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 National Liability & Fire Insurance (Attorney Protective) Insurance policy excludes certain client ownerships, management and/or directors/officer legal work from coverage.
E. EXCLUSIONS
This Policy does not apply to:
2. Any claim or request for Supplementary Payments based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving any of the following:
a. Any Insured’s services or capacity as an officer, director, partner, trustee, manager, owner, or employee of 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 other than the Named Insured, except for your services as a court appointed trustee or as an officer, director or member of any non-profit professional legal association, its governing board, or any of its committees;
b. Any Insured’s services or capacity as a public official or employee of a governmental body, subdivision or agency, except however for a claim or disciplinary proceeding brought by a governmental agency, body or subdivision as a client of the Named Insured that is based upon or arises solely from the performance of legal services by an Insured to the governmental agency, body or subdivision, but only if such services are performed as a member of or on behalf of the Named Insured;
k. Any legal services rendered or that should have been rendered by you with respect to a controlled enterprise;
B. DEFINITIONS
Wherever used in this Policy:
6. Controlled enterprise means any existing or prospective entity, business enterprise, or real estate interest, other than the Named Insured, in which any Insured and/or their lawful spouse, or an accumulation of Insureds and/or their lawful spouses, at the time the wrongful act occurs or the claim is made:
a. Owns, owned or will own ten percent (10%) or more of the enterprise, entity, or real estate interest;
b. Votes, voted or will vote ten percent (10%) or more of the issued and outstanding voting stock or elects ten percent (10%) or more of the directors in an incorporated entity;
c. Is or was entitled to receive ten percent (10%) or more of the profits of an unincorporated enterprise or entity;
d. Holds, held or will hold ten percent (10%) or more of the debt instruments of the entity, enterprise, or real estate interest; or,
e. Is or was entitled to directly control, operate or manage the entity or business enterprise, or act as a general partner of a limited partnership, managing general partnership, or comparable position in any other business entity or enterprise.
16. Named Insured means the person or entity designated as such in the Declarations of this Policy.
31. You, your or Insured means:
a. The Named Insured and any predecessor firm specifically named in the Declarations of this Policy;
b. Any present partner, principal, officer, director, shareholder, or employed lawyer of the Named Insured, but only during the performance of legal services in the course and scope of their duties on behalf of the Named Insured;
c. Any past partner, principal, officer, director, shareholder, or employed lawyer of the Named Insured, but only while they rendered or failed to render legal services in the course and scope of their duties on behalf of the Named Insured;
d. Any lawyer who acts as Of Counsel or as an independent contractor to the Named Insured and is designated as such in the Application and is listed in the Named Insured’s records as Of Counsel or as an independent contractor at the time of the wrongful act, but only during the performance of legal services on behalf of the Named Insured;
e. Any non-lawyer employee or non-lawyer independent contractor of the Named Insured whose work is engaged and directed by the Named Insured, but only with respect to the furtherance of legal services rendered and while acting in the course and scope of their duties on behalf of the Named Insured; or,
f. The estate, heirs, executors, administrators, assigns and legal representatives of any Insured in the event of such Insured’s death, incapacity, insolvency or bankruptcy, but only to the extent such Insured would otherwise be provided coverage under this Policy.
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