Earlier this year we blogged about a Pennsylvania attorney that had been sanctioned for $1 million for “egregious tactics”. As we mentioned sanctions are not generally covered by Lawyers Professional Liability Insurance policies. The good news for Pennsylvania insurance defense attorney Nancy Raynor is that the $1 million sanction has been overturned. The bad news for her is that the trial judge’s decision to award $45,000 in attorney’s fees and costs to the other party has been upheld by three-judge superior court panel.
As with sanctions attorney’s fees and costs are not considered damages by most attorney malpractice insurance policies. The following Professional Solutions current 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.”
Many attorney are under the mistaken believe that attorney’s fees are covered under their lawyers professional liability insurance policy. They only find out at the time of a claim that this is a mistaken belief when the claims department denies the claim.