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 Zurich Insurance policy excludes certain client ownerships, management and/or directors/officer legal work from coverage.
III. EXCLUSIONS
This Policy shall not apply to any Claim, Damages, Claim Expenses, Disciplinary Proceeding, or Subpoena Costs based upon or arising out of, in whole or in part:
D. Any Insured’s or former Insured’s capacity or status as:
1. An officer, director, partner, shareholder, manager or employee of a business enterprise, charitable organization or pension, welfare, profit sharing, mutual or investment fund; or
2. A public official, or an employee of a governmental body, subdivision or agency unless the Insured is privately retained solely to render Legal Services to the governmental body, subdivision or agency and the remuneration for the Legal Services is paid directly or indirectly to the Named Insured;
E. The alleged acts or omissions by any Insured, with or without compensation, in connection with any business enterprise (other than the Named Insured), whether for profit or not-for-profit, in which any Insured has or had a Controlling Interest;
VIII. DEFINITIONS
E. Controlling Interest means the right of an Insured or a member of an Insured’s Immediate Family, directly or indirectly, to:
1. Own 10% or more of an interest in an entity;
2. Vote 10% or more of the issued and outstanding voting stock in an incorporated entity;
3. Elect 10% or more of the directors of an incorporated entity;.
4. Receive 10% or more of the profits of an unincorporated entity; or
5. Act as general partner of a limited partnership, managing general partner of a general partnership, or comparable position in any other business enterprise.
K. Immediate Family means the natural person:
1. Insured;
2. Insured’s spouse or party to a civil union recognized under the applicable state law;
3. Insured’s parent(s), adoptive parent(s) or step-parent(s);
4. Insured’s sibling(s) or step-sibling(s); and
5. Insured’s child(ren), adoptive child(ren) or step-child(ren).
L. Insured means:
1. The Named Insured;
2. Any lawyer or entity listed in the application on the day the Policy Period incepts until such time as the lawyer or entity ceases to be a member of the Named Insured subject to Subsection VIII.L.4. below;
3. Any lawyer or entity who becomes a partner, officer, director, stockholder or shareholder or employee of the Named Insured during the Policy Period until such time as the lawyer or entity ceases to be a member of the Named Insured subject to Subsection VIII.L.4. below;
4. Any lawyer or entity who is a former partner, officer, director, stockholder, shareholder or employee of the Named Insured or Predecessor Firm, but only in connection with such lawyer’s or entity’s rendering of or failing to render Legal Services on behalf of the Named Insured or Predecessor Firm;
5. Any lawyer or entity who is designated by the Named Insured as counsel or of counsel in the application, but only in connection with such lawyer’s or entity’s rendering of or failing to render Legal Services on behalf of the Named Insured;
6. Any other person who is employed or retained by the Named Insured as a legal secretary, paralegal, contract attorney or other legal office staff member, but only in connection with such person’s rendering of or failing to render Legal Services on behalf of the Named Insured and also only within the scope of such employment or retention agreement; and
7. 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 that such Insured would otherwise be provided coverage under this Policy.
Q. Named Insured means the entity or individual set forth in Item 1. of 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