Malpractice Insurance Shields Against Mainstream Policy Gaps

Lawyers working as in-house counsel often feel malpractice insurance is unnecessary. This is understandable given that many states have statutes requiring an employer to indemnify employees for losses incurred as a direct result of work they are ordered to perform. See, e.g., California Labor Code Section 2802(a). This protection would even extend to damages sought by the employer in a lawsuit against the in-house counsel, thereby making such suits entirely impractical.

Nevertheless, there are several gaps that Employed Lawyers Professional Liability ("ELPL") policies can fill. A few of the more common risks covered include the following:

• Perceived attorney-client relationships — Offhand advice given to coworkers or others that is mistaken and leads to a negative outcome could create liability.

• Moonlighting — Pro bono work performed outside the scope of work for the employer would not be covered by the above-referenced statutes.

• Insolvent employer — The statutes requiring indemnification offer little assistance if the employer is insolvent.

Another viable option for many lawyers working as in-house counsel is a Directors & Officers ("D&O") policy. As the name suggests, these policies would provide coverage to any attorneys who also function as directors or officers within the company. Assuming that qualification is met, D&O policies are an excellent option that provide robust coverage. Many recent court cases have turned out favorably for D&O policyholders in a variety of fact scenarios. See David A. Gauntlett, New Case Continues Trend of Determining D&O Policies Offer Broad Coverage,  https://lnkd.in/ghr_DJQD (Dec. 12, 2024).