An Eastern District Judge has ruled that any defense or indemnity that would have been provided by the defendant’s insurance policy is void.  The law firm of Abrams, Fensterman, Fensterman, Eisman, Formato, Ferrara & Einiger has had two suits lodged against it, but the judge explained that the firm’s professional liability insurance contains exclusions that prevent it from responding to these matters.  The exclusions deal with related entities and cross-ownership.

All firms have this same risk.  Unless negotiated otherwise, a lawyer’s malpractice insurance policy will contain exclusions that prevent coverage for claims brought by entities that are managed, controlled or operated by the firm or by any individual insureds.  Policies also exclude any entity that the firm has more than 5%-25% ownership in (exact percent depends on policy wording).  Additional exclusions apply on many policies.

Since no two professional liability policies are the same, it take an experienced broker to navigate the policy wording and to know how it applies to each firm’s individual circumstances.  When choosing which insurance to purchase, price is a factor – but adequate coverage needs to be in place.  Contact us today to learn how to best protect your firm from gaps in coverage.