Claim time is not the time to find out the attorney has no malpractice coverage for the reported claim. Attorneys that do work for clients where the attorney is involved with client management or ownership may run afoul of attorney malpractice policy exclusions. As no two client relationships are the same and no two policies are alike, where an attorney is doing legal for clients with an ownership or management role it is wise to read the entire policy. Where one malpractice insurance policy may provide coverage, the same client relationship with another malpractice policy excludes coverage. Depending on the attorney’s attorney/client relationship(s) there may be no coverage provided by the attorney malpractice policy.
The Freedom Specialty Insurance policy excludes certain client ownerships, management and/or directors/officer legal work from coverage.
V. EXCLUSIONS
This policy excludes coverage for any loss in connection with a claim:
E. alleging, based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in any way involving a covered act committed by you in connection with any business enterprise which is not the named insured if, at the time of such covered act any of you, had a controlling interest in such business enterprise. This exclusion applies whether or not a lawyer-client relationship existed;
F. alleging, based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in any way involving the activities performed by you as a public official or as an employee of a governmental body, subdivision, or agency thereof, unless you are employed solely to render professional services and the remuneration for the professional services is paid to you;.
IV. DEFINITIONS
F. Controlling interest means the right, directly, or indirectly, to (a) vote thirty percent (30%) or more of the issued and outstanding voting stock in an incorporated entity, (b) elect thirty percent (30%) or more of the directors of an incorporated entity, (c) receive thirty percent (30%) or more of the profits of an unincorporated entity, or (d) have the position of general partner of a limited partnership, managing general partner of a general partnership, or comparable position in any other business enterprise.
R. Named insured means the individual, partnership, or firm engaged in the practice of law under the name stated in Item 1. of the Declarations and its predecessor practice, if any.
EE. You or your means the named insured and any person which was, is or becomes any of the following:
1. a partner, principal, director, member, officer or shareholder, employed lawyer, or patent agent of you but only while acting on your behalf;
2. a patent agent for which you are legally liable but only while acting on your behalf;
3. your employee or leased or temporary employee of you but only while acting on your behalf;
4. an incorporated partner, including the shareholders thereof;
5. any other person or law firm who is a lawyer and who is: (a) designated as “counsel” or “of counsel” to or (b) engaged as an independent contractor or on a per diem basis by you, but in either case only while acting on your behalf; and
6. the estate, heirs, executors, administrators, assigns, and legal representatives of any person or law firm who previously qualified as you in the event of your death, incapacity, insolvency, or bankruptcy but only to the extent that you would otherwise be provided coverage under this policy.
7. the lawful spouse of any of you solely by reason of:
a. spousal status; or
b. a spouse’s ownership interest in property or assets that are sought as recovery. This definition shall not apply to the extent a claim alleges any wrongful act by such spouse.
In all events, coverage as afforded with respect to a claim made against you will only apply to covered acts committed or allegedly committed by you on or after the date you joined the named insured and prior to the time you ceased
Affected insured attorneys should not solely rely on the information provided in this blog. As facts may differ, determining malpractice coverage for each attorney client relationship requires a complete review of the malpractice policy. The facts that cause an alleged malpractice claim could also impact coverage.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080