Lawyers Make the Worst Insureds
Lawyers’ malpractice coverage is typically written on a claims-made basis. That means lawyers must report “claims” against them during the policy period or they lose coverage when they are later sued. In some policies the definition of “claim” includes “an act, error or omission, . . . which the insured knows or reasonably should know will result in a demand.” While that might seem like very broad coverage, it is a trap for the unwary lawyer. Lawyers are naturally reluctant to report disagreements with clients or disappointing results to their insurer, but if they have a policy with that language, they need to.
In Minnesota Lawyers Mutual Ins. Co. v. Baylor & Jackson, the lawyers/insureds submitted an unsigned affidavit in opposition to a motion for summary judgment filed against their client. In deciding against the client, the judge pointed to the absence of “admissible” evidence. That ruling was made in 2006. The decision was upheld on appeal in 2009, and based upon that ruling the insureds put their malpractice insurer on notice. The client subsequently brought a malpractice lawsuit.
In the coverage suit that followed, the court held that when the underlying trial judge refused to let the witness sign his affidavit and subsequently pointed to the absence of “admissible” evidence, all in 2006, any reasonable lawyer would have been on notice that a claim by the client would result.
A harsh ruling perhaps, but lawyers, you need to beware of your coverage.
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