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In light of recent corporate scandals, in-house attorneys have become increasingly concerned about protecting themselves from malpractice claims. Implementing risk management policies and procedures is a good start, but staff counsel may wish to supplement these practices with an insurance program. Employed lawyers professional (ELP) liability insurance until recently was a little-known product not often included in a company or organization’s annual insurance budget. Now that interest in ELP is growing, underwriters are receiving more inquiries from in-house attorneys about its coverage. Here are the most frequently asked questions. What is ELP insurance? ELP covers claims for malpractice arising out of the legal work an employed lawyer performs for the company or organization. The stand-alone policy is designed to pick up where a traditional Directors and Officers liability insurance (D&O) policy leaves off, providing more specialized coverage for the attorneys. The claims that the policy is designed to cover are primarily claims by third parties: i.e., persons or entities who are neither directors or officers nor employees of the company or organization. In addition, there may be coverage for claims by certain individuals within the company or organization whom the attorney is assigned to represent as a condition of the attorney’s employment. The coverage generally is available to attorneys who work for public and private companies or for nonprofit organizations or associations. Some carriers will also write coverage for attorneys who work for local or state government bodies. Aren’t attorneys covered under D&O insurance? D&O policies might offer some protection for an attorney who is also a director or officer, for wrongful acts he or she commits as a director or officer of that entity. However, many D&O policies have a professional services exclusion, potentially excluding coverage for legal advice or other legal work performed by the in-house counsel. Attorneys who are not directors or officers of the company or organization ordinarily are not covered under a D&O policy, unless coverage is expanded to include employees. In-house attorneys should speak with the agent or broker who places the D&O coverage for the company or organization to understand better what the policy’s features and limitations are. Is the company covered under ELP insurance? When the employer indemnifies its attorneys, the employer is protected in the event of a claim against its in-house counsel in that the company or organization is reimbursed for covered defense expenses and loss amounts for which it indemnified the attorneys, in excess of the deductible. Technically, ELP covers wrongful acts (“errors or omissions”) committed only by the employed lawyers. The company or organization cannot practice law, and thus cannot be sued for legal malpractice. What if I am not indemnified by the company? The policy covers both indemnified and nonindemnified claims. For claims against the attorneys that are not indemnified by the company or organization, the policy pays, on behalf of the attorney, covered defense expenses and loss amounts that are in excess of any applicable deductible amount (usually this is zero for nonindemnified claims). For any claim, loss amounts may include covered damages from a settlement or judgment that an insured attorney is legally obligated to pay. Can my legal staff be covered under an ELP policy? Ordinarily, paralegals, legal assistants, and other legal department staff assisting the attorneys in the performance of legal services can be included under ELP policies. Contract attorneys who perform legal services for the company or organization’s legal department may also be added. If the legal department has nontraditional staffing arrangements or employees who do not clearly fit the definition of insured, the attorneys should discuss this with the underwriter in order to determine appropriate ELP coverage. I don’t work for a public company. What is my ELP exposure? Third-party malpractice claims can arise from a number of areas. While the most “public” identifiable claim might arise in connection with an outside shareholder suit, the legal services performed by attorneys in private companies or organizations often affect third parties, potentially opening the door to professional liability claims. Examples include the following: • Legal services performed in connection with a downsizing or reorganization. • Representations made to outside counsel or an opposing party during the course of litigation. • Reports or opinion letters submitted to outside agencies or regulatory bodies. • Legal review of company-published articles or informational pamphlets. • Approval of contract language used with outside vendors or customers. • Work performed for non-wholly owned subsidiaries that may be in conflict of interest with the parent company or another subsidiary. • Responses to customer complaints. • Press releases or interviews. • E-mail leaks of proprietary information. Am I protected if my employer or another “inside” party sues me? As customarily seen in D&O and other related policies, claims by other insureds, the company itself, or its employees or directors are subject to an “insured vs. insured” exclusion under ELP policies. However, unlike many other policies, ELP coverage may provide a “carveback” to this exclusion, granting coverage for certain kinds of internal claims, such as claims by current or former employees arising out of human resources work the attorney performed for the company, or independent shareholder suits. Other “internal” claims may be defended but not covered for damages. Can my pro bono work be covered? Yes, ELP policies generally pick up pro bono work that is approved by the employer. If any pro bono work is unusual or doesn’t seem to fit within the language of the policy, ask the underwriter if the policy can be endorsed to include this additional exposure. The underwriter may request supplemental underwriting information to better understand the risk. What about work for the company’s clients, side work for directors or employees of the company, or moonlighting — incidental work for people or entities outside of the company? Coverage for non-pro bono legal services performed for clients other than the company or organization may or may not be covered under an ELP policy. If the company or organization requires the attorney to perform legal services for clients, or asks the employed lawyers to perform personal legal services to directors or employees, the attorney should make this clear in any application for ELP coverage. Likewise, the attorney should describe any incidental legal services provided outside the scope of employment, with the company’s consent, for which coverage is desired. The underwriter may require additional underwriting information and may charge an additional premium or put limitations on the scope of the coverage, if granted. What coverage is available for Sarbanes-Oxley exposure? Since the Sarbanes-Oxley Act is a relatively recent development, coverage associated with this new legislation may not be addressed specifically in the policy form itself, but rather by endorsement. Employed lawyers who appear and practice before the Securities and Exchange Commission or who are otherwise concerned about Sarbanes-Oxley exposure should confirm with the underwriter the extent of their coverage, including coverage for defense expenses for investigations as well as civil and disciplinary actions brought against insured attorneys pursuant to Section 307 of the act. Coverage for fines and penalties assessed pursuant to Sarbanes-Oxley are not covered under ELP policies, because fines and penalties are uninsurable by law. In addition, the underwriter may inquire about the legal department’s risk management practices regarding compliance with Sarbanes-Oxley as a condition of offering coverage. An agent or broker who specializes in professional liability coverages can be a good resource for in-house attorneys who wish to discuss the insurance coverage available under ELP policies. Policy forms are available on certain carriers’ Web sites so potential insureds can review and discuss the coverage with their company or organization’s management. In addition, the underwriters are often available for conference calls or meetings with potential insureds to discuss specific coverage needs, or any other issues or underwriting concerns the employed lawyers may have regarding the policy. Laurie J. Sablak, J.D., is an assistant vice president and product manager for Employed Lawyers Professional liability insurance at the Chubb Group of Insurance Companies in Simsbury, Conn. The views expressed here are general in nature and do not necessarily represent those of her company or any other insurer.

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