Honesty Is the Best Policy
What happens when efforts to encourage professionals to disclose mistakes come up against professional liability policies that prohibit insureds from admitting liability without the insurer’s consent? No New England court appears to have addressed the question, but given the increased attention on early disclosures of and apologies for medical mistakes (see my recent blog posts on how MA’s Health Payment Reform Act affects medical malpractice litigation and a new website that supports efforts to encourage apologies in such cases), it’s only a question of time before the issue arises.
A recent Illinois decision suggests that the public interest in disclosure of mistakes may trump the policy language. In that case, an attorney discovered that he had made a mistake in drafting a will. He promptly disclosed the error and its possible consequences to the intended beneficiaries. They rewarded his candor by suing him. Further complicating matters, the lawyer’s professional liability insurer filed suit seeking a declaration that the lawyer’s acknowledgement of his mistake was a breach of the policy that excused the insurer from defending. The insurer relied on the policy’s “voluntary payments” clause, which in part stated that the insured “will not admit any liability” without the insurer’s consent.
The lawyer finally found a sympathetic ear in the court, which rejected the insurer’s argument. The court concluded that the policy provision was void as against public policy, because the attorney had a duty to comply with the ethical rules as he understood them. The court shrugged off the insurer’s contention that it only wanted to “play a role” in the disclosure, stating that it was uncomfortable with the idea of an insurance company advising an attorney on his or her ethical obligation.
It’s important to note that in many states, including Massachusetts, an insurer has to show that it was prejudiced before denying coverage based on an insured’s breach of the voluntary payments clause. This may be hard to do if there is a statute in place prohibiting admission of a disclosure or apology as evidence of liability. Further, many medical professional liability insurers are involved in efforts to encourage early disclosures of and apologies for mistakes. They may not necessarily enforce the policy language even if it literally applies.
The case is Illinois State Bar Association Mutual Insurance Co. v. Frank M. Greenfield & Associates, P.C., 2012 Illinois App. (1st) 110337.
About Anne: I specialize in Insurance Law and Litigation at Anderson & Kreiger, primarily in the areas of professional malpractice, commercial liability and D&O insurance. My most recent post for Between the Lines discusses a new website that intends to encourage doctor apologies in MA malpractice litigation.