What is innocent insured protection?

Innocent insured protection, sometimes called the innocent insured clause or severability of exclusions, is a policy provision that safeguards attorneys who are blameless when a partner or colleague at their firm commits acts that would normally trigger a policy exclusion. Without this provision, the misconduct of one attorney could void coverage for every attorney insured under the same policy.

Most malpractice policies contain exclusions for fraudulent acts, dishonest conduct, criminal behavior, and intentional wrongdoing. When one attorney at a firm engages in such conduct, for example by converting client trust funds or knowingly filing fraudulent documents, the exclusion could theoretically be applied to deny coverage for the entire firm, including attorneys who had no knowledge of or participation in the wrongful acts.

The innocent insured provision prevents this outcome by severing the application of exclusions on an individual basis. Each insured attorney is evaluated independently. The exclusion applies only to the attorney who committed the wrongful act, while innocent attorneys retain their coverage. This means that if a client sues the entire firm for losses caused by one partner's fraud, the innocent partners remain covered for their defense costs and any vicarious liability they face.

The scope and strength of innocent insured provisions vary among carriers. A strong innocent insured clause provides full coverage to non-participating attorneys, including both defense costs and indemnity, without requiring them to prove they had no knowledge of the wrongful acts. A weaker version might require the innocent attorney to affirmatively demonstrate they had no knowledge, or it might protect only the defense cost obligation while excluding indemnity coverage.

Some policies apply the innocent insured protection only to specific exclusions, such as fraud and dishonesty, while others extend it to all exclusions in the policy. The broadest protection applies the severability principle to every policy exclusion, ensuring that one attorney's conduct cannot impair another's coverage under any circumstances.

For firms with multiple attorneys, the innocent insured provision is among the most critical policy features to evaluate. Even small firms face this risk, as a single partner's misconduct can expose the entire practice. Review this provision carefully with your broker, and favor policies that offer the broadest innocent insured protection available.