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Occasionally we are asked to add an “Additional Insured” to a Lawyers Professional Liability Insurance Policy.  In the world of commercial insurance this is a normal practice.  Most requests to add an “Additional Insured” to a General Liability, Commercial Property, Workers Compensation or Business Owners Policy are approved by the insurance carrier as long as there is a good insurance/business purpose for the request.  For instance, a bank holds a lien on some business personal property owned by the business or the 3rd party wanting to be named as an “additional insured” is doing business with the entity and wants to make sure that any covered claim made against the entity or the 3rd party for the business that they are doing together is covered for covered losses potentially also against the 3rd party.

So if having an “Additional Insured” is a common in the commercial insurance world why won’t the Attorney Malpractice Insurance Carrier honor such a request?

Even if the 3rd party is another law firm, Attorney Malpractice Insurance Carriers do not want to extend coverage to a law firm other than the one(s) named on the declarations page.  Lawyers Professional Liability Insurance policies are written on behalf of the named insured firm and the attorneys that work for the firm.   The “Additional Insured” endorsement could potentially extend coverage to other law firms and attorneys that are not part of the firm and were not part of the underwriting or rating process.

If the 3rd party is not a law firm, the Attorney Malpractice Insurance Carrier will not honor the request to add that 3rd party onto the law firm’s policy as an “additional Insured’.  The only exception to this can be a Title Company that is owned by the attorneys in the law practice, where the Attorney Malpractice Carrier has a specific endorsement just for the Title Company.  The reason that the request will not be honored is that the Lawyers Professional Liability Insurance is written for the attorneys and employees that work for the law firm.  The only work that is covered is the work done by the attorneys and the employees on behalf on the named insured law firm where there is an attorney/client relationship and where the 3rd party might a claim against the law firm.  This can be critically important in case of a claim.  As with many professional policies, the law firm generally has the right to say yeah or nay on settling a claim.  Potentially an “additional Insured” could have that right to block a settlement.  Also if the 3rd party that is being added is also a client, exclusions in the policy may exclude coverage for this very client.  Many policies have exclusions for one insured bringing a malpractice claim against another insured on the policy.

 

This blog is not intended to give specific insurance advice.  It is only intended to give generally information covering insurance concepts.  

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