OSB Professional Liability Fund

Plan Changes for the 2019 Primary and Excess Plans

November 20, 2018

The PLF Board of Directors recommended the following changes to the Primary and Excess Coverage Plans for 2019 to the Oregon State Bar Board of Governors, which approved the changes on November 17, 2018.  The 2019 PLF Primary Coverage Plan can be found here. The 2019 PLF Claims Made Excess Plan can be found here. This summary does not include approved minor wordsmith changes.

Summary of Changes

Return of Attorney Fees Is Not Covered.  Consistent with virtually every other attorney malpractice policy of which we are aware, the PLF’s long-standing position is that claims seeking return or recovery of attorney fees are not covered by the Plan.  In order to make the PLF’s position even more clear, the Board and the BOG approved changes to three sections of the Plan.

1.         Definition of Damages.  The definition of Damages in the 2019 Plan now reads:

Damages means monetary compensation a Covered Party must pay for loss and does not include:
a.         Fines, penalties, statutorily enhanced damages, or enhanced prevailing fees;
b.         Punitive or exemplary damages;
c.         The return, forfeiture, disgorgement, restitution, reduction, or offset of any fees, costs, expenses or disbursements paid to, charged by, or owed to any Covered Party or to any Law Entity with which any Covered Party was associated at the time any such fees, costs, expenses or disbursements were paid, charged, or incurred, including but not limited to fees, costs, expenses, or disbursements alleged to be excessive, not earned, unnecessary, ill-advised, or caused, in whole or in part, by any alleged negligent advice;
d.         Rescission, injunctions, accountings, restitution, equitable relief;
e.         Any personal profit or advantage to a Covered Party;
f.          Any award of attorney fees, costs, or interest arising from any claim reference in (a) through (d) above, or from any excluded claim.

There are a number of examples provided to illustrate the PLF’s intent.

2.         A new paragraph has been added in the Duty to Defend to make it clear that the PLF does not have a duty to defend any Claim that is not a claim for Damages.
 
The PLF does not have a duty to defend any Claim, or the portion of any Claim, that is not a Claim for Damages, as defined in Section IA.  In the event the PLF voluntarily agrees to defend any Claim, or any portion of a Claim, that does not seek Damages, it will be subject to the Covered Party’s agreement that the Covered Party will cooperate with the PLF’s attempt to settle or dismiss any alleged Claim for Damages that may also be alleged.  Following any such dismissal or settlement, the PLF will have the right to withdraw from the defense of any remaining claim.

3.         Exclusion 10, dealing with Law Practice Business Activities, has been amended to remove references to claims involving return or recovery of attorney fees.  We made this change so that the PLF’s position with respect to claims seeking return or recovery of attorney fees was in one place:  the definition of Damages.  This change comes with an important warning, incorporated into the Plan:
 
IMPORTANT NOTE:  THIS EXCLUSION WAS AMENDED AS OF 1/1/19, BUT THIS IS NOT AN EXPANSION OF PREVIOUS COVERAGE.  PLEASE SEE THE AMENDED DEFINITION OF “DAMAGES” REGARDING CLAIMS INVOLVING ATTORNEY FEES, COSTS, EXPENSES, OR DISBURSEMENTS.

Innocent Partner Coverage – Exclusion 2.

The PLF issues Plans individually, to each lawyer.  Under the more recent Plan language, the only Covered Parties under each of these Plans are the individual lawyer, named on the Declaration page, and any Law Entity that is legally liable for any Claims against the individual lawyer.  Exclusion 2, on page 8 of the 2018 Plan, excluding certain wrongful acts, contains a provision intended to say that innocent Covered Parties are not subject to Exclusion 2.  We revised this provision to clearly state the PLF’s intent as to when a Law Entity, sued for the wrongful conduct of another member of the firm, qualifies as an innocent Covered Party.  To clarify the PLF’s intent, the PLF Board and the BOG approved the following language:

2.   Wrongful Conduct.  This Plan does not apply to any Claim based on or arising out of:
a.   Any criminal act or conduct;
b.   any knowingly wrongful, dishonest, fraudulent, or malicious act or conduct;
c.   any intentional tort; or
d.   any knowing or intentional violation of the Oregon Rules of Professional Conduct (ORPC) or other applicable code of ethics.
Exclusion 2 applies even if the Covered Party did not intend to cause harm or damages.

This Exclusion 2 does not apply to You if You: did not commit or participate in any acts or conduct set forth in subsections (a) through (d); had no knowledge of any such acts or conduct at the time they occurred; and did not acquiesce or remain passive after becoming aware of such acts or conduct.  Exclusion 2 does not apply to any Law Entity covered under this Plan unless a member of the Control Group of the Law Entity:
      (1) committed or participated in any acts or conduct set forth in subsections (a) through (d); or
      (2) had knowledge of any such acts and acquiesced in them or failed to take, or attempt to take, corrective action.

Control Group includes all persons who are managers or officers of the Law Entity, and/or all persons with authority to act, make decisions, or enter into agreements on behalf of the Law Entity.

Business Interests – Exclusion 6.

The Board and BOG approved a complete rewrite of Exclusion 6.  The intent of Exclusion 6 is to ensure that the Plan excludes claims where the lawyer has a significant connection with the business enterprise making the Claim, beyond providing legal representation or services, or had such significant connection with the business enterprise at the time of the acts, errors, or omissions on which the Claim is based.  In reviewing Exclusion 6, we concluded it was not as clear as it could be.  The change is not intended as any change to the scope of coverage.

Business Interests.  This Plan does not apply to any Claim by a business enterprise:

a.   In which You have an Ownership Interest; or in which You are a general partner, managing member, or employee; or in which You control, operate, or manage, either individually or a fiduciary capacity, any property that is owned, managed, or maintained by the business enterprise; or

b.   At the time of the alleged acts, errors, or omissions on which the Claim is based: You had an Ownership Interest in the business enterprise; You were a general partner, managing member, or employee of the business enterprise; or You controlled, operated, or managed, either individually or a fiduciary capacity, any property that was owned, managed, or maintained by the business enterprise.

Ownership Interest means either You, those controlled by You, Your spouse, parent, stepparent, child, stepchild, sibling, any member of Your household, or those with whom You are regularly engaged in the practice of law, collectively own more than 10% of the business enterprise or owned more than 10% of the business enterprise at the time of the alleged acts, errors, or omissions on which the Claim is based.

Harassment & Discrimination – Exclusion 16.

The PLF Plans do not apply to claims involving harassment or discrimination.  The Board and BOG approved changes to make clear that this exclusion does not apply when a lawyer is involved in a workplace investigation into harassment.  We also added a protected class of sexual identity.
 
16. Harassment and Discrimination. The Plan does not apply to any Claim based on or arising out of harassment or discrimination by any Covered Party on the basis of race, creed, age, religion, sex, sexual orientation, sexual identity, disability, pregnancy, national origin, marital status, or any other basis protected by law.


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