Thank you to licensees who have reached out with questions regarding CPATA’s professional liability insurance requirements. We understand this is the first time that agents are required to hold professional liability insurance and that this can feel like a significant financial investment. For lawyer licensees, law society coverage may not meet CPATA’s requirements, leaving them searching for options to fill the gaps. As a new regulator, CPATA is progressively fine-tuning its approach in response to these challenges.
Why is professional liability insurance important?
In most Canadian regulated professions where services are offered to clients, professional liability insurance is a staple. The College of Patent Agents and Trademark Agents Act includes a legislative requirement for licensees to hold professional liability insurance, which CPATA must enforce. Insurance is a primary way in which CPATA can protect the public interest, as it protects the client in situations where errors and omissions on the part of the agent result in financial loss for clients. It also offers a benefit to the agent and their colleagues by ensuring that resources are available to defend the agent and redress damages.
What are the requirements?
A licensee who holds a class 1 licence or a class 3 licence and who provides services to the public, must have professional liability insurance that meets the following requirements:
- it must be issued by a company licensed in Canada;
- it must cover claims made in and outside Canada;
- it must indemnify the licensee for any civil liability that arises from the licensee acting as a patent agent or trademark agent;
- it must have coverage limits of a minimum of $1 million per claim and $2 million aggregate per year.
Class 3 licensees must be covered by the insurance policy of their supervisor, their employer or their own policy. Those who work in government or as in-house agents are exempt from the requirements.
How did CPATA establish these requirements?
CPATA took a risk-based approach to insurance and consulted industry experts and practitioners in the process of establishing requirements.
The College hired an independent risk management and actuarial consulting firm to perform an analysis and make recommendations. Axxima included in this review the UK regulator of P&T attorneys, and the most widely available commercial insurance programs for P&T agents in Canada and the UK. They made 16 recommendations regarding insurance to CPATA in this report.
In July 2021, CPATA published a consultation paper outlining its proposed approach to the insurance requirement. Some licensees engaged with the details of the proposal, before the CPATA Board of Directors made its ultimate decision. Out of 16 insurance requirements the firm suggested, CPATA only selected 4, taking as light a touch as possible to minimize the burdens to practitioners, and ultimately clients.
CPATA also only required licensees with a higher risk to have insurance, namely class 1 or class 3 licensees who provide services to the public. It excluded those who work in government or as in-house agents.
Why must claims both inside and outside of Canada be covered?
In considering the requirements for coverage, the CPATA Board of Directors was mindful of approaches adopted in the United Kingdom, which recognize that IP practice is global.
Typical Canadian patent and trademark agency practice, unlike legal practice, involves extraterritorial aspects because clients often seek foreign patent and trademark protection and rely on their Canadian agent to access foreign legal regimes. While Canadian agents often retain and instruct foreign associates on behalf of their clients, it is naïve to assume that agents merely act as a conduit for communications between their clients and foreign associates . For example, Canadian agents advise clients in defining the scope of trademark and patent rights to be protected in other countries, and assist in the filing of applications defining those rights, whether by instructing foreign associates or by filing applications that extend rights into other countries
Because of this, the Board determined insurance coverage must cover claims wherever they are made. The Board recognized when a Canadian agent gives advice to a Canadian client, that advice will implicate non-Canadian law because of the reach of the rights involved.
The cost of insurance
We realize that the cost of insurance can be a significant financial investment for a sole practitioner or a small firm. However, there are many documented cases where intellectual property clients have been harmed and unable to recuperate losses as a result of agent actions. Insurance remains a primary way in which CPATA can protect the public interest and a legislative obligation under the CPATA Act. CPATA has done its best to take a light-touch regulatory approach to insurance requirements so that the financial burden to practitioners and by extension clients is minimized.
Ongoing work for lawyer-agents
In the past months, CPATA has heard from numerous licensees who are also lawyers regarding the gaps in their current coverage. CPATA has had discussions with law society insurers, who provide coverage for lawyer agents across Canada. We concluded that except for the policies of the Law Society of British Columbia and le Barreau du Québec, the other policies left gaps in the coverage CPATA required. This is because the policy may not have sufficient monetary limits, excludes claims made outside of Canada or will not cover a claim that relates to non-Canadian law.
Discussions about changing coverage by these insurers are ongoing, as CPATA has asserted that lawyer agents when practicing IP law should not have less coverage available to them for the work they do as part of their professional acts on behalf of clients.
CPATA has also had in-depth discussions with insurers such as LawPRO about adjusting their programs to meet patent agent and trademark agent needs. We encourage our licensees to communicate directly with their insurers to voice their requirements, in the hopes that these programs will evolve to serve lawyer-agents better.
CPATA is equally attempting to work with insurers to identify insurance policy options to fill the gaps between current law society policies and CPATA’s requirements. The gap in coverage is frequently minor but has to date proven to be a challenge to address short of a second, free-standing insurance policy. More information about this will be released as developments occur.
In an effort to give licensees a buffer period to find solutions that work for them, licensees are not required to have professional liability insurance in place until the end of 2022. While CPATA has asked agents to report on their insurance situation during the annual renewal period, the deadline for insurance is not until the end of the year.
CPATA is a new national, independent regulatory body. We are in the process of fine-tuning our policies and operations to best meet our mandate of regulating this profession in the public interest. Insurance is an area in which we expect developments in the upcoming year, and a key priority for CPATA. We always find it helpful to hear the perspectives of our licensees. Please reach out to our CEO Darrel Pink at firstname.lastname@example.org if you have additional information that might be useful to the College as its insurance requirements come into effect.