All law firms should carry a business owners and commercial auto policies to protect your assets from the business side perils of your law firm, ie property damage, general liability, business interruption insurance, personal injury protection. These commercial insurance policies exclude the practice side of your law firm.
Lawyers Professional Liability Insurance are written on a claims made basis. These Attorney Malpractice Insurance policies protect for errors and/or omissions committed by you, your partners or your employees in the course of their professional duties where you become or could become legally liable.
Examples of the perils covered are missed filing deadlines; legal procedures/engagements that the outcome was less than what was hoped for (whether actual or perceived); or errors made in interpreting the law or applying a statute. As a general rule, Attorney Malpractice policies exclude coverage for general liability insurance or property insurance coverage.
The Professions Solutions Insurance policy shows the typical definition of what damages are:
“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
Damages;
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 note the items that are not typically included in damages as these are generally items that either cannot be insured for or are considered deliberate acts.
In addition, most admitted Attorney Malpractice policies also provide coverage for disciplinary defense, but not for the sanctions or attorney fees.
There is no good reason why any private practice attorney does not carry Lawyers Professional Liability Insurance. No matter how careful you are errors (either actual or perceived) do occur. When an error that causes damage to your client does occur, it should be the responsibility of the attorney to step up to the bar and make the client whole.
Note: The above is general information about a Claims Made Insurance policy concept. Different insurance policies and different situations may or may not treat these concepts in a similar manner.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080 |