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 American Alternative policy excludes certain client ownerships, management and/or directors/officer legal work from coverage.
IV. EXCLUSIONS
C. CERTAIN CAPACITIES: This Policy does not apply to any Claim alleging, based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in any way involving any Insured’s status or capacity as:
1. A past, current or potential future officer, director, shareholder, partner, member, manager (or equivalent position) or employee of any entity not named in the Declarations, except as provided in paragraph I.E.5. This exclusion does not apply to services as a member, director or officer of a bar association, ethics, peer review, formal accreditation or licensing body, or similar professional board or committee;
2. A trustee of a pension, welfare, profit-sharing, mutual or investment fund or investment trust;
3. A fiduciary under the Employee Retirement Income Security Act of 1974 and its amendments or any regulation or order issued pursuant thereto, or any other similar state or local law; provided, however, that this exclusion will not apply to Claims where an Insured is deemed to be a fiduciary solely by reason of Professional Services to an employee benefit plan; or
4. A public official or employee, or representative of a governmental body, entity or agency, provided that this exclusion will not apply to Claims where an Insured is deemed to be a public official, employee or representative solely by reason of Professional Services provided to such governmental body entity or agency.
E. CONTROL OR OWNERSHIP POSITIONS: This Policy does not apply to any Claim alleging, based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in any way involving Professional Services that were performed, directly or indirectly, for any entity not named in the Declarations, if at the time of the alleged Wrongful Acts that form the basis of the Claim, the Named Insured, or any combination of Insureds maintained either:
1. a total ownership interest that, either directly or indirectly, that exceeded 10% of such entity; or
2. the capacity to directly or indirectly control, operate or manage such entity.
III. DEFINITIONS
N. INDIVIDUAL INSURED means:
1. Any individual lawyer, partnership, limited liability partnership, professional corporation, professional association, limited liability Company or limited liability partnership who is a current or former partner, principal, officer, director, stockholder, shareholder, member (if the Named Insured is an LLC) or employed lawyer of the Named Insured or a Predecessor Firm;
2. Any individual lawyer, partnership, limited liability partnership, professional corporation, professional association, limited liability Company or limited liability partnership who serves either as “Of Counsel” to the Named Insured, or as Independent Contractor; and
3. Any current or former non-lawyer employee of the Named Insured or a Predecessor Firm;
but only for Professional Services provided on behalf of the Named Insured or a Predecessor Firm.
P. INSURED means the following persons and entities:
1. The Named Insured listed in the Declarations;
2. Any Predecessor Firm; and
3. Any Individual Insured.
Q. NAMED INSURED means the person or entity designated in the Declarations.
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