Failure to Advise Insurer of Potential Claim Defeats Coverage: Lawyer Must Report All 'Potential' Claims of Malpractice When Applying for E&O Insurance.

Author:Zalma, Barry

Almost all legal malpractice insurance policies issued in the last 40 years have been claims-made policies that only respond to claims made during the effective dates of the policy. As a result, insurers demand that when a lawyer applies for insurance he or she must disclose all known and potential malpractice claims. Failure to report a potential claim will deprive the lawyer of coverage if a claim is actually made after the policy is issued.

In Elizabeth A. Ruiz, Personal Representative of the Estate of Marcia A. Paul V. the Bar Plan Mutual Insurance Company, No. ED106926, Missouri Court of Appeals Eastern District Division Four (September 3, 2019) Elizabeth A. Ruiz ("Ruiz") appealed the trial court's grant of summary judgment in favor of The Bar Plan Mutual Insurance Company ("The Bar Plan") on her claim filed on behalf of the estate of Marcia A. Paul ("Decedent").


Ruiz brought her claim against The Bar Plan to collect on a legal malpractice judgment entered in favor of Decedent against The Bar Plan's insured, Charles H. Steib ("Steib"). Steib renewed a claims-based professional liability insurance policy with The Bar Plan ("the Policy") effective in 2009. In the Policy, coverage for claims based upon conduct occurring before the issuance of the Policy was conditioned on Steib notifying The Bar Plan, at the time of the Policy renewal application, of any act or omission that he had a basis to believe might give rise to a claim against him. The trial court determined that the Policy did not afford coverage for Ruiz's legal malpractice claims because Steib did not report Decedent's potential malpractice claims against Steib to The Bar Plan when he reapplied for insurance coverage.


Ruiz contended that Steib fully complied with the Policy's notice requirements because he reasonably believed no malpractice claim could be brought against him on behalf of Decedent following Decedent's death.


Steib, through his law firm, submitted a Policy renewal application to The Bar Plan in December 2008. It provided that it: "is a condition precedent to coverage under this Policy that all Claims be reported in compliance with Section VII. CLAIMS, Paragraph A." The policy also provided that under Section III Exclusions, Exclusion L expressly excluded coverage for any claim based upon or arising out of "[a] Claim against an Insured who before the Policy effective date knew, or should reasonably have known...

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