What are common malpractice policy exclusions law firms should know about?

Understanding your malpractice policy's exclusions is essential because they define the boundaries of your coverage. While policy language varies by carrier, several exclusions appear in virtually every legal malpractice policy and directly affect how you manage risk.

The intentional acts exclusion bars coverage for claims arising from dishonest, fraudulent, criminal, or intentionally wrongful conduct. This exclusion does not apply until intent is established by final adjudication, meaning the carrier will typically provide a defense until the intent question is resolved. The insured-versus-insured exclusion bars claims by one attorney at the firm against another, such as a partner suing a fellow partner for malpractice. These disputes are considered internal governance matters better addressed through the partnership agreement or D&O coverage.

The business enterprise exclusion removes coverage for claims arising from business activities that are not the practice of law, such as real estate investments, business ventures with clients, or financial advisory services outside the scope of legal practice. If an attorney invests in a client's business that fails, the client's claim against the attorney would likely fall under this exclusion. The bodily injury and property damage exclusion recognizes that physical harm claims belong under general liability rather than professional liability coverage.

Other notable exclusions include claims arising from services provided to entities in which the attorney has an ownership interest, claims related to patent or trademark prosecution in some policies, claims arising from the operation of title agencies or escrow companies, and sanctions or penalties imposed by courts or regulatory agencies. Some exclusions can be removed or modified by endorsement for an additional premium. Review your policy's exclusions annually with your broker and negotiate removal of exclusions that are unnecessarily restrictive for your practice.