Law Society insurance covers theft by lawyers, not by their employees

Lawyer Hong Guo

A number of Chinese investors are facing big losses that a Law Society spokesperson says are unlikely to be covered by trust fund insurance after $7.5 million disappeared from a Richmond lawyer’s accounts.

Hong Guo, a prominent immigration and real estate lawyer in Richmond, has alleged in a B.C. Supreme Court lawsuit that two former employees conspired with accomplices to steal $7.5 million from her trust fund.

The B.C. Law Society says that after Guo reported the trust fund shortage this summer, the society took control of the fund and related client files and is investigating.

The Law Society has a trust fund insurance program to cover money lost from legal trusts. But Guo’s clients may not be eligible. The Society’s insurance fund rules say clients are only eligible to recover trust fund losses if the lawyer steals the funds.

“Lawyer theft from a trust account is covered by this policy — employee theft from a trust account is not,” Law Society spokeswoman Vinnie Yuen confirmed in an email. When a lawyer steals client money from a trust account, under the Law Society’s trust protection coverage, the most compensation a claimant can receive is $300,000.

In order for B.C. lawyers to insure against employee theft, lawyers must purchase special fidelity insurance not included in B.C. Law Society insurance coverage.

But this coverage is not mandatory, Yuen said.

In an interview with Postmedia this week Guo said her firm did not carry optional insurance to cover employee thefts.

Also, Yuen said professional liability insurance, which is also provided under the Law Society’s insurance fund, “covers lawyer negligence and ensures that clients receive the compensation to which they are legally entitled if a lawyer makes a mistake while providing legal services.”

“However, this insurance for negligence does not cover losses from a lawyer’s trust account in any way connected to a dishonest or fraudulent act,” Yuen said.

According to legal filings, at least five property transactions were affected in the Hong Guo trust fund case. Three Chinese citizens who hired Guo to complete their property sales allege they lost a total of $1.38 million in “holdback funds.” In real estate conveyances, the lawyer hired to transfer a property after it is sold will often keep a large portion of sale proceeds in trust until the Canadian Revenue Agency determines whether a non-resident investor tax bill will be issued.

None of the allegations have been proven in court.

Full Article & Source:
Law Society insurance covers theft by lawyers, not by their employees