Closely held entity exclusions are frequently overlooked on Attorney Malpractice Insurance Policies. Every attorney malpractice insurance policy has restrictions/exclusions for this issue. It is common for insurers to have a supplement to list the firm ‘clients’ that an attorney has an equity interest in. Insurers use the closely held entity supplement to tack on specific entity policy exclusions. Large percentages of a law firm’s practice revenue derived from closely held clients may upon careful reading of the policy find that the firm has little to no coverage for that work. The firm may be paying premiums for policies that provide no coverage.
Attorney professional liability insurance policies are not standard. If your firm does work for closely held entities spending 10 to 15 minutes reading the policy exclusions could save you thousands in excluded claims. Discuss the situation with your malpractice agent.
Exclusions for may exist for closely held entities or attorney owned entities. The exclusions can be a percentage of ownership either individually or collectively with the firm’s attorneys and/or family. Or it might be an exclusion for managing the business. Given these variables, one attorney malpractice policy could provide coverage where another malpractice policy will exclude coverage.
Endorsements attached to policies are another place where insurers restrict coverage. Underwriters add specific entity exclusions where the policy itself did not exclude coverage.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080