Fee suit exclusions seem to be the latest insurance ploy to cheat unsuspecting lawyers.
An engagement agreement is designed to be a "two way street." The lawyer promises to do certain things... address the needs (and wants?) of the client; represent the client to address the challenge being faced by the client, whether it be a lawsuit or a transactional issue. And, of course, the lawyer is representing that he/she is competent to do so.
The client, on the other hand, promises to tell the truth to the lawyer, provide information and documents relative to the matter when requested by the lawyer to do so ... and to pay the fee as billed in accordance with their arrangement.
What are the consequences of failure to honor the respective promises? For the lawyer, it is a malpractice suit and/or a disciplinary proceeding. For the client, it's withdrawal by the lawyer (unless on the eve of trial or otherwise would prejudice the client) or a lawsuit for payment of the fee.
BUT, some insurance carriers are lining up with clients, saying that if the lawyer sues for fees, and the client cross complains or counter sues for negligence or files a disciplinary complaint with the state bar, the carrier will not provide defense costs or pay any judgment against the lawyer. The effect of this is to deny the lawyer the ability to collect the fee when the client fails to pay. Why pay insurance premiums for something you will not receive? The $64 question.
Fee suit exclusions are a veiled attempt by insurance companies to raise premiums without notice to the lawyer. And, the lawyer generally isn't even aware of this exclusion.
Both law schools and insurance companies conspire to keep lawyers ignorant of the business nature of their practice. In no other industry do creditors ignore their rights and fail to sue debtors for refusal to pay legitimate debts resulting from their purchases. Why should lawyers be placed in a different position? Why should clients be encouraged not to pay their lawyers' fees?
The reality is, according to people I've spoken with in the industry, that there are few lawsuits filed by lawyers. (Perhaps it's because lawyers have been scared away.) Further, the reality is that there are few counter suits for negligence. The further reality is that lawyers win most of these lawsuits; the figure I've been given is winning 9 out 10.
Seems that the lawyers face a big challenge: Failure of the law schools to teach business practices so lawyers can more effectively represent clients and efficiently deliver legal services; insurance carriers looking out for themselves, not their customers (lawyers); and bar associations believing their sole function is to protect the public, rather than a dual function of protecting the public AND helping their members (lawyers) to become better practitioners (including business skills).
Lawyers who survive in this environment should be commended.