Coverage Question Series – Part 40
Post on February 1st, 2019
This is a continuing series in which we address policy coverage questions that we routinely discuss with you and your colleagues. The answers provided are based on the basic policy form, currently LPLP-1s (effective for all policies new or renewed as of May 1, 2018). Refer to your specific policy and any endorsements attached thereto that may change coverage or the answers provided here.
A client fired me and accused me of malpractice a month before I purchased my OBLIC policy, am I covered?
Nope. This situation is an insurance tale as old as time. It was your opinion that your work was right and true as it can be. The client had been on board with all your recommendations, but even as the matter was going well, you would still say you were barely even friends. Then somebody bends to the pressures of the legal profession and an error is made, unexpectedly. And, just as you were switching to the OBLIC policy.
The OBLIC policy form excludes “any “Claim” arising out of any act, error, or omission occurring prior to the “Effective Date” of [the] policy if any Insured knew or could have reasonably foreseen prior to the “Effective Date” that such act, error, or omission might result in any “Claim” or suit.” EXCLUSIONS, (i)(1), pg. 6.The “Effective Date” is more expansive than just the start of the current “Policy Period.” It is defined as when coverage became effective under the first policy issued by OBLIC, provided the same or substantially similar coverage has been in force continuously without interruption under the current policy or any prior policies issued by OBLIC. See II. DEFINITIONS, (e), pg 3. Therefore, because the beast of a claim was known prior to the first policy issued by OBLIC, coverage would be entirely excluded when the “Claim” was made after the OBLIC policy was in force.
The beauty of the “Effective Date” language in the OBLIC policy is that if you have continuous coverage with OBLIC and learn of a potential claim prior to renewal, coverage will still be available if you report the claim on the new “Policy Period” after renewal (as described in the last Coverage Question email #39). This benefit is unlike some competitors who exclude coverage for claims known prior to the policy period in which they are reported, even if they were providing coverage on the earlier policy. However, we strongly encourage you to report to OBLIC any known circumstances immediately so that we can put our years of experience to work on your behalf. Further, the policy requires that if a “Claim” is made or suit is brought, you need to immediately forward to the Company every demand, notice, summons or other process received. Failure to do so is a breach of the policy notice provision.
Pro-tip: Timely report all acts, errors, or omissions that could be reasonably foreseen to become a “Claim” to your current insurer to avoid potential exclusions of coverage, especially prior to switching insurance carriers.
As you should expect, these Q&A scenarios are based on simple hypotheticals. Coverage determinations for an actual claim are ultimately based on the unique facts, applicable law, and the Terms, Conditions, Limitations, Exclusions, and Endorsements of your policy.
Carl Marsh, Esq.