12 April 2023, by Johan Shahar, Vice President, FINPRO – Malaysian Bar, Marsh Insurance Brokers (M) Sdn Bhd
Do you know how the Malaysian Bar Professional Indemnity Insurance policy is affected when an insured sues another insured under the scheme?
Like most professional indemnity insurance (“
PII”) policies, the Malaysian Bar PII Policy expressly excludes coverage to claims made by an insured against another insured. The rationale behind such “
Insured versus Insured” exclusion is to prevent collusion between the insureds to frame a claim between them which would compel the Insurer to underwrite their purported losses.
While the PII policy generally excludes claims involving an insured against another insured, there are three instances where the coverage is afforded.
Clause 32(p) of the 2023
Certificate of Insurance (COI) provides –
“The Insurer will not indemnify you under this Policy for:
any claim or counterclaim set off by an insured against another insured under the Malaysian Bar Professional Indemnity Insurance Scheme provided however that this exclusion shall not apply to:
- any claim where you act as a legal practitioner for the claimant;
- any claim where you act as a legal practitioner for a client in pursuing an action against another insured (second insured) and the second insured sues you;
- any claim where you act as a legal practitioner for a client in respect of your legal practice.”
Generally, the exclusion shall not apply to instances where the insured seeking coverage had been sued as a result of the insured’s provision of legal services to a client in furtherance of the insured’s legal practice. This is notwithstanding that the client may be another insured under the Scheme.
Therefore as long as the allegations made by one insured against another arises from the lawyer/firm’s conduct in acting as a legal practitioner for their clients’ interests, then such claims are generally entitled to indemnity under the PII Scheme subject to the policy’s terms and conditions.
Examples of claims that have been excluded by the Insurer of the PII Scheme under Clause 32(p) include:
- disputes between partners (eg disputes over clients’ files, partnership profits, assets etc);
- disputes between former partners (eg disputes relating to the goodwill of firm’s name);
- fee sharing disputes between insureds;
- actions by a firm against their former legal assistants for misusing the firm’s templates and precedents; and
- any other disputes or disagreements on issues which are not related or in respect of the insured lawyer/firm acting for the benefit/interests of their client.
Ultimately every claim notified will be carefully reviewed based on its own facts and circumstances. Therefore, please be reminded to immediately notify each and every claim or potential claim made against a lawyer/firm to Marsh Insurance Brokers Sdn Bhd appointed by the Bar Council for the PII Scheme. The firm’s premium will not be affected by any claims loading unless and until the Insurers have made a payment in respect of such claim whether for defence costs or any judgment/settlement sum.
For more information on the subject matter, please contact: mbar@marsh.com