Claim time is not the time to find out the attorney has no malpractice coverage for the reported claim. Attorneys that do work for clients where the attorney is involved with client management or ownership may run afoul of attorney malpractice policy exclusions. As no two client relationships are the same and no two policies are alike, where an attorney is doing legal for clients with an ownership or management role it is wise to read the entire policy. Where one malpractice insurance policy may provide coverage, the same client relationship with another malpractice policy excludes coverage. Depending on the attorney’s attorney/client relationship(s) there may be no coverage provided by the attorney malpractice policy.
The AIG (National Union) policy excludes certain client ownerships, management and/or directors/officer legal work from coverage.
V. EXCLUSIONS
This policy does not apply:
2. Certain Services and Capacities.
To any claim against you in your capacity as:
a. an officer, director, partner, manager, operator, or employee of an organization other than that of the named insured;
b. a public official, or an employee of a governmental body, subdivision, or agency; or
c. a fiduciary under the Employee Retirement Income Security Act of 1974 and its amendments thereto, or similar federal, state, local or common law, or any regulation or order issued pursuant thereto, except if you are deemed to be a fiduciary solely by reason of legal advice rendered with respect to an employee benefit plan.
3. Equity Interests.
If a person insured under this policy owns alone or together with his or her spouse or Domestic Partner, ten percent (10%) or more of the issued and outstanding shares, units or other portions of the capital of an organization, and that person simultaneously provides professional legal services with respect to such an organization, this policy will provide no coverage to that person for any claims based upon or arising out of such professional legal services.
If the collective equity interest of:
a. all persons and entities insured under this policy;
b. spouses of persons insured under this policy; and
c. the named insured
is thirty-five percent (35%) or more of the issued and outstanding shares, units or other portions of the capital of an organization, and any person insured simultaneously provides professional legal services with respect to such an organization, this policy will provide no coverage to any person insured or to the named insured for any claims that result therefrom.
6. Status as Beneficiary or Distributee.
To any claim made against you in your capacity as a beneficiary or distributee of any trust or estate.
II. DEFINITIONS
10. Named insured means any person or entity designated in the Declarations, including the predecessors of any such person or entity.
11. Organization means a corporation, partnership, association, trust or fund (including a pension, welfare, profit sharing, mutual or investment fund or trust), or any other business enterprise or charitable organization of any kind or nature. Organization does not include any entity insured under this policy.
25. “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.
Affected insured attorneys should not solely rely on the information provided in this blog. As facts may differ, determining malpractice coverage for each attorney client relationship requires a complete review of the malpractice policy. The facts that cause an alleged malpractice claim could also impact coverage.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080