Maybe obvious, but one of the most important considerations in a claims made and reported insurance policy is timely reporting. ALPS’ Claims Made and Reported Policy requires an insured to immediately report any claim or circumstance that could reasonably be expected to be the basis of a claim. Generally, coverage does not exist for a claim first made or reported before or after the policy period.
Attorneys are usually well aware of the reporting obligations involving their own cases. But what about cases handled by the other attorneys in the firm? Is an attorney protected by the coverage of the LPL policy by relying on one’s own personal knowledge of a claim or potential claim? The answer might surprise you.
The ALPS policy specifies that, “At the Effective Date of this Policy, no Insured knew or reasonably should have known or foreseen that the Wrongful Act might be the basis of a Claim.” In other words, an insured firm could be out of coverage if one insured attorney in the firm knew or should have known of a claim or circumstance that could give rise to a claim and did not timely report it. Therefore, for purposes of timely notification triggering coverage, you are your partner’s keeper.
This is especially true if knowledge of facts and circumstances predates an application for insurance whether it is an initial application or an application for continued coverage. The overwhelming view across the country, for courts dealing with this issue, is that no coverage exists for the entire firm and its individuals when one attorney fails to disclose facts regarding a claim or potential claim in an application.
We’ve seen coverage issues or potential coverage issues based on untimely notice in the following scenarios:
- The senior partner who brings in their own cases and works independently. It may seem unnecessary for the firm to monitor the files of the attorneys with the most experience and knowledge in the firm. That attorney may not want anyone looking over their shoulder. In this scenario, it can be difficult to address the need for some oversight.
- The attorney dealing with substance abuse or depression. Often attorneys who are dealing with personal issues are not able to fulfill duties to clients and are not willing or able to admit they need help with either issue.
- The attorney suffering or recovering from health issues. Similarly, attorneys who either can’t work because of a medical condition or need to dedicate time to recover may not want to give up work or admit they are unable to fulfill their duties.
- The attorney working remotely. A firm that allows an attorney to work remotely without having full access to that attorney’s files is at risk. The first issue is the lack of a network that allows firm members to access the remote attorney’s work. Second, an attorney who does not have periodic physical contact with his or her partners could be showing a number of signs that would normally trigger the concern of coworkers. But, rather than being evident, they go undetected and unaddressed.
In order to hopefully spare a reader or two from learning the hard way, here are some suggestions:
- Firms who find familiarity with Scenario #1 must have the tough conversation with the most experienced lawyers in the firm. All firms need a periodic monitoring or an auditing system that covers the work of ALL attorneys in the firm.
- With Scenario #2, these types of issues can be clear and evident when people have contact with one another in an office environment day after day. If someone is struggling, the firm must heed the warning signs and make sure that there is appropriate support and oversight. In other situations, we understand that there are no warning signs. If this is the case, a periodic monitoring or an auditing system that covers the work of ALL attorneys in the firm will increase the likelihood of finding any problematic files.
- In evaluating Scenario #3, if an attorney is away from the office for an extended period for a medical issue, procedure, or recovery, the firm must step in and monitor files. It is not sufficient to rely on the attorney who might need help but does not want to ask for it.
- Firms should not allow attorneys to work remotely, similar to the final scenario above, without adequate checks in place. There must first be a plan for sufficient contacts with the individual working remotely and a system set up that allows the firm access to the attorney’s files.
In a nutshell, first, any multiple-attorney firm needs monitoring procedures to spot otherwise undetectable issues. There’s no “one size fits all” system; what’s best for a firm will vary based on its size and setup. Second, a firm must address warning signs with individual attorneys when they arise. By taking these steps, firms will be in the best position possible to timely spot matters that need to be reported to preserve coverage.