So Late That Coverage Was Lost
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A large law firm held a professional liability policy at the time they hired and added three partners. Those partners were accused of malpractice for actions while working for their previous firm. The legal papers informing the trio of the allegation were shared with the new firm and that is when the situation became tangled. The problem was with the timing of the notification to the insurance company.
Click below for information on how a lower as well as an appellate court interpreted the issue. Both courts focused on a key requirement under the firm’s claims-made policy provision.
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Professional Coverage, But Routine Mistake
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This loss turned into a dispute between legal and insurance professionals who should have been on the same side. Ideally, this would have been a straightforward situation, playing out as follows:
1. A loss occurs
2. The loss is reported
3. The insurer determines that the loss is covered
4. The loss is paid
While their arguments were over allegations of malpractice, which was not the critical item. The problem was that a group of people trained as lawyers didn’t meet their policy’s loss notification requirement.
Click here for additional information on the specialty liability protection that is available to legal professionals. It is from Gordis on PC Insurance found in Advantage Plus.
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You Have to Tell on Time
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Lawyers typically have a deep understanding of legal contracts, which is what insurance policies are. Yet the law firm in our featured case seriously mishandled their policy’s Loss Notification Condition. Internally, the affected lawyers quickly advised executive staff about the claim. However, that knowledge remained insider information. Notification does not occur until sufficient information is shared with the applicable insurer. Further, the information has to be shared within the required time frame.
Because the law firm’s notification was so late, a loss that would have been managed by their insurer became ineligible. The lost coverage was affirmed after a lawsuit and an appeal. Insurance protection is quite valuable, but its availability is qualified. Proper Notification is important because its absence negatively affects an insurance company’s ability to evaluate a claim and to determine its obligation to respond.
Click here to see an article that discusses general loss notification obligations. It is from Emarketing for Agents found in Advantage Plus.
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Lawyerly Losses Are More Complicated
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Our friendly law firm’s problems were caused by simple, yet serious oversight. However, lawyers’ professional liability policies contain a complicated set of obligations when an incident happens. Most policies require a more basic amount of information, similar to what is needed to report news. Rather than merely answering Who, What, When, Where, Why and How, legal liability claims require more.
Claims against lawyers often involve interpreting how harm was caused by acts of both commission as well as omission. Determining whether a lawyer should be held liable takes a lot more information that is also more nuanced. Persons who seek lawyers and who become their clients are owed a far higher level of service because they heavily rely on their advice.
Click here for more about the broader responsibilities assigned to insureds when a loss occurs. It is from the Lawyers Professional Liability Coverage Analysis in PF&M found in Advantage Plus.
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