Professional Liability Matters

A law firm’s failure to disclose a potential claim on its insurance application may act as a waiver of coverage. Lloyd’s of London recently argued that coverage did not apply to a California based law firm in a multi-million dollar legal malpractice action. According to Lloyd’s, the professional liability insurance policy contained an exclusion for claims the firm knew or reasonably should have known about prior to the effective date of the policy. At the time the law firm procured the policy, an attorney from the insured entered into a tolling agreement extending the statute of limitations on a potential malpractice claim. This pre-claim was not disclosed on the insurance application. That spells trouble.

One million dollars of coverage for $100 million in losses? Unfortunately, that appears to be the case for the West, Texas fertilizer plant that recently exploded. Reportedly the owners of West Fertilizer Co. hold a negligible amount of insurance compared to the estimated cost of the damage caused by the blast. The plant did not hold excess or umbrella insurance policies. The fact that the company’s owner has not breached any applicable regulation has been the subject of heated debate on the national level regarding regulating mandatory insurance coverage for companies that handle hazardous materials.

It’s bound to happen…professionals make mistakes. Some of those mistakes may lead to a professional malpractice claim while others may go unnoticed, never to be heard of again. Given that most professionals cannot predict the future nor speak for their clients, professionals must timely report each mistake to her malpractice carrier pursuant to the applicable reporting deadlines because the policy may require it. Even those mistakes that seem inconsequential must be reported. The risks of failing to do so can prove to be costly.

Dr. Oz, a well known TV personality, was recently named in a New York lawsuit arising from on-air advice he provided to his viewers. The doctor allegedly informed his audience about a “heated rice” remedy for insomnia. Dr. Oz called it “my night sleep special” on the April 17, 2012, episode of his NBC show titled “Dr. Oz’s 24-Hour Ultimate Energy Boost Plan.” Unfortunately for 76-year-old Frank Dietl, that Boost Plan left him bedridden for weeks with severe burns on his feet. According to the lawsuit, Dr. Oz failed to provide proper warnings and instructions about the home remedy. The plaintiff seeks unspecified damages from Dr. Oz, NBC Studios, Sony Pictures Television and Harpo Productions.