Legal Malpractice Avoidance Tip: What Should You Do If You’re Sued?
If You’re Sued
Don’t defend yourself – you could void your malpractice coverage – instead, contact your carrier. Most carriers will permit you to file preliminary objections in Pennsylvania or A Motion to Dismiss in Delaware in order to avoid paying the deductible if the case against you has no merit or can be summarily dealt with. If the Court does not dismiss the case at this stage, carriers will routinely engage defense counsel to answer the Complaint. Professional liability policies generally give the insurer the right to control the defense—this includes the selection of an attorney.
A covered insured must cooperate in his or her defense. Cooperation includes attending hearings and trials, providing and securing evidence, etc. Monitor what your defense counsel does on your behalf. Remember, in this case, you are the client (and your insurance company is not).
From a business perspective, your assigned defense counsel has competing interests regardless of what that counsel may say. In addition to satisfying you, defense counsel also knows that if he or she wants future work from your carrier and that they must minimize what will be paid out in order to settle a case. After your deductible is paid, defense counsel will be billing your carrier. Thus, it behooves defense counsel to keep billings low and minimize the recovery. Remember, you are now a client and thus, the beneficiary of the protection afforded by the Rules of Professional Conduct.
Claim / Incident Notification
All malpractice policies require the insured to notify the carrier in the event that a claim is made. Sometimes, the policy will require such notification with a limited time frame, such 30 or 60 days. Others may require notification “as soon as practicable” Still, other policies may require that the claim be made during the policy period or within a limited time period after the policy expires. These types of policies are known as ‘claims-made-and-reported-policies.”
Whatever the terms of the policy, you must be aware of and comply with them in order to ensure coverage.
Most policies include a clause under which the insurer cannot settle without the consent of the insured. Some policies contain a “hammer clause.” If that is the case, if the insurer recommends accepting a settlement offer and the insured refuses and requests continued defense, then the insurer’s liability will be capped at the amount of the recommended settlement.