In-House Lawyers Need Legal Malpractice Too

Should the Coverage be Provided by Your Company?

Although attorneys employed inside firms may not have paying clients, they still have an Errors & Omissions exposure that needs to be addressed.  In most cases this is through a company-paid Employed Lawyer’s Professional Liability policy.

Potential scenarios that could lead to claims from the attorney’s work within the scope of his or her duties:

1. Incidental advice to, or about, fellow employees on:

• employee benefit matters
• employment agreements
• employment complaints
• opinions on coverage for the employee under company auto or general liability insurance policies
• other incidental personal matters

2. Matters involving company customers, competitors or other business associates whereby the counter-party claims the legal work was negligent or misleading

3. Complaints by regulators concerning the attorney’s work

Some within the company may say insurance is unnecessary because a claim would be covered under the company’s D&O policy.  However, the advice to employees may, in the insurer’s view, fall outside the scope of the attorney’s work for the company.  Also, the D&O policy has exclusions that would negate coverage for the attorney in the following areas: employment matters (the EPL exclusion), retirement matters (the ERISA exclusion), and matters with competitors (the Unfair Business Practices exclusion).

Clear to the company’s D&O insurer, but very gray in reality

Insurers latch on to exclusions like moths to a light.  It seems applicable and binding to them if there is a hint the activity might fall under the exclusion.  But in matters within a company involving the in-house lawyer, it is too dangerous at worst, and ambiguous at best, to rely on the company D&O policy.

The premium for Employed Lawyers coverage is very low, and the company owes it to the attorney to provide it.  Employed lawyers should make that case to their bosses.

(c ) Licata Risk & Insurance Advisors, Inc. 2019

Frank Licata

[email protected]

617.718.5901

Jan 13, 2020