Attorney malpractice Insurance policy normally contain closely held ownership exclusions. If this is the insured’s 1st policy or the insured is changing malpractice insurers finding and reading this exclusion may save the insured a denied claim. Law firms members may own another entity, or their spouse may own another entity. Or an attorney at the firm is an officer or board member of another entity that the firm provides professional services to.
If this situation sounds familiar, make sure to find and read the policy exclusion(s) determining if this policy exclusion applies. Malpractice policies may define this policy exclusion in the definition section or the exclusion section. There may be more than one area of the policy that defines coverage for this situation. So, where one insurer may cover the relationship between the law firm and the entity, another may exclude coverage for the same relationship. It pays to shop and ask questions.
General Star’s exclusion wording:
J. any business enterprise other than the Named Insured or a Predecessor Firm which is or was more than 15% owned by any Insured or an accumulation of Insureds, or in which any Insured is or was an officer, director, partner, manager, or employee, or which is or was directly or indirectly controlled, operated or managed by any Insured, other than solely in a fiduciary capacity;
It is common for an attorney providing legal services for an entity to be asked to join the board, but before you do review your malpractice insurance policy and discuss this issue discuss your malpractice insurance agent. There may be an alternative insurer that provides the needed coverage.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080