Legal Malpractice

Grumpy Clients Could Be Cause for Notice to Malpractice Insurer

More insurance companies are trying to evade coverage of legal malpractice disputes by claiming law firms failed to notify them of a potential claim, according to a defense lawyer.

Most claims-made policies require lawyers with prior knowledge of a potential claim to provide written notice to the insurance company before the end of the policy period. William Voorhees Jr. of Morristown, N.J., told the New Jersey Law Journal that more companies are relying on that “prior knowledge” language in attempts to deny coverage.

“The prior knowledge exclusion is the exclusion du jour of the insurance industry,” he said. “The denial of claims because of the prior knowledge exclusion has increased dramatically in the past four to five years. It is working, if for no other reason than it has the factual effect of driving down the malpractice plaintiff’s demand.”

Voorhees was commenting on a recent declaratory judgment suit filed by General Star National Insurance Co., which contends it does not have to defend a lawyer because he failed to notify the company that a client expressed displeasure with a $150,000 settlement and a Medicare lien. The client also said she would talk to another lawyer about the case, according to the suit filed in federal court in Trenton, N.J.

“The carrier’s declaratory judgment suit, filed Tuesday in federal court in Trenton, N.J., could cause sleepless nights for any lawyer who has ever had to deal with a client disappointed by the outcome of a case,” the article says.

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