Section 42 Coverage Section of the Policy

• Library: Prof Liability 2005

In most lawyers’ professional liability policies, coverage is stated in broad language. The policies cover liability to “acts, errors, or omissions” “arising out of the performance of professional services in the insured’s capacity as a lawyer,” or use other similar language. Generally, the insuring agreement is not written in terms of “malpractice” or “negligence.” As a result of this language, the claimant is not required to be a client of the attorney for coverage to exist under the policy.

Although stated in broad terms, the insuring language providing coverage arising out of “professional services” does limit a carrier’s coverage. Significant problems can arise in attempting to determine whether an insured acted as a “lawyer” providing “professional services.” Many carriers have attempted to limit this confusion by adding an exclusion in the policy. See the discussion of the business enterprise exclusion in §8.43 below.

Normally the insuring agreement also includes restrictions on coverage regarding an insured’s prior knowledge of any claim or potential claim. These restrictions generally provide that coverage will not exist if the insured knew of a claim or potential claim before the effective date of the policy.

Understandably, insurers do not want to provide coverage to an insured for an error of which the insured is already aware. This restriction is an attempt by the insurance industry to prevent the company from writing a policy insuring the proverbial “burning house.”

Continental Casualty Co. v. Maxwell, 799 S.W.2d 882 (Mo. App. W.D. 1990), addresses this issue. In Maxwell, the insured...