An attorney can do the darnedest things to ensure that they get their claim denied. Attorney Malpractice insurance policies are claims-made and reported policies. Remember insurance policies are contracts. Not understanding your coverage is not a defense for getting a claim denied. Not following the contract after the claim can negate a covered loss. Over the years through ignorance or deliberate acts here are some of the ways that attorneys have gotten their claims denied.
Not reporting a claim in a timely manner-Sometimes there can be a debate as to when an attorney should report a claim. My moto is if in doubt report. Waiting for the firm to lose the appeal and then report the claim is likely too late. Most legal malpractice policies have language contained in the policy as to how long you have to report a claim. Generally, a sure why to lose coverage is to not report a potential claim prior to renewal time.
Not disclosing prior claims or disciplinary activity-Checking the boxes on a new business or renewal application that state that you are not aware of any claims activity when you have had reported claims could not only get future claims denied but could trigger a policy recession. It is a ‘Yes’ or ‘No’ question. If in doubt disclose.
Prior Knowledge-Many claims departments state that this is the number one reason for denial of claims.
Defending Yourself without notifying the Insurer-Most attorney malpractice policies are duty to defend, meaning that the insurer agrees to provide a defense for covered losses. But with this insurer obligation normally comes the requirement that the insurer determines who will defend and how it will be defended. Answering the complaint without involvement of the insurer could jeopardize the claim defense and coverage.
Not disclosing attorneys working at your firm-This might seem obvious but leaving attorneys off of the application or not disclosing new hires is a good way to get a claim denied.
Assuming that you are covered-Assuming just because an attorney is listed on the firm’s application there is coverage. If the attorney is doing work for another firm not listed on the declarations page as a named insured, that attorney likely has no coverage for that work. Coverage will be declined.
Letting your coverage lapse-Remember these are claims-made policies. Reporting a claim for covered acts that occurred during your policy being inforce but after having coverage terminated will get your claim denied every time. We have actually had firms report claims over a year past the coverage termination date and yes, they were denied.
Not carrying malpractice coverage-And then there are the attorneys that have not carried coverage for years but decide that it would be a good idea to get some coverage. Claims reported for acts that happened prior to the inception date of coverage is a claim denied. God may give forgiveness for past sins, but don’t expect your insurer to pay for them without having carried insurance when the act occurred.
Dropping or shortening your prior acts-This is a quick way to save money on your insurance premiums. But if the reported claim comes in for acts committed prior to your new prior acts date, coverage will be denied.
Not paying attention to the policy exclusions-Another place that attorneys run into trouble is doing legal work for entities that the attorney has a financial interest or is in the management of that entity. Read your policy carefully. There may be no coverage for this work. Pay attention to endorsements and policy language that excludes coverage for suing clients for fees or for example doing intellectual property work. If the language or endorsements are in place coverage will be denied. You may need to find a different insurer.
Failing to carry D&O Insurance for entities where attorney is a board member or officer-Directors and Officers Insurance is essential coverage for charities, non-profits and other entities that an attorney is a board or officer member. Generally, there is no attorney malpractice coverage for this work.
Court Awarded Attorney’s Fees or Sanctions-Most legal malpractice insurance policies exclude coverage. Many an attorney has seen a claim denied for these acts.
Things not intended to be coverage by Legal Malpractice Insurance-It is amazing how attorneys will determine that they have coverage for theft of funds or a data breach just because they have attorney malpractice insurance. Malpractice policies are not legal umbrella insurance. Claims have been denied for these claim exposures and other exposures outside of the scope of the malpractice policy.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080