Hiring a suspended attorney impacts the firm’s attorney malpractice insurance. While it is the firm’s prerogative to hire who they want, it can cause a firm to lose coverage.
Some Examples:
1. Law Firm hired an attorney that was currently suspended from the practice of law. Firm did not know about the suspension. Law Firm is slow to notify L Squared Insurance Agency about the hire and consequently the insurer is in the dark about the hire. About 3 months after the firm hires the attorney, firm finds out that the attorney is suspended from practice when the new attorney supplement is completed. Insurer at this point threatens to cancel coverage midterm or not renew and/or at the same time rescinding any coverage for attorney that is currently not licensed to practice law. (Attorney malpractice insurance policies provide coverage for licensed attorneys.) Firm was non-renewed and is now in surplus lines with less coverage and a higher premium.
2. Firm hires an attorney that had a number of “private” admonishments for notarizing documents that were not witnessed personally. Law Firm’s incumbent insurer does give renewal terms that are about 25% higher with a very high deductible.
3. Firm knowing hired a suspended attorney as a paralegal. All is well as most insurers do not ask questions about paralegals. After a couple of years, attorney’s suspension ends. Attorney malpractice insurer is promptly notified of new attorney on firm’s roster. Law Firm’s attorney malpractice insurer refuses to renew coverage or add attorney to policy. Firm is now in surplus lines.
It is a malpractice underwriter’s prerogative to refuse to add an attorney on for coverage at a law firm. This can put the firm in a precarious position. Finding new coverage midterm can be difficult and costly. Not having an attorney covered by malpractice insurance could be even more expensive.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080