Commonly part of the policy disciplinary coverage is found on admitted and a few non-admitted Legal Malpractice Insurance policies. Insurers that do not offer disciplinary coverage as part of their standard policy seldom will endorse it on.
With Legal Malpractice Insurance policies not being standard, this additional coverage appears under headings like ‘Additional Coverages,’ ‘Supplemental Payments,’ ‘Disciplinary Proceedings,’ ‘Regulatory Inquiry Extension’ or related names either in the body of the policy or as an endorsement to the policy.
Disciplinary Coverage is a defense only coverage; it will not indemnify for any fines or sanctions levied against the attorney or firm. Disciplinary Coverage normally not considered ‘damages’ which means it will not reduce your liability policy limits. Normally there is no deductible. Limits for this coverage usually range from $5000 to $100,000 and can be for each incident, for the policy period or a combination.
Legal Malpractice Insurance policies disciplinary coverage can be ‘duty to defend’ or reimbursement. With ‘duty to defend’ disciplinary coverage once reported to the insurer, the insurer is responsible for providing counsel and pays defense costs up to the limits stated. The insurer may in consultation with the attorney appoint counsel for defending the matter.
Other Legal Malpractice Insurance policies offer ‘Reimbursement’ coverage for Disciplinary Matters. In this case the attorney needs to find counsel to defend the matter and receive reimbursement for the cost of defense. Further limiting the insurer’s liability, ‘Reimbursement’ policies may only pay defense costs if there is no finding against the attorney.
When faced with a disciplinary matter, check your policy before responding or obtaining your own counsel. Insurers may decline coverage if notification for the matter occurs after the matter is adjudicated. Not timely reporting disciplinary matters have gotten law firms non-renewed.
The average cost to defend a disciplinary matter can exceed $20,000. Even with your Legal Malpractice Insurance policy having ‘Disciplinary Coverage,’ it is important to read and understand what your policy truly covers. All Attorney Malpractice Insurance policies are not created equally. ‘Reimbursement’ Disciplinary Coverage that only pays if the attorney is ‘innocent’ could lead to thousands of dollars of unreimbursed legal expenses.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080