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 QBE Insurance policy excludes certain client ownerships, management and/or directors/officer legal work from coverage.
IV. EXCLUSIONS
This Policy does not apply to any Claim, Damages, or Claim Expenses:
B. based upon or arising out of, in whole or in part, any Insured’s capacity as a former, existing or prospective officer, director, shareholder, owner, partner, manager, trustee, or employee of a business enterprise or charitable organization or a pension, welfare, profit sharing, mutual or investment fund or trust. This exclusion applies to a Claim arising out of the formation of such entity and to a Claim by or on behalf of such entity and related entities, or by or on behalf of former, existing or prospective officer(s), shareholder(s), partner(s), manager(s), owner(s), trustee(s), or employee(s) of such entity or related entities. This exclusion does not apply to any Professional Services listed in Subsection III.R.9 herein;
C. by or in connection with any business enterprise not named in Item 1 of the Declarations in which:
1. the Insured(s) own, individually or collectively, more than a twenty (20%) percent interest;
2. any Insured is a partner or employee; or
3. said business enterprise is directly or indirectly controlled, operated, or managed by any Insured or the Insured’s spouse or domestic partner, other than solely in a fiduciary capacity;
N. based upon or arising out of, in whole or in part, any Insured’s capacity as a public official or an employee of a governmental body, subdivision or agency.
III. DEFINITIONS
I. “Insured” means:
1. the Named Insured;
2. any Predecessor Firm;
3. any natural person who:
a. is the sole owner of, or is or was a partner in, the Named Insured or Predecessor Firm;
b. was or is a member of the board of managers, director, executive officer, or shareholder of the Named Insured or Predecessor Firm;
c. was or is an employed lawyer or other employee of the Named Insured or Predecessor Firm;
d. was or is an Independent Contractor, or
e. was or is an Of Counsel attorney, provided that such person is acting within the scope of their duties on behalf of the Named Insured or Predecessor Firm.
4. As respects the liability of each Insured described above, (a) the heirs, executors, administrators, assigns and legal representatives of any such Insured in the event of death, incapacity or bankruptcy, and (b) the lawful spouse or a person qualifying as a domestic partner under the provisions of any applicable federal, state or local law of such Insured, but only for a Wrongful Act actually or allegedly committed by such Insured, to whom the spouse is married, or who is joined with the domestic partner.
K. “Named Insured” means the person or entity identified at Item 1 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