Hiring a suspended attorney by a law firm might not impact the law firm’s attorney malpractice insurance. Hiring a recently reinstated suspended attorney to practice law will impact your attorney malpractice insurance. So what is the distinction?
This is the typical question that is asked on an attorney malpractice new business application. Also there is a similar question on the ‘add attorney form’ when hiring a new attorney.
“Has any lawyer in the law firm currently or in the past 5 years:
Been refused admission to practice, disbarred or suspended from practice; been reprimanded, sanctioned or disciplined by any court or administrative agency, to include grievances, or are any such proceedings currently in progress? “
The suspended attorney that is working for the firm cannot be practicing law. So hopefully the suspended attorney is working in the capacity of a paralegal or other staff clerical position for the firm. Sometimes a firm hires a recently reinstated attorney to be a paralegal. In either case attorney is still a lawyer and the law firm should answer ‘yes’ to this question. Depending on the explanation the insurer may or may not offer coverage. It may or may not impact the rates.
But the law firm hiring a recently reinstated attorney where the attorney is practicing law puts the law firm’s coverage in jeopardy. The law firm should have a conversation with their agent and insurer prior to hiring. To move forward with adding the attorney to the law firm’s policy it will need to complete the ‘add attorney supplement’ with answering ‘yes’ for the attorney having been suspended.
For small law firms an admitted insurer will likely do 1 of 2 actions:
1. Refuse to add the new attorney unto the law firm’s coverage. If firm really wants this attorney to work for them, only option to get coverage is to cancel current policy and rewrite a new policy through a surplus lines insurer, where the premiums will be substantially more and the coverage less. Or
2. Insurer agrees to add the attorney onto the policy but at renewal non-renews the policy or greatly increase the renewal premium. If not renewed, almost all new business applications ask similar questions meaning that searching for any admitted insurer to write the firm is seldom successful. The admitted insurer’s new business underwriting criteria likely will not permit them to write a law firm with a recently reinstated suspended attorney. The firm will end up in surplus lines.
Some firms have ‘reinterpreted’ or ‘rationalize’ the meaning of ‘any lawyer’ to only those attorneys that are actually ‘practicing’ law. By not disclosing a suspended attorney or recently reinstated attorney working for the law firm that law firm risks claims being denied; being non-renewed upon disclosure; or coverage recession.