This issue comes up with frequency. Attorneys for a variety of reasons join together. In many cases they share office space, support staff, computer systems, and other equipment to spread out the costs. Some actually make themselves look like a partnership from letterhead to advertising when no partnership agreement exists.
Attorneys entering into this relationship need to be aware that not all Lawyers Professional Liability Insurance Carriers will write just one attorney in such a relationship. Many malpractice carriers will only write all of the attorneys or none. Malpractice carriers are concerned about having vicarious liability for exposures they know nothing about. Given this, many malpractice insurance carriers will not write a group of lawyers that do not have a formal partnership agreement. These non-partnership arrangements limit the insurance carriers that will quote such a “Law Firm”. Normally with less competition there will be higher malpractice premiums paid by the attorneys.
A recent federal court case addressed non-partnership relationships and the associated vicarious liability. In this case the federal court stated that because the plaintiff did not rely on the “partnership” to seek representation it could not bring an action against the other “partners”. Attorney should be aware that in other jurisdictions and in other courts have taken the approach if it looks like a duck, it’s a duck. And even with the current case, if the plaintiff could show that they had relied on the “partnership” when the engaged on the representation, the plaintiff would have been able to pursue the malpractice claim against other non-partners of the non-partnership.
When attorneys enter into such a relationship, they need to be aware how they are presenting themselves to the public. The “innocent” non-partnership attorneys could find that they are being brought into a malpractice claim when the only thing they did is to have malpractice insurance coverage that the plaintiff attorney wants to get too because the “guilty” attorney has none.
Other insurance issues of concern are how the Business Owners Insurance (BOP) will properly cover property and general liability of non-partnership attorneys. Generally property owned by different attorneys that are not associated with a partnership agreement, cannot be properly covered under one BOP policy. Workers Compensation Insurance can be another mine field that opens up attorneys not part of a partnership to other vicarious liability issues that are excluded under the normally employer-employee relationship.