It’s important to have the proper coverages to make sure your firm is properly insured. But also, it’s important to know if you have insurance for your entity or persons that are associated with the firm.
For most, this is a simple question but over the years we have seen some highly creative things done to try to get coverage for as many attorneys as possible without having them actually have coverage. One frequent attempt at providing coverage is to list attorneys as of counsel to the firm. Yet they actually do no work for the firm and have their own billing systems. These of counsels might be sharing receptionists and other equipment with your firm. Most commonly they are tenants renting space from a firm they reside with.
We’ve even seen where contractually firms tried to paper over by saying that through their tenant’s rent that of counsels are part of firm and part of their insurance coverage. It certainly is creative but there is no coverage.
So, who has coverage under attorney malpractice insurance policy?
The place to start to determine coverage is looking at the definitions of ‘Named Insured’ ‘Insured’ and/or ‘You.’
The current Wesco policy defines “Named Insured” as:
“Named Insured” means the persons and entities designated in the Declarations.
The current AIG policy defines “Named Insured” as:
Named insured means any person or entity designated in the Declarations, including the
predecessors of any such person or entity.
If we stop here, it appears that the example cited above might be coverage for the tenant attorney. But we need to dig deeper into the definitions.
As we stated frequently there is no standard wording for attorney malpractice policies. Since we represent at over 35 companies, we have at least 35 different versions of the truth.
The Wesco insurance policy defines “Insured” as:
“Insured” means the Named Insured, predecessor firm and the persons or entities described below:
1. Any lawyer, partnership, professional corporation, professional association, limited liability corporation or limited liability partnership who is or becomes a partner, officer, director, stockholder-employee, associate, manager, member or salaried employee of the Named Insured during the policy period shown in the Declarations;
2. Any lawyer previously affiliated with the Named Insured or a predecessor firm as a partner, officer, director, stockholder-employee, associate, manager, member or salaried employee but only for legal services performed on behalf of the Named Insured or a predecessor firm at the time of such affiliation;
3. Any lawyer, law firm, partnership, professional corporation, professional association, limited liability corporation or limited liability partnership who acts as Of Counsel to the Named Insured or any non-employee independent contractor attorney or per diem attorney to the Named Insured but only for legal services performed on behalf of the Named Insured;
4. Any former or current employee who is a non-lawyer of the Named Insured or any predecessor firm, but solely for services performed within the course and scope of their employment by the Named Insured or any predecessor firm;
5. The estate, heirs, executors, administrators, assigns and legal representatives of an Insured in the event of such Insured’s death, incapacity, insolvency or bankruptcy, but only to the extent that such Insured would have been provided coverage under this Policy.
For the AIG policy there is not a specific definition for insured but there is one for “You”:
“You” means the named insured and the persons or entities described below:
a. any lawyer, partnership, limited liability partnership, professional corporation or professional
association, limited liability company or limited liability partnership who:
i. as of the inception date of the policy, is a partner, officer, director, stockholder-employee, associate, manager, member or employee of the named insured;
ii. after the inception date of the policy and prior to its termination, becomes a partner, officer, director, stockholder-employee, associate, manager, member or employee of the named insured;
iii. was previously affiliated with the named insured as a partner, officer, director,
stockholder-employee, associate, manager, member or employee of the named insured;
iv. is acting as “of counsel” to the named insured; or
v. is acting as an independent contractor or on a per diem basis to the named insured;
but only for professional legal services performed on behalf of the named insured during the time of such affiliation. Those of you who qualify for and elect a non-practicing extended reporting period shall be considered within the definition of you only as an individual, as set forth above; and
b. each nonlawyer employee who was, is, or becomes an employee of the named insured, but
only while acting within the scope of employment on behalf of the named insured at the time
of such employment.
Even with the different wording between the two policies there is one consistency. Of counsels have coverage under the firm’s policy but only for work that they do on behalf of the named insured firm. So, if the of counsel is merely a tenant of the named insured firm even if they listed on the policies of counsels only have coverage for work that they do for the named insured firm. If they’re doing no work for the firm, they have no coverage.
CLICK HERE TO GET AN ATTORNEY MALPRACTICE INSURANCE QUOTE
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080