Every few months we have a law firm contact us about a judge that awarded attorney’s fees to the other party. That award can be in the hundreds of thousands of dollars. Many are under the false assumption that this is something normally covered under an attorney malpractice policy.
As with sanctions, attorney’s fees and costs are not considered damages by most attorney malpractice insurance policies. Even though this could be considered a policy exclusion the coverage is removed in the definition section of the policy.
The following Professional Solutions policy definition is typical what is defined as damages:
“6. Damages means compensatory Damages that an Insured becomes legally obligated to pay as a result of any judgment, awards or settlement, including pre-judgment interest, of any alleged Wrongful Act or Personal Injury, provided settlement is negotiated with the assistance and approval of the Company. Damages do not include:
a. Legal fees, expenses paid, or costs incurred through or charged by the Insured, regardless of whether they are a result of judgments, settlements, awards, restitution of funds, unearned fees, forfeiture, financial loss or otherwise, if not previously agreed to in writing by the Company;
b. Injunctive or declaratory relief;
c. Civil or criminal fines, sanctions, penalties or forfeitures, whether or not related to, or as a result of local, state, or federal regulations, statutes, ordinance, law, rules of civil or criminal procedure, and any such judgments, awards, orders, settlements, agreements, or consequences resultant thereof;
d. Punitive or exemplary Damages;
e. Multiplied portion of any award or judgment, such as double or treble
f. Any form of non-monetary relief;
g. The return by an Insured of any fees, costs, or remuneration paid to any Insured.”
It is important to know your policy and your coverages. Don’t assume, read your policy.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080