Protecting the ‘business side of the law,’ a firm needs to carry business owners, workers compensation, and cyber insurance. But these commercial insurance policies exclude the ‘practice side of the law.’
Claims-made attorney malpractice insurance policies protect the ‘practice side of the law.’ Typically, an attorney malpractice policy covers errors and/or omissions committed by you, your partners, or your employees in the course of their professional duties where you become or could become legally liable. Be aware that malpractice insurance is not all perils insurance. Every policy defines coverage slightly differently. It is important to know your own coverage.
Perils covered are missed filing deadlines; legal procedures/engagements that the outcome was less than what was hoped for (whether actual or perceived); or errors made in interpreting the law or applying a statute while performing professional services. As a rule, attorney malpractice policies exclude the ‘business side of the law.’ Coverage for general liability insurance, property insurance coverage, cyber and workers compensation are excluded. But attorneys are sometimes surprised, at claims time, by what may also not be covered. Claims time is not the time to learn about your coverage.
The Professions Solutions Insurance policy shows the typical definition of what damages are:
“6. Damages means compensatory Damages that an Insured becomes legally obligated to pay as a result of any judgment, awards, or settlement, including pre-judgment interest, of any alleged Wrongful Act or Personal Injury, provided settlement is negotiated with the assistance and approval of the Company. Damages do not include:
a. Legal fees, expenses paid, or costs incurred through or charged by the Insured, regardless of whether they are a result of judgments, settlements, awards, restitution of funds, unearned fees, forfeiture, financial loss or otherwise, if not previously agreed to in writing by the Company;
b. Injunctive or declaratory relief;
c. Civil or criminal fines, sanctions, penalties, or forfeitures, whether or not related to, or as a result of local, state, or federal regulations, statutes, ordinance, law, rules of civil or criminal procedure, and any such judgments, awards, orders, settlements, agreements, or consequences resultant thereof;
d. Punitive or exemplary Damages;
e. Multiplied portion of any award or judgment, such as double or treble
Damages;
f. Any form of non-monetary relief;
g. The return by an Insured of any fees, costs, or remuneration paid to any
Insured.”
It is important to note that certain damage types typically excluded are items that either cannot be insured for or are considered deliberate acts. But there can be other exclusions that remove coverage such as for closely held business clients and/or for services that are not considered something that an attorney would do.
Most admitted attorney malpractice policies also provide coverage for disciplinary defense, but not for the sanctions or attorney fees. Again, you need to carefully read what the insurer covers and as not all insurers cover this equally.
In the end there is no good reason any private practice attorney does not carry legal liability Insurance. No matter how careful you are errors (either actual or perceived) do occur. When an error that causes damage to your client does occur, it is the attorney’s responsibility step up to the bar and make the client whole. But understand the coverage you purchase.
Note: The above is general information about a Claims-Made Insurance policy. Each policy is different. Each claim is different.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080