LAW FIRM'S FAILURE TO GIVE NOTICE WHEN CLAIM WAS MADE NEGATED COVERAGE

Professional Liability	Claims Made
Late Notification

During the first year of a lawyers professional liability policy, carried by a thousand-member law firm, three new partners were notified of a claim against them. It arose from alleged malpractice on their part while all were members of another firm. They referred the notification papers to the executive committee of their new firm. The committee did nothing, believing it was a matter for the partners' previous firm.

After a further demand was received, the new firm sent written notice of the claim against the partners to their insurer. However, at the time notice was sent, it was well into their policy’s renewal period.

The insurer sought a declaration that its policy did not cover the claim against the lawyers "because it was first made but not reported during the first policy year." (The policy was written on a "claims-made" basis.) Under federal jurisdiction because the FDIC was involved, a federal district court judge agreed that there was no coverage. On appeal, the court said: "There is no question that a claim was reported by (the insured law firm) during the second policy period; but if that claim was 'first made' during the first policy period yet not reported then, it is not covered by the policy." That was the case here.

The judgment of the trial court was affirmed in favor of the insurance company and against the insureds.

Editor's Note: The three individuals against whom the malpractice lawsuit was brought were insureds under the policy, by virtue of their partnership status, as well as the firm itself.

The National Union Fire Insurance Company Of Pittsburgh, Pa, Plaintiff, Appellee V. Baker & Mckenzie Et Al., Defendants, Appellants. United States Court of Appeals for the Seventh Circuit. Nos. 92-1718, 92-1763, 92-1864, 92-1991. June 22, 1993. CCH 1993-94 Fire and Casualty Cases, Paragraph 4391.