Though infrequent, lawyers sometimes do bad things. As we recently wrote here, this can be a particular problem when the bad things put certain partners and associates of the firm on one side of a legal matter, and a bad actor or mistaken partner or associate on the other side.
And if these bad things result in claims against a firm’s professional liability insurance policy, a little discussed section called the innocent insured clause can be the difference between a slightly higher premium and complete loss of coverage for the firm.
Defining Innocence
The innocent insured clause of a professional liability insurance policy generally inoculates other attorneys in the firm when another lawyer commits a wrongful act. In short, it allows the entirety of the firm to continue its liability coverage even if a member of the firm does something knowingly wrong. Because such actions may result in legal action against the firm, this clause can help ensure the firm is still covered and able to mount a defense despite the actions of one or two actors.
This coverage varies, and it is often affected by the prior knowledge clause, which requires that others in the firm must not have had prior knowledge of the wrongful acts in question in order to enjoy continued policy protection. If, however, you (as a partner or associate in the firm) did have prior knowledge of the wrongful act or actions in question and did not stop or report them, you would not be covered by the firm’s professional liability policy.
The Verdict on Coverage
The innocent insured clause is not always standard in every professional liability policy. While many policies written on an admitted basis do include this clause, just as many do not. And if your liability policy is written on a non-admitted basis (typically for riskier practice areas), there should be no assumption that an innocent insured clause exists.
As always, the best recommendation is to read your policy, speak to your agent about the needs of your firm and explore your options.