Legal malpractice insurance is essential for Wisconsin lawyers who want to protect themselves and their firms from financial liability resulting from errors and omissions in their legal work. While this insurance provides critical protection, it does not cover all possible scenarios. It’s crucial for attorneys to understand the limitations of these insurance policies so that uncovered claims don’t catch them off guard.
Intentional Acts and Criminal Conduct
Legal malpractice policies do not cover attorneys who knowingly engage in criminal activity, fraud, or willful misconduct. Malpractice insurance is designed to protect against negligent mistakes, not deliberate acts. Examples of excluded acts are:
- Embezzlement of client funds
- Knowingly providing false statements or misrepresenting facts
- Criminal acts tied to the attorney’s services
- Intentionally breaching the fiduciary duty
Insurance policies may deny all coverage if a lawsuit contains claims of both negligence and intentional wrongdoing. However, if the claim of intentional wrongdoing is a minor part of the lawsuit, the policy may still cover the negligence claim.
Claims Arising from Business Interests
Some lawyers are involved in businesses outside of their legal practice. For example, they may serve on corporate boards or be involved in charitable organizations. Legal malpractice insurance generally excludes claims arising from these other business interests that aren’t directly related to the legal services the attorney provides.
This insurance also doesn’t cover the attorney’s acts related to their work as an elected public official or government employee.
For claims to be covered by legal malpractice insurance, they must be tied to the work the attorney performs in their capacity as legal counsel. And claims arising from a conflict of interest between the attorney’s practice and their other business interests are often excluded.
Prior and Unreported Acts
Some insurance policies have retroactive dates up to which they will cover claims filed against the insured attorney. However, the policy will not cover claims against the attorney before this date, so policyholders should make sure they know when the cutoff period is. Policies also often require the attorney to disclose any existing claims for them to be covered retroactively.
Legal malpractice insurance policies generally require claims to be reported to the insurer within a set period during the policy’s duration. Failure to report a claim in time could result in the policy not covering it.
Fee Disputes and Sanctions
Fee disputes with clients are typically not covered by legal malpractice insurance. Insurance policies usually deny coverage if a client sues because they believe they were overcharged, weren’t refunded when they should have been, or were the victim of other fraudulent billing practices.
Malpractice insurance also doesn’t cover punitive damages, including:
- Court-imposed fines or penalties
- Disciplinary actions from the State Bar of Wisconsin
- Sanctions for discovery violations
- Sanctions for contempt of court
Cybersecurity Breaches and Data Loss
If your law firm is the victim of a cybersecurity breach, that will typically not be covered by your legal malpractice insurance, as it isn’t directly related to legal representation provided to clients. Even if the breach impacted client data, this insurance usually doesn’t apply.
However, professional cyber liability insurance is another type of insurance you can purchase alongside your legal malpractice insurance. It covers breaches of confidential client information and other adverse effects of data breaches. Cyber liability insurance offers flexible coverage from $50,000 to $1,000,000.
Claims Made by Non-Insured Individuals
Most policies only cover claims made against named insureds, such as specific attorneys listed on the policy. Claims against other employees not named on the policy may not be covered, so it’s vital to make sure you understand exactly whose actions the policy covers. If you bring a new attorney onto your team, you may have to update your policy to include them as an insured, and you should regularly review who’s covered by your policy so you can prune those who no longer work at the firm.
Other Policy Exclusions
Other common legal malpractice insurance exclusions are claims of sexual harassment or discrimination, as these claims are unrelated to an attorney’s services and legal representation.
Your policy may feature additional exclusions, and it’s important to review them so you know the scope of what your specific policy does and doesn’t cover. For example, does it cover part-time legal practitioners or attorneys who are retiring or leaving the practice?
It’s also essential to review the available supplemental coverage options. Beyond cyber liability insurance, you may want intellectual property (IP) coverage and abstractor and title insurance agent coverage. These supplemental coverage options can help fill the gaps left by your legal liability insurance exclusions.
Contact WILMIC Today
WILMIC has been providing Wisconsin lawyers with legal liability insurance and legal malpractice coverage since 1986. Contact us today to learn more about our insurance coverages and how we can help protect your firm’s financial security.