How do lateral hires from other firms affect malpractice coverage?

Hiring a lateral attorney from another firm introduces both opportunity and risk from an insurance perspective. The incoming attorney's prior work at their former firm may generate future malpractice claims, and the question of which firm's policy covers those claims must be resolved before the lateral joins your practice.

In most cases, the lateral attorney's prior firm retains liability for claims arising from work performed there, and their policy covers those claims. However, if the lateral attorney brings client matters with them to your firm, the analysis becomes complicated. Work performed on a transferred matter before the move should be covered by the prior firm's policy, while work on that same matter after the move falls under your firm's policy. If a claim involves work spanning both periods, both carriers may be involved, and disputes over coverage allocation can arise.

Your malpractice carrier will want to know the lateral hire's practice areas, years of experience, prior claims history, and the volume and nature of matters they are bringing to the firm. If the lateral has a history of claims, your carrier may increase your premium, impose a surcharge, or in extreme cases, exclude that attorney from coverage. Disclose the lateral hire's background completely and honestly, as failure to do so can constitute a material misrepresentation that jeopardizes coverage for your entire firm.

Before the lateral attorney starts, confirm in writing with both your carrier and the lateral's prior firm how prior acts coverage is being handled. Ensure there is no gap period where neither policy would respond to a claim arising from the transition period. Your partnership or employment agreement with the lateral should address indemnification obligations for pre-existing claims and responsibility for any tail coverage costs from the prior firm.