The Claims Made Policy-a Trap for the Unwary Lawyer?
| Jurisdiction | Colorado,United States |
| Citation | Vol. 06 No. 1989 Pg. 1121 |
| Pages | 1121 |
| Publication year | 1989 |
1989, June, Pg. 1121. The Claims Made Policy-A Trap For the Unwary Lawyer?
It has been a long, hard day for attorney Tim Jones. After an endless wait, a hearing had been held before the court on Jones's motion for a protective order, and Jones lost. When Jones gets to his office, he takes a few minutes to look at the accumulated mail. The fourth letter in the pile is a response to Jones's inquiry to a lawyer in California about handling a personal injury claim for Jones's client. The letter says that, even though the claim has merit, counsel can do nothing because California's one-year personal injury statute of limitations has already run. Resisting an impulse to hit his head against the wall, Jones puts on his coat and goes home.
Mary Smith, a lawyer in another firm, also has had a taxing day. Among her stack of telephone messages is a note to call Pat Campbell. Mary remembers Pat Campbell as being the recently married second wife of Jim Campbell, a client whom Mary represented when Jim was divorced. There were no children of the first marriage and the division of property was bitterly contested. Mary calls Pat, who tells her that Jim has died and that she has found a life insurance policy on Jim which lists Sue Campbell, Jim's former wife, as the beneficiary. Pat wants to know why Jim did not make her the beneficiary. Mary explains to Pat that she will have to retrieve Jim's file and promises to call her back. As Mary hangs up, she has an uneasy feeling about her handling of Jim's divorce because she cannot remember discussing life insurance with Jim.
Joe Brown, a third lawyer in the same community, has enjoyed a quiet day in the office. His work is interrupted by his secretary, who wants to discuss the recently closed sale of the Diamond Ranch, which Brown handled. The property covered two counties, and Brown's client, Diamond, took back separate deeds of trust to secure part of the purchase price. The secretary tells Brown that, in some unaccountable way, the deed of trust conveying the Elbert County property has been sent to the clerk and recorder of Lincoln County and that the Lincoln County deed of trust has been sent to Elbert County. Brown tells the secretary to send the deeds of trust to the proper counties immediately. As Brown sits back in his chair, he remembers a conversation with Diamond which took place just before the closing. Diamond had remarked that rumors were flying about Star, the purchaser of the ranch, having troubles with the Internal Revenue Service ("IRS"). Brown resolves to find out if there are recent IRS liens against Star in either county.
These three unfortunate lawyers may have committed malpractice. Each is insured under a claims made professional liability policy. This article discusses the claims made policy and relates these hypothetical situations to coverage under such a policy.
Liability policies historically have been written on an accident or occurrence basis. This means that the event which triggered coverage is the error or omission on the part of the insured which led to loss or damage. For example, assume that Mary Smith's client, Jim Campbell, lives for ten years after his divorce. It is then discovered that Mary carelessly neglected to advise Jim to make his second wife, Pat, a beneficiary on the policy. Pat sues Mary. If Mary had an occurrence policy at the time of the divorce, that contract will cover the claim, even though it did not materialize until years after Mary did the work.
Occurrence policies are no longer available to Colorado lawyers, although all auto and homeowner's policies are...
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