Failing to carry the proper legal malpractice insurance can lead to significant sanctions, but it does not destroy a law firm’s limited liability protection, according to the Appellate Division of the New Jersey Superior Court.
The Facts of the Case
Seeking to dismiss a legal malpractice lawsuit, defendant John Ward argued that he is shielded from liability as a partner in Ward and Olivio, LLP and is therefore not vicariously liable for the alleged legal malpractice of his former partner, defendant John Olivo. Pursuant to N.J.S.A. 42:1A-18c, a partner in an LLP is generally not personally liable for the acts of another partner. However, the plaintiff argued that the firm’s insurance lapsed while the partners were winding down the firm, causing it to revert to a general New Jersey partnership.
Thus, the primary issue in Mortgage Grader v. Ward & Olivowas whether an attorney loses his liability protection as a partner in a limited liability partnership (LLP) if the LLP failed to purchase a tail insurance policy, which provides insurance coverage for malpractice that occurs during the claims-made policy coverage period but is reported after the claims-made policy has lapsed. The trial court previously held that violating the insurance rules relegated the LLP to a general partnership and thereby exposed the partners to vicarious liability for each other’s malpractice.
The Court’s Decision
The Appellate Division reversed. “We disagree with the motion judge that such a sanction is authorized and hold that when attorneys practice law as an LLP, and the LLP fails to obtain and maintain professional liability insurance as required … the LLP does not revert to a general partnership,” the appeals court held.
Instead, the Appellate Division stated that failing to carry the proper insurance is grounds for the Supreme Court to terminate or suspend the firm’s right to practice law or otherwise discipline it.
“Our Supreme Court has chosen to discipline attorneys without malpractice insurance that are organized as professional corporations, rather than dissolve their corporate structure,” the opinion explains. In reaching their decision, the justices cited cases in which lawyers were censured or disbarred for violating the state’s insurance requirements.
Crypto Investor Protection: SEC and CFTC Enforcement Trends
Crypto investor protection continues to evolve, with the SEC and CFTC investing resources and coordinating more closely to uphold regulatory standards. Whether you’re a retail investor, an institutional trader, or part of a crypto startup, understanding enforcement trends is essential for navigating this dynamic and high-stakes regulatory environment. Crypto Is No Longer the Wild West […]
New Jersey’s Next Manufacturing Tax Credit: Stability Secured, Timing Matters
A Settled Regulatory Environment Enables Confident Capital Planning New Jersey’s new manufacturing incentive program, Next New Jersey Manufacturing Program, enters 2026 with something uncommon in economic development these days: policy stability. The statute is enacted, New Jersey Economic Development Authority’s (“NJEDA”) rules are adopted, and the application portal is open. With the election outcome settled, […]
When done successfully, industry roll-up acquisitions can dramatically grow and strengthen your business. In this post, we break down what an industry roll-up is, why companies pursue it, and what makes it an effective (and sometimes risky) business strategy. What Is an Industry Roll-Up Acquisition? In an industry roll-up acquisition of companies, a buyer acquires multiple companies […]
Genesis Mission: How the U.S. Government’s New AI Platform Will Reshape Corporate Innovation, Risk, and Competition
The federal government has launched one of the most ambitious scientific initiatives in decades, and it will redefine how companies develop technology, manage risk, and compete. The Genesis Mission, created by Executive Order and driven by the Department of Energy (“DOE”), is intended to accelerate scientific discovery through a national AI platform that links supercomputers, […]
Stablecoins and the GENIUS Act: How New Global Rules Are Reshaping Compliance
Stablecoins Leave the Grey Zone Stablecoins were supposed to be the “boring” part of crypto: digital dollars that just work. Yet for years they have lived in a regulatory no-man’s-land, classified one day as securities, the next as commodities, and sometimes as something regulators had not even named yet. That uncertainty is finally starting to […]
Don’t Overlook the Importance of Business License Management
If you operate a business without the proper license, you risk fines, insurance issues, reputational harm, and even business closure. Even innocent mistakes, like forgetting to renew a license, can have significant consequences, such as losing your lawsuit for payment of services that are unlicensed, which makes it imperative to have business license management procedures […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
