Reporting Malpractice Claims
| Publication year | 1988 |
| Pages | 663 |
| Citation | Vol. 17 No. 4 Pg. 663 |
1988, April, Pg. 663. Reporting Malpractice Claims
Generally, courts have defined legal malpractice as consisting of four elements: duty, breach of duty, approximate causation and damages.(fn1) These elements provide the jurist with guideposts for defining malpractice. However, as a practical matter, an insured utilizes more instinct than knowledge when identifying a claim for the purposes of effecting coverage. Many insurance policies define a claim as follows:
"Claim" means a demand received by the insured for money or services, including the service of suit or institution of arbitration proceedings against the insured.
A few policies utilize all of the above language but further state that a "wrongful act" must be alleged in the suit papers. It is unlikely that an insurance company will decline at least its duty to defend if the complaint fails to identify a "wrongful act" per se or contains an inarticulate ad damnum.
A claim couched in inarticulate suit papers is likely to invoke defense by the carrier, on behalf of the insured, with a reservation of rights in place and ready to recover expenses or damages paid if later the claim is deemed excluded from coverage. An example of how strictly a court will enforce an unambiguous insurance provision can be found in Freemont v. Lawton.(fn2) In that case, the court determined that the carrier's definition of a claim was unambiguous and, therefore, no coverage was provided for what may have been otherwise covered in a more ambiguous provision. As an aside, the definition of a claim in Freemont was similar to that quoted above.
At this point, it appears that only with suit papers in hand could an insured be certain that they have incurred a reportable claim. However, the majority of insurance policies combine or confuse the definition of a claim with references to "potential claims," "occurrences" or "incidents; some policies do not define a claim at all.
An ambiguous construction of the definition of a claim is typified by the inclusion of the following policy language:
If, during the policy period or any extended reporting period, the company shall be given written notice of any act, error or omission which could reasonably be expected to give rise to a claim against the insured under this policy, any claim which subsequently arises out of such act, error or omission shall be considered to be a claim reported during the policy period or extended reporting period in which the written notice was received.
Given this definition, it appears that a claim is akin to Martha Washington's characterization of Philadelphia, circa 1776: "You will smell it before you see it!"
When definition is lacking, insureds have been inclined to overreact and employ novel approaches to reporting a claim with the hope of ensuring coverage for any eventuality. As an example, some insureds provide a carrier with a listing of all client matters and state:
Enclosed is a listing of all client matters handled by our office. It is conceivable that an act, error...
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