Attorney Professional Liability Insurance

Mandatory Reporting Of Malpractice Insurance, Not Mandatory Coverage – – – Yet.

Illinois attorneys are not required to obtain professional liability insurance but they are required to report annually whether they carry malpractice coverage and, if so, the date of the coverage for the policy. Supreme Court Rule 756(e). If an attorney fails to report their malpractice coverage, they will be removed from the master roles for the year. Supreme Court Rule 756(g). The attorney is required to keep insurance coverage records for at least seven years.

The Nature of Professional Liability Coverage

Coverage issues under professional liability policies differ in many aspects from general liability coverage due in part to the nature of the coverage. Attorney professional liability coverage is usually issued on a “claims made” basis. This type of policy can create critical time issues. Delays of even a single day may create insurance coverage questions that require resolution before a defense or indemnification is provided by the insurance company.

Coverage under a typical claims made policy with no extended reporting period can be triggered when certain events occur:

  1. The claim is made during the policy period, or

  2. The claim is reported during the policy period.

The actual date of the event, act, omission or error on the part of the professional is often not a determining factor for coverage.

Notice, Knowledge and Material Representations

One area heavily litigated by attorneys and insurance companies is whether the policy is void or may be rescinded based upon material misrepresentations. This involves examination of the facts within the attorney’s possession at the time he or she applied for coverage. Issues often arise such as allegations within a malpractice complaint, letters of inquiry to attorneys regarding a former client’s representation, subpoenas directed to former counsel and other communications that may have provided the applicant with knowledge of a pending claim. Closely associated with these issues is the question of whether the representation in the application was material.

The point in time to retain coverage counsel will vary from case to case. Often, early retention of coverage counsel by the insurance company will prevent the issuance of an unfounded denial or reservation of rights letter that may expose the insurance company to claims of estoppels or extracontractual damages.

Likewise, attorneys that perceive a potential dispute developing with their insurance company may wish to seek an opinion regarding the strength of their position or the basis of a denial or reservation of rights letter. Early involvement of insurance coverage counsel can often assist with the resolution of a matter without the need for a declaratory judgment action.

The Point In Time To Consider Retaining Insurance Coverage Counsel:

  • To obtain an opinion within the local jurisdiction regarding policy interpretation,
  • Prior to the issuing a reservation of rights letter,
  • To review the state law on estoppels and waiver prior to issuing a denial letter,
  • Upon receipt of a reservation or denial letter by the attorney – there may be a limited window of opportunity to resolve a matter and avoid further litigation,
  • For the interpretation or an opinion of any policy language.

Illinois Supreme Court Rules Addressing Professional Liability Coverage

The Supreme Court Rules on Admission and Discipline of Attorneys,

Part B Registration and Discipline of Attorneys,
756: Registration and Fees,
756(e) Disclosure of Malpractice Insurance

Supreme Court Rule 756(e) provides as follows:
(e) Disclosure of Malpractice Insurance.

As part of registering under this rule, each lawyer shall disclose whether the lawyer has malpractice insurance on the date of the registration, and if so, shall disclose the dates of coverage for the policy. The Administrator may conduct random audits to assure the accuracy of information reported. Each lawyer shall maintain, for a period of seven years from the date the coverage is reported, documentation showing the name of the insurer, the policy number, the amount of coverage and the term of the policy, and shall produce such documentation upon the Administrator’s request. The requirements of this subsection shall not apply to attorneys serving in the office of justice, judge, associate judge or magistrate as defined in subparagraph (a)(4) of this rule on the date of registration.

Supreme Court Rule 756(g) provides as follows:

(g) Removal from the Master Roll.

On February 1 of each year the Administrator shall remove from the master roll the name of any person who has not registered for that year. A lawyer will be deemed not registered for the year if the lawyer has failed to provide trust account information required by paragraph (d) of this rule or if the lawyer has failed to provide information concerning malpractice coverage required by paragraph (e) or information on voluntary pro bono service required by paragraph (f) of this rule. Any person whose name is not on the master roll and who practices law or who holds himself or herself out as being authorized to practice law in this State is engaged in the unauthorized practice of law and may also be held in contempt of the court.