Page 48 - Investment Advisor December 2022/January 2023
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WEALTH & RISK
By Steven F. Goldman
Time to Boost Protection for In-House Lawyers?
Advisors can help identify gaps in their risk management strategies.
ttorneys make up a sizable
share of many advisors’ val-
A ued, long-term client bases, and
the fastest growing segment — attor-
neys working in-house at companies —
now numbers well over 100,000. This
growth continued in 2022, according to
the Association of Corporate Counsel’s
(ACC) 2022 Chief Legal Officers Survey,
as 45% of respondents expected to hire
more attorneys this year, up 13 points
from 2021. This presents an opportunity
for advisors to identify potential gaps in The third area encompasses moon- produce six- or even seven-figure losses,
their risk management strategies. lighting or other engagements outside which could deliver a devastating hit to
their company work. In these cases, the an attorney’s personal wealth.
POTENTIAL RISKS attorney is not acting as a sole proprietor, The good news is that there is a spe-
Company attorneys face the threat of but may be assisting a friend or family cific type of coverage available and in
lawsuits on three main fronts. The first member with a personal legal matter or many cases the company purchases it
relates to the legal work they provide to possibly providing advice or support as a for their legal department. It’s called
their employer, which may involve areas member of a not-for-profit organization. employed lawyers professional liabil-
such as contract negotiation, merger and As an example, an in-house transac- ity and it features broad definitions of
acquisition due diligence, intellectual tional attorney for a financial institution “insured” (employed lawyers, their legal
property, and employment and labor law, defended an indigent client in a felony support staff, independent contractor
any of which can result in allegations assault matter under a state bar associa- attorney, temp attorney, and notaries),
from third parties for legal malpractice. tion’s suggested pro bono legal services “professional services”, “claim” and
More and more, these duties are extend- guideline. After the client was convicted, “loss” to encompass a wide range of
ing to compliance efforts, such as priva- he sued the attorney for malpractice, scenarios related to their in-house legal
cy issues, and involve interactions with alleging ineffective assistance of counsel. work, personal interactions and pro
third-party regulatory bodies, such as While in-house attorneys may believe bono or moonlighting endeavors.
the Securities & Exchange Commission. that their work is covered by the com- It’s well worth it for in-house attor-
The second source of risk comes into pany’s directors and officers liability neys, including those working in advisor
play when well-meaning in-house attor- policy, the unfortunate reality is that it firms, to check whether their company
neys provide what could be considered may only apply to very select executives. has this coverage. If not, it’s best to con-
personal legal services for company Further, it may not provide coverage for tact an insurance agent to see if there’s
employees or executives. These are typi- the performance of legal services, and a way it can be purchased. While your
cally informal, such as a lunchtime conver- it generally does not extend to claims in-house attorney wealth management
sation where an employee might ask for an arising out of personal legal services, clients may not expect this type of insur-
opinion on a matter, such as a home sale moonlighting, or pro bono legal services. ance recommendation from you, it may
transaction. Similarly, an executive might In addition, the attorney’s personal prove to be a value-added service that
ask an in-house attorney for thoughts or umbrella liability policy typically does could further cement a trusted relation-
even help on areas ranging from a traf- not extend coverage related to the pro- ship with them for the long term.
fic violation to establishing a trust to a vision of legal services. This results in
divorce. Engaging in those conversations a significant gap that could expose in- Steven F. Goldman is Division President,
and offering advice or support could open house attorneys to a substantial loss. It’s North America Financial Lines at Chubb. Adobe Stock
them up to a lawsuit for negligence. not unusual for these types of lawsuits to Reach him at [email protected].
46 INVESTMENT ADVISOR DECEMBER 2022/JANUARY 2023 | ThinkAdvisor.com