Don't Miss this Vital Condition of your Legal Malpractice Insurance Policy

When I learned that my blog would be posted between my second and third favorite holidays, I wanted to do something befitting the season that would be a good combination of scary and gratitude. The scariest thing that I know of that would be relevant to a legal malpractice blog would have to be, being told that there is no coverage when submitting a claim to your malpractice insurance carrier. Sometimes that is merely a consequence of the nature of the claim. Some things simply fall outside the scope of the policy. For matters like that, hopefully you have worked with our business team to secure the necessary insurance for all your non lawyers professional liability exposures.

What this post is about are those errors or omissions, real or imagined, that fall squarely within the sphere of a legal malpractice policy but still there is not coverage. We all buy insurance to protect us when things go bad so how would a policy not respond when the allegations are within coverage? Usually the reason your policy may not cover your claim is due to a failure to give timely notice. It has long ago stopped surprising me that so many lawyers don’t understand the basics of claims made and reported insurance policies. Every month I deal with insureds who knew or should have known about a circumstance that could result in a claim and despite such knowledge failed to timely report. Ultimately waiting to submit notice until the house is on fire, only to learn there is no coverage because they did not timely report. A claim can only attach to the policy in place when the circumstances that give rise to the claim occurred and the insured knew or should have known about those circumstances. Defective notice makes a bad situation worse all around; even for me, as the part of my job that I hate the most is telling someone a claim that would otherwise be covered by the policy, isn't, because they breached a condition of the policy to report and trigger coverage.

This condition may seem harsh but is consistent with our commitment and obligations to all our insureds. Honor the contract we have with our insureds, that is what we strive to do as faithfully as possible. That goal affords protection for the attorney as well as provides protection for your client in the situation where a mistake has occurred, and notice has been given. When done according to the natural course of events and the terms of the Insurance policy, that is something to be thankful for even if not a magic wand. It's not necessarily going to be an easy pass, but in the end it's a far far better than when there's no coverage.

So the take away is that it's better to over report then under report. Don’t drink your own Kool-Aid that the client is a friend or otherwise values your relationship to the point they won’t make a claim. Great if that's the case – but protect yourself and your client by reporting the matter. Also, for those with partners – check on how they are doing and for potential issues with any given file or possibly many files. Their knowledge and failure to disclose belongs to the firm. We have seen lawyers not coping with mistakes dig themselves and their firm even deeper holes by hiding mistakes from the client and their partners.

I am always thankful when notice is not a consideration and we can get on to assessing the merits of a claim, protecting the insured and compensating appropriately an impacted client. I know you will be thankful too.