Common LPL Coverage Issues Overlooked By Attorneys

Many lawyers have some type of ownership/equity interest in or with the clients they serve.  Others serve on local nonprofit boards within their community.  All do so usually without completely understanding how these outside interests and relationships affect their professional liability insurance coverage.

Most lawyers professional liability policies exclude coverage for those professional services that lawyers provide to clients where the lawyer has an ownership interest in or with that client.  Some policies go so far as to include ownership interests of the lawyer’s spouse!  Common examples that I have seen on lawyer applications are: ownership in title agencies, real estate, and small businesses of all kinds.

LPL Polices also exclude the acts of the lawyer when acting as a director, officer or board member of entities, including nonprofits.  Lawyers are often asked to sit on boards because they ARE Lawyers and are tapped for their knowledge of the law during board meetings.  It is very difficult for the lawyer and the board to distinguish when the lawyer is acting as a board member and when and if the lawyer is acting in the capacity of a lawyer and lawyer client relationship.  It is easy for the lawyer to get caught in a situation where the board believes he/she provided legal advice however the lawyer believes that he/she provided that advice as a member of the board.  In the event that “advice” leads to a bad outcome for the board and eventually ends in a malpractice claim, the lawyer could be without coverage!

Before accepting board positions or investing with or in clients, all lawyers should ask how this relationship will impact the professional liability insurance from both a coverage and cost standpoint.