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 Hudson Insurance policy excludes certain client ownerships, management and/or directors/officer legal work from coverage.
IV. EXCLUSIONS
This policy will not apply to any Claim, Disciplinary Proceeding or non-party subpoena based upon or arising out of, in whole or in part:
D. the Insured’s capacity or status as:
1. an officer, director, partner, trustee, shareholder, manager or employee of a business enterprise, charitable organization or pension, welfare, profit sharing, mutual or investment fund or trust;
2. a public official, or an employee of a governmental body, subdivision, or agency unless the Insured is privately retained solely to render Legal Services to the governmental body, subdivision or agency and the remuneration for the Legal Services is paid directly or indirectly to the Named Insured;
E. the alleged acts or omissions by any Insured, with or without compensation, for any business enterprise, whether for profit or not-for profit, in which any Insured has a Controlling Interest;
VII. DEFINITIONS
D. Controlling Interest means the right of an Insured or a member of an Insured’s Immediate Family, directly or indirectly, to:
1. own 10% or more of an interest in an entity; or
2. vote 10% or more of the issued and outstanding voting stock in an incorporated entity; or
3. elect 10% or more of the directors of an incorporated entity; or
4. receive 10% or more of the profits of an unincorporated entity; or
5. act as general partner of a limited partnership, managing general partner of a general partnership, or comparable position in any other business enterprise.
G. “Domestic Partner” means any natural person who enters into a civil union or qualifies as a domestic partner under any federal, state or local law or under the provisions of any formal program established by the Named Insured.
H. Immediate Family means:
1. the Insured;
2. the Insured’s spouse or Domestic Partner;
3. the Insured’s parent(s), adoptive parent(s) or step-parent(s);
4. the Insured’s sibling(s) or step-sibling(s);
5. the Insured’s child(ren), adoptive child(ren) or step-child(ren).
I. Insured means:
1. Named Insured, which is the entity shown in Item 1 of the Declarations;
2. any lawyer or professional corporation listed in the application on the day the Policy Period incepts until such time as the lawyer or professional corporation ceases to be a member of the Named Insured subject to section 4 below;
3. any lawyer or professional corporation who becomes a partner, officer, director, stockholder or shareholder or employee of the Named Insured during the Policy Period until such time as the lawyer or professional corporation ceases to be a member of the Named Insured subject to section 4 below;
4. any lawyer or professional corporation who is a former partner, officer, director, stockholder or shareholder or employee of the Named Insured or Predecessor Firm, but only in rendering or failing to render Legal Services on behalf of the Named Insured or Predecessor Firm;
5. any person or entity who is designated by the Named Insured as counsel or of counsel in the application, but only in rendering or failing to render Legal Services on behalf of the Named Insured;
6. any other person who is employed or retained by the Named Insured as a legal secretary, paralegal, contract attorney or other legal office staff member, but only in rendering or failing to render Legal Services on behalf of the Named Insured and also only within the scope of such employment or retention agreement; and;
7. the estate, heirs, executors, administrators, assigns and legal representatives of any Insured in the event of such Insured’s death, incapacity, insolvency or bankruptcy, but only to the extent that such Insured would otherwise be provided coverage under this policy.
Insured, also referred to herein as You or Your, means the Named Insured and:
1. Any Predecessor Firm;
2. Any individual, who was, is or becomes an owner, partner, officer, director, shareholder, associate, paralegal, manager, member or employee of the Named Insured, solely while acting in a professional capacity on behalf of the Named Insured or a Predecessor Firm;
3. The Named Insured’s part-time, intern, temporary or leased employees, but only while acting on behalf of the Named Insured;
4. Your lawful spouse or Domestic Partner, solely for liability arising from any Wrongful Act of an Insured committed without the participation of such spouse or Domestic Partner;
5. Your heirs, assigns, and legal representatives in the event of Your death, incapacity or bankruptcy to the extent that You would have been covered; or
6. A past or present Independent Contractor or Of Counsel attorney, but solely while acting in such capacity on behalf of the Named Insured.
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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
(616) 940-1101 Ext. 7080