The New Jersey Superior Court, Appellate Division, has held that an attorney applying for legal malpractice coverage on behalf of his firm had a duty to inquire as to whether his fellow attorneys were aware of potential malpractice claims. Imperium Ins. Co. v. Porwich concerned attorney Philip Feintuch’s application for legal malpractice coverage on behalf of a firm consisting of Mr. Feintuch, his son, and another attorney, Alan Porwich. While Mr. Feintuch operated the firm as a “sole proprietorship,” Mr. Porwich was listed as a partner on the firm’s website. At the time Mr. Feintuch completed the application for malpractice insurance, Mr. Porwich had failed to serve a complaint on behalf of his client, resulting in its dismissal. In responding to the questions on the malpractice application regarding potential malpractice claims, Mr. Feintuch failed to disclose Mr. Porwich’s failure to serve the complaint. According to Mr. Feintuch, he did not ask Mr. Porwich about potential malpractice claims when completing the application, instead relying upon Mr. Porwich to disclose such claims.
By the time the malpractice policy came up for renewal, Mr. Porwich’s client had filed a complaint to the Ethics Committee regarding Mr. Porwich’s failure to return the firm’s file to the client. The Committee directed Mr. Porwich to return the file and stated that formal action would be taken if Mr. Porwich failed to act. Mr. Porwich nevertheless had failed to return the file at the time the renewal application was completed. Mr. Feintuch again failed to inquire as to potential malpractice claims when preparing the renewal application, and therefore did not disclose the claims on the application.
During the second policy period, the client filed a legal malpractice action against Mr. Porwich and the firm. The firm tendered the claim to its malpractice insurer, which instituted a declaratory judgment action challenging coverage. The insurer relied upon a policy exclusion stating that it had no duty to provide coverage for claims arising from acts committed before the policy period, if before the effective date of the policy, the “Named Insured knew or could have reasonably foreseen that such act, circumstance, or event could give rise to a Claim against any of you.” The trial court held that the insurer was required to provide coverage. The Court determined that the term “Named Insured” referred only to Mr. Feintuch, who was the sole proprietor of the firm. As Mr. Feintuch did not know of the potential malpractice claim when applying for coverage, the trial court held that the exclusion did not apply.
In reversing this decision, the Appellate Division held that as the term “Named Insured” was defined in the policy as “the individual, partnership, or firm engaged in the practice of law under the name” set forth in the Declarations, the term encompassed all of the attorneys in the firm. In support of this determination, the Court noted that for the purposes of policy application questions asking whether “you” were aware of potential malpractice claims, the term “you” was expressly defined to include any attorney in the firm, making Mr. Porwich’s knowledge of potential claims “plainly critical to the issue of coverage.” The Court therefore held that Mr. Porwich’s knowledge of the potential malpractice claim triggered the policy exclusion and eliminated the insurer’s duty to provide defense and indemnification.
Porwich demonstrates that attorneys applying for legal malpractice insurance on behalf of a firm cannot simply assume that partners and associates in the firm will volunteer potential malpractice claims. Rather, Porwich emphasizes the need for legal malpractice applicants to ask each attorney in the firm regarding potential claims.