As laid-off lawyers streamed out of Washington’s major law firms, many hoped to hang out their own shingle and carry on as solo practitioners.
Now some are finding legal malpractice insurance carriers are less than eager to help them get started, fearing these new firms may mean waves of new malpractice claims against the policies.
Anecdotally at least, insurers are getting much more aggressive about defending their own bottom lines.
Take Forest Walpole, an Alexandria lawyer criticized for filing a questionable real estate lawsuit, who is facing $272,000 in judicial sanctions after the judge in the case called the claims of Walpole’s client “frivolous,” “wildly speculative” and “vindictive.”
Now his malpractice insurer, Attorneys Liability Protection Society Inc., of Missoula, Mont., says it shouldn’t have to cover the sanctions. It filed its own suit in the U.S. District Court in Alexandria on July 30, asking for a ruling that Walpole’s policy doesn’t cover judicial sanctions or costs incurred because of malicious or intentionally wrongful acts.
For lawyers — who are ethically obligated to be “zealous advocates” for their clients, and are trained to throw the kitchen sink at their opponents — the stiff sanctions and lack of insurer support may be troubling.
If the insurer’s suit is successful, Walpole and his client, Lauren Kivlighan, principal broker of Northern Virginia Real Estate Inc. in McLean, will be personally liable for the sanctions imposed by Fairfax Circuit Court Judge Jonathan C. Thacher on June 29.
The insurer is also asking the judge to order Walpole to reimburse the company for the cost of the legal representation it provided Walpole while sanctions were being sought against him.
Walpole, who has not formally responded to the complaint, declined comment.
Like litigation generally, legal malpractice claims tend to surge during and after recessions, leaving insurers scrambling to protect themselves from the fallout.
Paul Andres, a professional liability insurance broker for Forrest T. Jones & Co. in Kansas City, Mo., said he’s heard that insurance companies are more closely evaluating claims to find ways to avoid paying them.
“That’s the logical progression of things,” he said, “and when the market is easy and the claims are low, the companies don’t have to vigorously worry about their bottom line.”
Many carriers won’t cover newly independent lawyers at all, concerned about their lack of a clear risk profile, Andres said. “Even if they’re in the business of writing [policies for] firms, they don’t want to deal with what they consider to be a wild card.”
Locally, some attorneys say they have sensed the change in tone from insurers.
“The carriers are getting more sophisticated,” said Roy Niedermayer, a litigator at Bethesda-based law firm Paley Rothman. “They ask more questions.”
During Walpole’s sanction proceedings, Attorneys Liability Protection Society defended Walpole but reserved its right to determine whether those court costs would ultimately be covered by the policy. The complaint does not put a price on those costs, and the insurer’s attorney, John McIntosh of Fairfax, said he did not know how much it could be.
Rachel Kronowitz, an insurance coverage partner at D.C.’s Gilbert LLP law firm, says insurers are usually fairly cooperative with requests for defense — until now.
“Historically, attempts by insurers to recoup defense costs were very infrequent, but it appears insurers have been more frequently exerting their right to seek reimbursement,” Kronowitz said. “Sanctions are generally not covered by policies, but it depends whether you got the Cadillac version of the policy or the Volkswagen version.”
Attempting to get out from under the obligation to defend attorneys, she said, is “an effort by insurers to try to get concessions from their policyholders — surprise, surprise.”
Insurers don’t often succeed in that effort, Kronowitz said, but Walpole’s case could be different.
In July 2007, Kivlighan retained Walpole in a commission dispute with another real estate broker, Karen Martins of McEnearney Associates Inc. of Alexandria. An Arlington couple had contacted Kivlighan to sell their home, but instead signed a contract with Martins. With Walpole’s counsel, Kivlighan claimed conspiracy to harm her business, “interference with contract expectancy” and defamation — claims that go far beyond the typical breach of contract case.
Kivlighan dropped her suit during the trial, and the defendants sought sanctions against Walpole and Kivlighan. The court agreed, finding that the only claim even “reasonably well grounded in fact” was a $37,500 breach of contract claim. The others were filed “out of a vindictive and malevolent desire to injure and intimidate a business competitor,” the judge wrote.
So what does this mean for aggressive litigators going forward? “You are trained to be zealous, but you also have to have appropriate underpinnings for your claims,” Kronowitz said. “But once you’re past that, you should be able to pursue your claim.”