Your Firm Found a Possible Malpractice Claim. Your Insurance Renews Next Month.

Your law firm discovers that a filing deadline may have been missed. The client has not complained, demanded compensation, or threatened a malpractice lawsuit. Should you disclose this to the professional liability insurer when your policy renews next month?

The partners are deadlocked; after all, nobody has made a claim. Yet by the time the client sues, the firm may find itself caught between two insurers, neither willing to provide coverage.

A Claim May Need to Be Reported Before Anyone Sues

Many lawyers’ professional liability policies operate on a claims-made-and-reported basis. Coverage generally depends on when a claim is made and reported, rather than simply when the alleged negligence occurred. In addition, some policies permit insured firms to report circumstances that may reasonably give rise to future claims.

To see why timing matters, suppose the firm discovers a potentially missed deadline in November, its policy expires December 31, and the client demands $500,000 in February. If the firm properly reported the circumstances before expiration, the expiring policy may treat the February claim as made during the earlier period, and later demands may be grouped with it as related claims. However, the option to report circumstances depends on the actual policy, so it should never be assumed.

The New Insurer May Already Consider the Problem Old News

Now suppose the firm did not report. When the client’s $500,000 demand arrives in February, the new insurer reviews the claim and asks when the firm first discovered the missed deadline. The answer is November, before the renewal.

At that point, the prior insurer may contend that no claim was made or qualifying circumstances reported during its policy period. Meanwhile, the new insurer may invoke a prior knowledge provision or another applicable exclusion because the firm knew about the potential problem before renewal. As a result, the firm could end up in a dispute with both insurers.

This risk is real. In Chicago Insurance Co. v. Paulson & Nace, PLLC, 783 F.3d 897 (D.C. Cir. 2015), for example, a law firm lost coverage for a $1.75 million malpractice judgment. The firm knew of a potentially serious error before applying for its policy but answered “no” when the application asked about circumstances that could lead to a claim.

The takeaway is that the firm should separately review its right to report circumstances under the expiring policy and its obligation to answer renewal application questions accurately.

What Counts as a Potential Malpractice Claim?

The answer depends on the policy’s definitions. Suppose a client emails the firm requesting reimbursement because an attorney allegedly mishandled a filing. Depending on the policy, that communication may already constitute a claim.

On the other hand, discovering a possible mistake does not necessarily mean a law firm has a claim to report. Instead, some professional liability policies include a notice-of-circumstances provision, which allows the firm to report facts that could give rise to a future malpractice claim. If the report satisfies the provision, a later qualifying claim may be treated as having been made during the earlier policy period.

How and where the notice is submitted also matters. For example, informing an insurance broker may not constitute notice to the insurer if the policy requires reporting through a designated address or procedure.

The content of the notice matters too. The insurer may require the firm to identify the client and matter, explain what happened, provide relevant dates, describe the potential harm, and explain why a malpractice claim might follow.

Finally, receiving an acknowledgment does not necessarily mean the insurer has accepted the notice as sufficient to preserve coverage for a later claim. A firm should retain the notice, supporting materials, and proof of timely delivery. If the client eventually asserts a malpractice claim, those records may determine which policy responds.

When the Lawyer Has Left, or the Firm Has Changed

Timing problems multiply when people move. Many lawyers’ professional liability policies cover former partners and employees for work they did on the firm’s behalf, so a partner who left in 2025 may still be covered under the firm’s current policy for advice given in 2023. Work done after leaving usually isn’t. The departing lawyer’s new policy, meanwhile, may exclude work done at the old firm, and the old firm’s expired policy may not accept a new claim unless an extended reporting period, or tail, was purchased. A lawyer can fall into the gap between them.

Mergers and acquisitions create a similar problem. A successor firm can take on a predecessor’s liabilities without its insurer agreeing to cover the predecessor’s earlier work; some policies cover predecessor firms, while others require an endorsement or limit prior-acts coverage with a retroactive date. And when a claim names both the firm and a former partner, their interests can diverge over who knew about the error and who bears responsibility, which may call for separate counsel.

A Lawyer’s Duty to the Client Is Separate From Insurance Reporting

Insurance reporting is not the only obligation a discovered mistake can trigger. For lawyers, it may also raise ethical duties to the client.

Under Illinois Rule of Professional Conduct 1.4, attorneys must keep clients reasonably informed and provide information necessary for informed decisions. The American Bar Association's Formal Opinion 481 addresses the obligation to inform current clients of material errors.

For that reason, lawyers should not assume that notifying the insurer satisfies duties owed to the client, or that investigating a possible correction justifies postponing required insurance notice.

If your firm discovers a possible malpractice claim before its insurance renews, we can help you evaluate reporting requirements and available coverage rights. Contact us to discuss your matter.

This article provides general information and does not constitute legal advice. For guidance concerning a specific matter, see our insurance recovery services. Coverage depends on the policy wording, the facts, and applicable law. To discuss potential representation, request a consultation. Submitting an inquiry does not establish an attorney-client relationship.