Attorneys wear many hats. Attorney malpractice insurance provides coverage for most hats but not all. A malpractice insurer’s definition(s) of professional services may cause coverage issues for attorneys that perform certain client services. If the services are provided using a license other than a law license, it is a good bet that it is not covered. When looking for the appropriate insurer, check the legal services (professional services) definition against the services that your law firm provides.
Attorney Protective (NLFIC) defines Legal Services (Professional Services) as:
B. DEFINITIONS
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.
14. Legal services means services provided to others by an Insured in the capacity as:
a. An attorney or notary public;
b. An arbitrator or mediator;
c. A title insurance agent;
d. A government affairs lobbyist or advisor;
e. An administrator, conservator, executor, guardian, trustee, receiver, or in any similar court appointed fiduciary capacity, provided such services are performed in connection with and incidental to the provision of legal services by the Named Insured;
f. An author, but only for the publication or presentation of legal research papers and legal writing relating to the practice of law, including materials for Continuing Legal Education credit, provided the total remuneration for such work is less than $25,000; or,
g. As a member of a bar association or other legal or attorney related ethics, peer review, accreditation, licensing or similar board, committee or organization;
but only if such services are performed as a member of, or on behalf of, the Named Insured. Legal services do not include the provision of, or failure to provide, any financial or investment advice or financial management.
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;
e. Any Insured’s actual or alleged violation of the responsibilities, obligations or duties imposed by the Employee Retirement Income Security Act of 1974, or the Pension Protection Act of 2006, including any amendments, or any rules, regulations or orders issued pursuant to the above-listed acts, or any similar provisions of any state, federal, or local statutory law or common law anywhere in the world;
h. Any Insured’s conversion, misappropriation, embezzlement, commingling, defalcation or ethically improper use of or disposal of funds or other property, whether held on behalf of clients or third parties;
k. Any legal services rendered or that should have been rendered by you with respect to a controlled enterprise;
l. Any Insured’s financial or investment advice, prediction, warranty, guarantee, opinion, referral or action relating to portfolio or trust account management, the performance of real estate, securities or other investments, or the promotion, sale or solicitation for sale, of securities, real estate or other investments;
n. The loss or destruction, or any diminution in the value of any asset in your care, custody or control, or out of the misappropriation of, or failure to give an account of, any asset in your care, custody or control, including the commingling of funds;
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This blog is an excerpt from the policy. The complete policy along with applicable endorsements could impact the information provided above.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080