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 US Specialty Insurance policy excludes certain client ownerships, management and/or directors/officer legal work from coverage.
V. EXCLUSIONS AS TO THE ENTIRE POLICY
This Policy does not apply to any Claim, Claim Expenses, Notification Expenses or Loss:
(B) based upon or arising out of an Insured’s capacity as:
(1) a former, existing or prospective officer, director, shareholder, partner or member, or manager of a business enterprise or charitable organization unless such enterprise or organization is named in the Declarations of this Policy;
(2) a former, existing or prospective officer, director, shareholder, partner, manager, or trustee of a fund or trust which is a pension, welfare, profit-sharing, mutual or investment fund or investment trust; or
(3) a fiduciary under the Employee Retirement Income Security Act of 1974 and its amendments or any regulation or order issued pursuant thereto or any other similar state or local law.
Notwithstanding the foregoing, this Exclusion shall not apply to a Claim based upon or arising out of an Insured’s capacity as a member, director, or officer of any professional legal association, its governing board or any of its committees.
(C) based upon or arising out of an Insured’s capacity as a public official or an employee or representative of a governmental body, subdivision or agency unless that Insured is deemed, as a matter of law, to be a public official or employee or representative of such entity solely by virtue of rendering Legal Services to such entity.
(E) by or on behalf of any:
(1) Insured, unless such Claim arises out of Legal Services rendered to an Insured as a client;
(2) entity in which any Insured collectively owns a twenty-five (25%) or greater financial interest;
(3) entity in which any Insured is an officer, director, partner, principal, or an employee; or
(4) entity that is or was operated, managed or controlled by any Insured.
IV. DEFINITIONS
(G) Insured
“Insured” shall mean:
(1) the Named Insured designated as such in the Declarations of this Policy;
(2) any lawyer, partnership, professional corporation, professional association, limited liability company or limited liability partnership who is or becomes a partner, officer, director, stockholder-employee, associate, manager, member or employee of the Named Insured during the Policy Period;
(3) any lawyer previously affiliated with the Named Insured or a Predecessor Firm as a partner, officer, director, stockholder-employee, associate, manager, member or employee but only for Legal Services performed on behalf of the Named Insured or a Predecessor Firm at the time of such
(4) any lawyer, law firm, partnership, professional corporation, professional association, limited liability corporation or limited liability partnership who acts as Of Counsel to the Named Insured or any non-employee independent contractor attorney or per diem attorney to the Named Insured but only for Legal Services performed on behalf of the Named Insured;
(5) any former or current employee, other than an employed lawyer, of the Named Insured or any Predecessor Firm, but solely for Legal Services performed within the course and scope of their employment by the Named Insured or any Predecessor Firm;
(6) the lawful spouse or Domestic Partner of an Insured (as set forth in paragraphs (2) or (3) above) for any Claim made against such spouse or Domestic Partner solely by reason of his/her status as a spouse or Domestic Partner of an Insured or his/her ownership interest in marital property/assets that are sought as recovery for such Claim, but only if the Claim does not allege any Wrongful Act by such spouse or Domestic Partner; and
(7) the estate, heirs, assigns or legal representatives of any Insured (as set forth in paragraphs (2), (3), (4) and (5) above) in the event of such Insured’s death, incapacity or insolvency, for any Claim made against the estate, heirs, assigns or legal representatives of such Insured solely by reason of his/her/its status as the estate, heirs, assigns or legal representatives of such Insured and only to the extent that coverage would have otherwise been provided under this Policy to such Insured.
(N) Named Insured
“Named Insured” shall mean the entity or individual designated as such in the Declarations of this Policy.
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