Tough call, you found this terrific attorney that would be a great fit for your firm. The attorney’s prior firm(s) work experience and skills are exactly what your law firm needs. The attorney is concerned about the prior firm surviving after departure and has asked if you will pick up this prior acts exposure.
When asked about adding prior acts, as an agent trying to minimize a law firm’s attorney malpractice exposure, we generally advise against. Here is why:
1. Your firm may never have had a claim because of great client intact and thorough work procedures. Adding an attorney’s prior acts exposure opens the law firm up to legal malpractice claims from the attorney’s prior firm. You really have no idea what skeletons are hiding at other firms. Past sins may rise up from the attorney’s old firm regardless of who may have worked on them. Significant claims have arisen with other law firms. If this happens these claims have impacted the impacted firm’s malpractice premium costs and insurability.
2. Because your new attorney may have limited access to old client files, a prior firm’s malpractice claim can be difficult to defend, especially if your new attorney was not directly involved in the case.
3. Many insurers immediately increase the firm’s attorney malpractice insurance premium when adding past acts for a new attorney. For a multi-person law firm most insurers add attorneys without prior acts at no cost midterm. And the renewal premium increase when the insurer is not picking up prior acts exposures is less.
4. Some insurers will not add prior acts coverage for new attorneys. This can be because of the insurer’s underwriting practices, attorney’s loss history, or the attorney’s past practice areas.
5. If the new attorney is coming on as an “Of Counsel” attorney most insurers will not honor a request for adding prior acts coverage. The problem is that an “of Counsel” attorney’s coverage is by definition only for work done on behalf of the named insured firm (your firm). There is no coverage for the “of counsel” attorney’s prior acts for work done outside of your firm.
From an insurance perspective putting up a fire wall between your firm and the attorney’s past firm is the best course of action. Where possible have the new attorney purchase an Extended Reporting Period Endorsement (Tail) for past acts. It will keep the skeletons from the past from reappearing in your future.
The picture in the article was taken at Portugal's Chapel of Bones. To read more about this chapel Click Here