Understanding the ancillary services coverage concern
Why Malpractice Policies Typically Don ’ t Cover Consulting Work :
Understanding the ancillary services coverage concern
By Mark Bassingthwaighte
Market forces drive change and , at times , even bring about innovation . So , in response , when a lawyer or firm decides to adjust the business model in some fashion in order to stay relevant or drive growth , I see that as a good thing as long as all the ramifications of the change are thought through and responsibly addressed . Unfortunately , a misstep that we see is this : lots of planning occurs and decisions are made prior to any kind of inquiry into the coverage piece . It happens more than you might guess . A lawyer will call in full of excitement as he or she fills us in on the new business model . Most of the time , the lawyer just wants confirmation the change won ’ t negatively impact coverage . The hard part with these calls is when the situation is such that we have to temper the lawyer ’ s enthusiasm and say there ’ s a problem they seem to have overlooked .
Perhaps a few examples are in order . Ancillary services are often the issue . It might be a lawyer planning to offer both legal and non legal services under the banner of his or her practice . Think regulatory compliance and consulting in the cybersecurity sector , employment law and consulting or investigation services in the employment law sector , or business formation and consulting in the business sector . It might be something like a lawyer and non-lawyer setting up several businesses , and the plan is to offer legal services , investment advice , and insurance sales under the banner of a common trade name . It might be a lawyer planning to team up with a local CPA to offer legal and nonlegal services under one roof . Heck , the plan might be as simple as deciding to offer do-it-yourself legal forms from the law firm ’ s website . Suffice it to say , the length of this list is only going to be limited by the creativity of lawyers , and we can be a creative bunch .
What is it about ancillary services that creates a problem ?
Here ’ s the rub . A lawyer ’ s professional liability policy does not cover any and all liability that a lawyer may face . At the most basic level , a legal malpractice policy will only cover allegations of negligence in the performance of professional services that were provided to clients of the named insured , which is a law firm . The definition of the term “ professional services ” is typically a rather broad definition that not only covers the legal advice and services traditionally provided in an attorney-client relationship , but often also includes certain common ancillary services such as acting as a mediator , arbitrator , executor , conservator , guardian , trustee , and the list can go on , again , with this caveat . Coverage will be in play only for professional services performed in an attorney-client relationship and that were performed for and on behalf of a client of the named insured . The important point here is to help you understand ancillary services that are nonlegal in nature , such as consulting , are not going to be covered under a lawyer ’ s professional liability policy nor will any work done on behalf of someone who is not in an attorney-client relationship with you .
If I want to move forward regardless , what are the options ?
While perhaps a bit frustrating , the best answer I can give is this : it depends . The specifics of your plan will dictate . Take a lawyer consultant whose plan is to practice in the cybersecurity space . Because these two legal and nonlegal services so closely overlap , a few insurers may be willing to offer a general errors and omissions policy that would cover both professional roles . Understand however , most of the time , if the plan is such that the nonlegal ancillary services are going to be closely tied to the legal services your firm offers , your legal malpractice insurance company may no longer be willing to insure your law practice unless changes are made .
Since you should have coverage for both your law practice and your ancillary business , anything you do to help underscore the presence of a separate and distinct delivery model for the legal and nonlegal services you wish to offer will make it easier to properly insure both risks by way of separate policies . This might mean the creation of two or more business entities would be called for , might require
ALPS Risk Manager Mark Bassingthwaighte , Esq . Since 1998 , he has been a risk manager with ALPS , the nation ’ s largest direct writer of professional liability insurance for lawyers . In his tenure with the company , Mr . Bassingthwaighte has conducted over 1,200 law firm risk management assessment visits , presented numerous continuing legal education seminars throughout the United States , and written extensively on risk management , ethics , and technology . Mr . Bassingthwaighte is a member of the State Bar of Montana as well as the American Bar Association , where he currently sits on the ABA Center for Professional Responsibility ’ s Conference Planning Committee . He received his J . D . from Drake University Law School .
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