also rely on their own coverage. The Court found that the existence of separate insurers in this case did not alter this principle.
3. Vicarious Liability of the Employer – While an employer can be vicariously liable for an employee’s professional negligence, this liability does not translate into an obligation for the employer’s insurer to provide a defense to the employee. The court emphasized that there is no common law duty requiring an employer’s insurer to extend coverage to an employee when that employee is not explicitly named as an “insured” under the policy. Even if such a duty existed, it would not compel LawPro to defend an individual outside the scope of its coverage.

Ultimately, the Court reinforced the importance of clear policy language and the principle that insurance contracts should be interpreted according to their plain meaning.

Key Takeaways for Insurers

• Policy Interpretation Governs – Courts will adhere to the plain wording of an insurance policy, particularly when defining the scope of coverage. This decision reaffirms that insurers should ensure their policy language is unambiguous in limiting coverage to intended beneficiaries.
• Risk Management Considerations – Law firms and professionals should be mindful of coverage gaps that may arise when working with non-lawyer professionals. Insurers may want to review and update their underwriting practices to address potential exposures in hybrid legal service arrangements.