Most attorneys understand that if they have a malpractice claim made against them or a lawsuit filed that they need to notify their insurer immediately. But it is also important for the attorney to know when they should or should not put their malpractice insurer on notice. Failing to report a potential malpractice claim may result in coverage being denied after the potential claim turns into an actual claim at a later date. Not every claim made against the law firm is a malpractice claim, but even so it may or may not be covered by your malpractice insurer. To what is covered make sure that as a lawyer you have read your insurance contract. In general a covered act needs to have a lawyer client relationship established for an attorney malpractice policy to provide coverage.
Also be leery of insurance agents that tell you not to report a claim that is clearly covered by the policy. Almost all malpractice renewal applications ask questions about whether there are covered claims or incidents that have happened during the year. Not reporting these matters on the renewal application is a guaranteed way to cause coverage problems in the future.
Reporting claims that are not malpractice claims could potentially impact insurability or malpractice rates. Every attorney malpractice insurance policy is different and it is import to understand the policy coverage as well as the requirements for claims reporting and notification to the carrier.
Here are a few examples of a claim that may or may not be covered by your malpractice Insurance policy:
1. A data breach/cyber fraud/cyber liability incident occurred. Some malpractice policies provide some data breach/ cyber coverage, if so you should report it. If not you might want to still report it if you believe that a malpractice claim might arise out of the incident in the future. Your cyber insurer likely is the best place to report this claim.
2. A contract dispute with a landlord or vendor where there is no attorney client relationship likely is not covered by your malpractice insurance.
3. A property damage claim should be reported to your business owner’s insurer.
4. A business interruption claim likely is not a malpractice claim and should be reported to your business owners and/or cyber insurer.
5. A workers compensation claim made by one of your employees should be reported to your workers compensation insurer.
6. An employment liability claim might be reported to your malpractice insurer if your malpractice policy provides some employment practices coverage, but most do not.
7. Contract disputes with employees or partners are likely not going to be covered by a malpractice policy.
Most attorney malpractice policies require that the insured give timely notice when they reasonably expect a matter might rise to the level of a claim. Some policies require only “claims” to be reported but include in the policy a definition of a “claim”.
There are generally time frames for claims reporting defined in the attorney malpractice policy. It is important to make sure that when you are aware of a matter that the covered claim is reported within that specified time frame. To protect your rights it is important that any potential claim be reported prior to the end of the current policy period regardless of whether you plan on renewing with the incumbent malpractice insurer. Remember these are claims-made policies, the insurer that is on the risk at the time the claim is made needs to be the insurer that the claim is reported to.
Just adding a claims supplement or including a claims report with the renewal application may not meet the claims reporting policy requirements. Many policies spell out the manner of when and where to report a claim. All require that the claim be in writing. Verbally mentioning the potential matter to your agent is not enough to meet this requirement. The written claim notice should include the name of the potential claimant, the time frame as to when the error may have occurred and the type of error that may be alleged. This notification should be sent in the manner as prescribed in your policy. If the manner of notification is not defined, then contact your agent to determine the proper procedure.
Examples of claim circumstances that should be reported are:
1. The attorney has missed a filing deadline or failed to give timely notice.
2. The attorney has been threatened in writing by the client that (s)he will be sued.
3. The client holds the attorney responsible for a case result that did not meet the client’s expectations and has stated so in writing threating suit.
4. The attorney is aware of breaching an ethical duty to the client or a 3rd party.
5. The case was lost because of an error that was committed by the attorney during the course of the case.
6. The attorney is aware of some other error that was committed that could ultimately impact the client’s case.
7. Any other matter that the attorney reasonably believes may turn into a malpractice claim against the firm at a later date.
Just because you might be able to “fix” the problem, it is not wise to withhold notification to your malpractice insurer. If the “fix” tried does not work; the lack of timely notification or proceeding with the course of action that did not “fix” the matter could be enough for the insurer to decline coverage on the claim.