Scenario #1: Homeowner sued in slip-and-fall case. Homeowner hires lawyer to defend personal injury claim who fails to suggest that homeowner consider whether homeowner has insurance coverage for the slip-and-fall case through homeowner’s property insurance. Homeowner (with counsel) enters into settlement agreement with slip-and-fall victim for non-trivial amount of payment. Failure to give notice of claim (or of settlement) to insurer bars later claim for insurance coverage.
Scenario #2: Business with in-house counsel hires outside firm to defend against business litigation. Business never references potential insurance coverage. Outside counsel assumes that business has already undertaken coverage analysis. Business (with counsel) enters into settlement agreement for non-trivial amount of payment. Failure to give notice of claim (or of settlement) to insurer bars later claim for insurance coverage.
In either of these circumstances, would there be a viable claim for professional malpractice against the lawyer for failing to inform her client about the possibility of insurance?
The answer to the question is complicated. (Note this 2006 decision out of New York, which reflects some of the considerations.)
Bottom line for litigants: if you are buying insurance for something other than, say, scratch paper, to line a bird cage, or because you like to give money away to your insurance company, you should consider any litigation or any possibility of litigation as a potential trigger for insurance coverage and you should undertake review of all policies or, alternately, affirmatively and expressly hire someone to analyze potential insurance coverage.
Bottom line for litigators: if you do not counsel your client to consider potential insurance coverage, the argument may be made that you have failed to meet a minimum standard of care. Some would suggest that you have breached ethical obligations to your client if you fail to recognize and highlight this important aspect of a large swath of U.S. civil litigation.