12-3 Common Policy Provisions
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12-3 Common Policy Provisions
A legal malpractice insurance policy contains pages and pages of "boiler plate" that require careful parsing.17 Below are the most common policy provisions.
12-3:1 Declarations Page
The declarations page briefly summarizes the policy. It typically includes the following information:
(a) The policy number.
(b) The insured lawyer's name and mailing address.
(c) The coverage period (referred to as the "inception date" and the "expiration date"). Policies normally are written for 12 months.
(d) The limit of liability, which will be expressed first for each claim and then for all claims in the aggregate. These amounts may or may not be the same. Thus, for example, a policy may state that it will pay up to $250,000 "per claim" with a "maximum aggregate" of $1 million.18
(e) The deductible (also referred to as the "retention amount"). This is how much the attorney has to pay "out of pocket" before coverage begins.
(f) The notice provision, indicating where the attorney must send a notice of claim. A separate address often is provided for non-claims correspondence.
(g) The premium. Depending on the insurer, this amount may or may not be payable in installments.
(h) The retroactive date (also known as the "go-forward" date). Many lawyers overlook this critical date, especially when changing carriers. Because almost all professional insurance policies are "claims made and reported policies" without a retroactive date, the claim must arise and be made during the policy period. For example, if a claim is made during the policy period for an alleged act of negligence that took place before the inception date, there is no coverage. However, if a claim is made during the policy period for an earlier act that is within the retroactive date, coverage will be provided.
(i) A list of the endorsements that modify or otherwise affect policy.
12-3:2 Insuring Agreement
The "insuring agreement" portion of a legal malpractice policy describes the type of coverage being provided. Depending on the policy, "additional coverages" may be included. Subject to strict limits (which often are quite low), these normally reimburse the insured lawyer for time lost attending hearings on a malpractice claim; defray the cost of defending bar complaints; and provide protection while the lawyer is serving as an officer or director of a non-profit organization.
12-3:3 Definitions
Legal malpractice policies usually have a list of defined terms. Such terms often serve to narrow coverage. Terms that normally are defined include:
(a) Claim. Coverage is triggered when a "claim," as defined by the policy, is made against the lawyer (or the lawyer becomes aware of such a claim). Depending on the policy, coverage also may be triggered when the lawyer is asked to toll or waive a statute of limitations. Claims normally are defined to exclude criminal proceedings as well as actions that seek injunctive, declaratory, equitable, or non-pecuniary relief.
(b) Damages. Typically, there is no coverage for fines, sanctions, punitive damages, the return or restitution of legal fees, and any equitable or non-monetary relief. In Continental Casualty Co. v. Black and Black, P.A.,19 for example, a law firm was sued for charging a client excessive fees. When the law firm tendered the claim to its insurer, the insurer denied coverage. The Third District Court of Appeal agreed and wrote, "[W]e find that the language of the 'return of fees' exclusion is clear and unambiguous, that the 'return of fees' exclusion is applicable, and that, as such, it excludes an action that was brought for excessive fees charged."20
(c) Insured. The word "insured" may or may not include predecessor law firms. As a result, a lawyer who changes jobs may face a gap in coverage. Likewise, lawyers who join a firm after the policy is issued may or may not be considered insureds.
(d) Legal Services. Only claims arising from the rendition of "legal services" are covered. Thus, depending on the policy, a lawyer may find that he or she has no coverage for performing such common lawyer functions as notarizing documents, writing title insurance, serving as an escrow agent or receiver, or authoring legal books and articles.
12-3:4 Exclusions
Legal malpractice policies routinely exclude coverage for the following:
(a) Acts taken by the lawyer in connection with a trust or an estate whose beneficiaries include the lawyer.
(b) Acts taken by the lawyer while serving as an officer, director, shareholder, or manager of a for-profit business.21
(c) Claims by enterprises owned by the lawyer or the lawyer's immediate family.
(d) Claims resulting from the loss or disappearance of any asset while in the lawyer's custody, including claims alleging conversion, embezzlement, or misappropriation.22
(e) Criminal, dishonest, fraudulent, intentional, or malicious acts.23
(f) Business or investment advice.24
If a legal malpractice plaintiff pleads alternative theories against a...
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