Attorneys may be surprised to learn that a lawyers professional liability policy normally excludes awarded attorney’s fees. Furthermore typically excluded are civil or criminal fines, sanctions, or penalties ordered by a court or other administrative body. Depending on the insurer’s carrier’s Lawyers Professional Liability Policy, the exclusion language is in 1 of 3 places; the insuring agreement, the definition section where defining damages or defining, or in the exclusion policy section.
In addition returning attorney’s fees to a client normally excluded.
Fees can be a significant exposure to an attorney as court attorney’s fees awarded can amount to millions of dollars.
The CNA Policy is an example for carving out attorney’s fees in the policy definition section as to what are damages:
“Damages” mean judgments, awards and settlements (including pre-judgment interest), provided any settlements are negotiated with the assistance and approval of the Company. Notwithstanding anything to the contrary contained herein, Damages also include those amounts the court is permitted to impose on a debt collector as set forth in 15USC§1692k(a). Damages do not include:
- legal fees, costs and expenses paid or incurred or charged by any Insured, no matter whether claimed as restitution of specific funds, forfeiture, financial loss, set-off or otherwise, and injuries that are a consequence of any of the foregoing;
- civil or criminal fines, sanctions, penalties or forfeitures, whether pursuant to law, statute, regulation or court rule, including but not limited to awards under 18 U.S.C. §1961, et. seq., Federal Rules of Civil Procedure 11 or 28 U.S.C. §1927 and state statutes, regulations, rules or law so providing, and injuries that are a consequence of any of the foregoing;
- punitive or exemplary amounts;
- the multiplied portion of multiplied awards;
- injunctive or declaratory relief;
- any amount for which an Insured is absolved from payment by reason of any covenant, agreement or court order.
The reasoning for not covering attorney fees and associated sanctions is that when awarded they are meant to punish for deliberate, excessive or egregious acts by an attorney.
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Lee Norcross, MBA, CPCU
California License # 0D87292
L Squared Insurance Agency, LLC ® DBA in California as L2 L Squared Insurance Agency, License # 0L93416
Managing Director, CEO
Lee@L2Ins.com
616-726-7080