Jonathan L. Schwartz, a partner in Goldberg Segalla’s Global Insurance Services Practice Group, was interviewed by Law360 for an article examining a recent Illinois Supreme Court decision that highlights the need for law firms to be on guard against material misrepresentations in their malpractice policy applications.
In the decision, Illinois’ highest court ruled that the “innocent insured” doctrine couldn’t prevent an insurer from using rescission to terminate a law firm’s malpractice policy, following one partner’s material misrepresentation on the policy renewal, even though the other partner in the firm had no knowledge of that misrepresentation.
Jonathan noted that law firms can avoid such a fate by negotiating more specific severability clauses, in order to ensure that a material misrepresentation on the policy application is only imputed to individuals with knowledge of the misrepresentation.
“These days, lawyers’ malpractice policies are being written with much more specific, nuanced severability provisions, that create a baseline of information for the insurer to accurately underwrite the risk,” Jonathan told Law360. “More specifically, these policies tie the innocent insured doctrine to the knowledge of certain people within the law firm.”