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Home > Blog > Avoid Attorney Malpractice Claims Investigate Client Insurance Coverage
TUESDAY, MARCH 13, 2018

Avoid Attorney Malpractice Claims Investigate Client Insurance Coverage

Travelers UmbrellaClaim Study:  Failure to Investigate Client’s Potential Sources of Insurance Coverage

Curiosity of Travelers Insurance Company

One of the initial issues that a civil litigator retained to provide a defense should consider is whether the client has any insurance coverage that might be responsive to the claim or suit. Even in a situation in which indemnity coverage, coverage for damages awarded against the client, may be denied, an insurance policy may nevertheless provide separate coverage for defense fees incurred by the client. The following scenario illustrates the potential ramifications for attorneys who fail to properly investigate and attempt to obtain any and all available coverage.

Background

A firm served as general counsel for a public board. The board received an employment discrimination suit in connection with the hiring of an employee. The discrimination claim was significant; with the plaintiff alleging damages in excess of $1,000,000.The board denied all allegations and the firm undertook the defense. After several years of litigation, the newly elected board retained new general counsel who questioned why the board had not submitted the suit for defense and indemnity under its employment practices liability policy in effect at the time the board received the suit. The new general counsel took over defense of the case and submitted the suit to the board’s carrier at the time it received the suit, requesting defense and indemnity coverage and requesting reimbursement of the approximate $200,000 the board had paid in defense fees to prior counsel. The carrier responded by denying all coverage, primarily due to the failure to timely notify the carrier of the suit per the terms of the policy. On the eve of trial, the board settled the matter with the plaintiff for$750,000.

What Happened

 

A few months later, the board filed a malpractice suit against the initial firm alleging, inter alia, that the firm had the responsibility to put the board’s carrier on timely notice of the suit, and that the firm’s breach of this duty resulted in the board incurring damages of $1,350,000, consisting of the $750,000 settlement and $600,000 in defense fees, all of which would have been paid by the school board’s carrier but for the firm’s alleged error.

Discovery reflected that the firm had a limited understanding of employment practices claims. It was concluded that had timely notice been provided to the carrier, the carrier would have defended the claim and paid the full $750,000 settlement. In defending the malpractice claim, the argument was made that the board had some responsibility to notify the carrier, so at least the board was comparatively negligent.

Result

 

Claim settled for $500,000. Defense expenses totaled approximately $225,000.

 

CLAIM STUDY RISK MANAGEMENT TIPS:

 

1.       Investigate - In connection with the defense of any civil litigation, always request in writing that the client provide all policies of insurance currently in effect.

2.       Report to carrier - Always tender the matter for coverage on a timely basis, and request that the carrier issue a written coverage position.

3.       Document advice - If the coverage determination is adverse to the client, document your advice regarding the determination in writing, or advise the client in writing if you are unwilling or unable to provide such advice.

4.       Confirm client’s response - If, for any reason, the client chooses not to seek coverage, confirm the client’s decision and their reasoning in writing.

Posted 12:35 PM

Tags: legal malpractice, attorney malpractice, lawyers professional liability insurance, claims
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