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 Wesco Insurance policy excludes certain client ownerships, management and/or directors/officer legal work from coverage.
This policy does not apply:
D. to any claim based on or arising out of an Insured’s capacity as:
1. a former, existing or prospective officer, director, shareholder, partner or manager of a business enterprise or charitable organization unless such enterprise or organization is named in the Declarations; or
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 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;
E. to any claim based on 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 the 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 governmental body, subdivision or agency;
F. to any claim based on or arising out of legal services performed for any existing or prospective partnership, organization, corporation, company or other business enterprise, including any claim made by or on behalf of such partnership, organization, corporation, company or other business enterprise, if at the time of the act or omission giving rise to such claim:
1. any Insured controlled, operated or managed or intended to control, operate or manage such enterprise; or
2. any Insured:
a. was a partner or employee of such enterprise; or
b. directly or indirectly owned more than 10% of such enterprise; or
3. Insureds cumulatively owned more than 35% of such enterprise.
As used in this exclusion, the word “partner” shall be deemed to include members of limited liability companies or limited liability partnerships.
M. “Insured” means the Named Insured, predecessor firm and the persons or entities described below:
1. Any lawyer, partnership, professional corporation, professional association, limited liability corporation or limited liability partnership who is or becomes a partner, officer, director, stockholder‐employee, associate, manager, member or salaried employee of the Named Insured during the policy period shown in the Declarations;
2. Any lawyer previously affiliated with the Named Insured or a predecessor firm as a partner, officer, director, stockholder‐employee, associate, manager, member or salaried employee but only for legal services performed on behalf of the Named Insured or a predecessor firm at the time of such affiliation;
3. 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;
4. Any former or current employee who is a non‐lawyer of the Named Insured or any predecessor firm, but solely for services performed within the course and scope of their employment by the Named Insured or any predecessor firm;
5. The estate, heirs, executors, administrators, assigns and legal representatives of an Insured in the event of such Insured’s death, incapacity, insolvency or bankruptcy, but only to the extent that such Insured would have been provided coverage under this policy.
P. “Named Insured” means the persons and entities designated in the Declarations.
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
California License # 0D87292
L Squared Insurance Agency, LLC ® DBA in California as
L2 L Squared Insurance Agency, License # 0L93416
Managing Director, CEO
(616) 940-1101 Ext. 7080