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Working Without a Net

9/14/18

By: Seth Kirby
For the legal professional, careful and appropriate selection of insurance is an essential component of practice management.  When faced with potential liability for an alleged mistake, attorneys should want the safety and security of relying upon their insurance carrier to help mitigate the potential liabilities that accompany their practice.  Unfortunately, many attorneys do not see the gaps in their insurance coverage until they are faced with a claim arising from their business activities.  A recent unpublished decision by the 4^th Circuit Court of Appeals is illustrative of this dilemma.  In Hartford Casualty Insurance Co. v. Ted A. Greve & Associates PA, case number 17-2407, in the U.S. Court of Appeals for the Fourth Circuit, the Court affirmed a general liability carrier’s denial of coverage to a personal injury law firm that was sued for alleged violations of North Carolina’s Driver’s Privacy Protection Act.  Apparently the firm had been obtaining crash reports from the state’s Division of Motor Vehicles and then using the information contained in those reports to solicit business from the involved drivers.  When faced with a class action lawsuit arising from these activities, the firm’s general liability carrier denied coverage on the basis that the claims were excluded as they arose out of a violation of a state statute.  The Court approved the denial, rejecting the firm’s contention that the claim could be viewed as a common law invasion of privacy.
This decision has very little significance outside of the unique facts of the case.  Indeed, it is conceivable that the firm at issue in the case may have other types of coverage that fill this gap.  Nevertheless, it serves as an important reminder that firms should carefully review all aspects of their operations and consider whether their particular areas of exposure are covered.  Does the firm engage in novel or unique advertising to solicit business?  Does the firm use litigation financing to assist in pursuing claims?  Does the firm have potential contractual exposure because it is acting as a title agent?  These are just a few of the questions that lawyers must consider when evaluating their risk profile and in determining the nature and extent of insurance products that they should purchase.  Frankly, this task is too difficult, and the consequences are too severe, to attempt without professional assistance.  A meaningful relationship with a qualified insurance broker that specializes in professional liability placement is an invaluable resource for law firms.  The broker can often spot risks that the firm is blind to, and they are certainly more familiar with the insurance products that may provide valuable protection to the firm.
It is impossible to accurately predict what the future holds, but careful examination, and regular reexamination, of a law firm’s business model can go a long way toward identifying the dangers that lie ahead.  Absent such careful planning, lawyers are literally working without a net and potentially setting themselves up for drastic financial consequences in the event of an alleged error.
If you have any questions or would like more information, please contact Seth Kirby at skirby@fmglaw.com.