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Insurer Not Held Responsible in Professional Liability Policy Case

Insurer Not Held Responsible in Professional Liability Policy Case

A decision for a 2019 complaint from a former client has finally come to a conclusion. The ruling made by The United States District Court for the Southern District of Florida ended with a deciding factor that the insurer did not need to defend an attorney nor the attorney’s firm. Professional liability policy made the decision difficult, but the specific conduct brought to the attention by the former client was technically uninsured. 

What type of attorney conduct is considered uninsured? 

The conduct in discussion happened in 2019 when the “former client filed a complaint in Florida state court against the attorney, his partner and their firm, alleging that they had held themselves out as a law firm when they were hired to litigate two lawsuits.” The insurer held their ground and “filed a declaratory judgment action” which stated they had no obligation to defend the client’s suit because “neither the attorney’s partner nor the law firm were named in the policy.” 

On top of this factor, the conduct also was “alleged fraudulent and deceitful conduct” which listed it uninsured.  All of these issues put together swayed the court in the final ruling to rule in favor of the insurer.  “The court concluded both that the policy afforded no coverage for the attorney’s alleged conduct, and that it would be barred under an applicable exclusion even if coverage were otherwise implicated.”

Do Professional Liability Policies automatically protect attorney firms? 

The initial policy that included the attorney and insurer defined “legal services” as “services performed by an Insured for others as a lawyer…only if such services are performed for a fee that insures to the benefit of the Named Insured.” Additionally, the firm was not named in the policy, therefore the insurer had no duty toward that firm nor additional partners. But, even if the firm was named in the policy, there would still be exclusions in the duties of the insurer  because of the specific coverage.

“The court noted that the policy excluded coverage for ‘any claim based on or arising out of an Insured’s capacity as…a former, existing, or prospective officer, director, shareholder, partner or manager of a business enterprise… unless such enterprise or organization is named in the Declarations.’” 

How does this affect future Professional Liability Policies? 

With the decision made final in this case, the attorney was sued due to being included as “a partner in a firm not identified by declarations.” This is a landmark decision, because the Florida “court held that coverage would be barred under this exclusion in any event.” Events like this showcase the reason to have an experienced agent. Mitchell & Mitchell have specialized in Lawyer Professional Liability for the past +25 years. For more information, contact