Although insured lawyers and their insurers are sophisticated groups, many of the former seem willing to purchase their professional liability insurance solely on the basis of price and without regard to subtle but important differences between policies, and many of the latter seem willing to accept the determination by the New York State insurance department that Insurance Law §3420(a) applies to such policies. This article explores some of those issues.
Insureds
Claims Made/Reported. The insuring agreements in the strictest types of policies require that the claim be both made and reported during the policy period.1 While the cases in some states deem that requirement to be against public policy, see R. Mallen & J. Smith, Legal Malpractice §38:14 (2014 ed.), the New York courts have upheld such clauses. See Travelers Indemnity Co. v. Northrop Grumman Corp., slip opinion (S.D.N.Y. 2013); Liberty Insurance Underwriters v. Perkins Eastman Architects, 2011 WL 1744218 (Sup. Ct., N.Y. Co. 2011); Checkrite Ltd. v. Illinois National Insurance Co., 95 F.Supp.2d 180 (S.D.N.Y. 2000); but see NYSID General Counsel Opinion 7-31-2003 (#2) (purporting to deem this requirement to be a violation of Regulation 121, 11 N.Y.C.R.R. §73, which sets forth minimum standards for such policies).2 The fact that the insurer may have sustained no prejudice is irrelevant for purposes of determining compliance with the claims made and reported clause. See Insurance Law §3420(a)(5).3
