No professional negligence coverage for a licensed paralegal under a lawyer’s policy

The court found that there was no coverage for a licensed paralegal under a lawyer’s policy in response to allegations of professional negligence.

Insurance law – Liability insurance – Professional negligence – Exclusions – Duty to defend – Interpretation of policy – Duties and liabilities of insurer – Vicarious liability

Pryce v. Lawyers’ Professional Indemnity Co., [2024] O.J. No. 5500, Ontario Superior Court of Justice, November 25, 2024, R.L. Akazaki J

A law firm, lawyer, and licensed paralegal were sued for professional negligence by a former client. The applicant, the defendant paralegal employed by the defendant law firm, and who was already covered under a mandatory paralegal professional liability policy issued by Lloyd’s, sought coverage under the LawPro policy issued to the defendant lawyer. The court rejected the arguments raised by the paralegal and determined that the LawPro policy did not extend coverage to the paralegal for the following reasons.

First, the grant of coverage and definition of insured in the LawPro policy clearly only extended to lawyers, and their law firms. The reference to employees of the firm only included lawyers, which was in contrast to the standard form Lloyd’s policy.

Second, the intention and commercial background of the LawPro policy was clearly to ensure lawyers with coverage extending to their firms by virtue of the fact that every lawyer in the firm was individually insured. This was consistent with the Law Society’s regulation of lawyers, not law firms, and the Law Society’s requirement that paralegals be insured under a separate insurance regime.

Third, although there was no dispute that the alleged negligence of the paralegal fell within the scope of his employment and the law firm was vicariously liable for his actions, this did not affect the coverage analysis. Vicarious liability under employment law did not give rise to a duty to defend an employee in a separate insurance contract under which the employee was not an insured.

This case was digested by Michael J. Robinson and edited by Steven W. Abramson of Harper Grey LLP and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please feel free to contact them directly at [email protected] or [email protected].