Definitions

Application. This is the application submitted by the insured to the insurer. The application is attached to and forms part of the policy.

Company. This is the named insured as stated in the Declarations. It includes any subsidiary of the Company.

Claim. A claim is any written notice received by the insured that it is the intention of any person or entity to hold any insured responsible for the results of a wrongful act. It includes any judicial, administrative, bar association or other proceeding against any insured.

Defense Expenses. These are reasonable legal fees and expenses incurred in the investigation, defense, or appeal of any claim. Defense expenses do not include remuneration, salaries, wages, fees, overhead or benefit expenses of the company or any insured.

Defense Sublimit. This is the underwriter's maximum aggregate limit of liability as stated in the Declarations. It is part of and not in addition to the aggregate limit of liability.

Discovery Period. This is the twelve-month period following the effective date of nonrenewal or cancellation of the policy. Note that discovery period coverage has to be purchased by the insured.

Insured. An insured is any person admitted to practice law who is, was, or becomes a fulltime or part time employee of the company for the purpose of providing legal services to the company. An insured also includes the legal heir, executor, administrator, or legal representative of any insured in the event of the insured's death, incapacity, or bankruptcy.

Loss. A loss means any damages or settlements that an insured is legally obligated to pay as a result of a claim. A loss does not include fines, sanctions, taxes, or penalties, punitive damages, or other matters that are uninsurable under the law.

Personal Injury. Personal injury means false arrest, detention or imprisonment, wrongful entry or eviction or other invasion of the right of private occupancy, malicious prosecution, libel, slander, or a publication or an utterance in violation of an individual's right of privacy.

Professional Services. These are legal services provided by an insured as an attorney, but only if the services are performed for the company and in the insured's capacity as an employee of the company. Professional services include pro bono legal services rendered by an insured with the prior written consent of the company, without compensation for indigent clients or for nonprofit public interest groups.

Related Claims. These claims are all claims based on, arising out of, resulting from, in consequence of, or in any way involving the same or related facts, circumstances, situations, events or wrongful acts.

Subsidiary. A subsidiary is any entity of whose outstanding securities representing the present right to vote for the election of directors more than fifty percent are owned by the company as named in the Declarations.

Wrongful Act. A wrongful act means any actual or alleged act, error, omission, breach of contract or duty, libel or slander committed by an insured. This is only in connection with the performance of, or actual or alleged failure to perform, professional services.

Exclusions

The underwriter will not pay defense expenses or loss for the following claims situations.

Dishonest, Fraudulent, or Criminal Act. There is no coverage for claims brought about by or contributed to in fact by any dishonest, fraudulent, or criminal act. Or any willful violation of any statute or law by any insured. This exclusion does not apply unless the act is established by an admission by any insured, or by a finding in any judicial or administrative proceeding.

Prior Employment. There is no coverage for any claim for any actual or alleged act, error, omission, breach of contract or duty, libel or slander committed by any insured before such person became an employee of the company.

Subsidiary. There is no coverage for any claim where an insured's position as an insured is with respect to any subsidiary with the claim being based on a wrongful act occurring prior to the date that the entity became a subsidiary.

ERISA. There is no coverage for claims arising out of the Employee Retirement Income Security Act of 1974.

Bodily Injury. There is no coverage for claims based on or arising out of bodily injury to or death of any person, or from damage to or destruction of any property (including the loss or use). This exclusion does not apply to mental anguish or emotional distress or humiliation resulting from personal injury.

Pollution. There is no coverage with respect to property as to which an insured is or alleged to be an owner or operator in a fiduciary or any other capacity arising out of any actual. Alleged or threatened exposure to, or generation, storage, transportation, discharge, release, removal, or escape of any pollutants or contaminants. There is also no coverage for clean up costs.

Employment-Related Claim. There is no coverage for claims by any insured or any other current or former director, officer, or employee of the company where such claims are made by a current or former director, officer, or employee of the company to whom the insured provided legal services at the direction of the company; this is in regards to a matter within the scope of the director's, officer's, or employee's duties. There is no coverage for claims based on actual or alleged discrimination, harassment, or wrongful termination. There is no coverage for crossclaims, third-party claims, or other claims for contribution or indemnity that is part of and results directly from a claim that is not otherwise excluded by the terms of the policy.

Joint Venture and Partnerships. There is no coverage for claims by any joint venture or partnership in which the company is a partner or member. This exclusion also applies to any security holder of the company unless the security holder bringing the claim is acting totally independently of, and totally without the solicitation, assistance, or participation of any of the insureds or the company.

Service as Director or Officer. This policy does not apply to claims based on or arising out of the service of any insured in his capacity as a partner, principal, director, officer, shareholder, or employee of any entity other than the company named in the Declarations.

Prior to Policy Inception. There is no coverage for claims based on or arising out of any claim or wrongful act that, before the inception date of this policy, was the subject of any notice given under any other insurance policy.

Prior Litigation. There is no coverage for claims based on or arising out of any pending or prior litigation or any judicial, administrative, bar association, or other proceeding against any insured as of the inception date of this policy.

Prior Knowledge. There is no coverage for any claim based on or arising out of any fact, circumstance, transaction, or event known to any insured or to the company as of the inception date of this policy, that a reasonably prudent person might expect to give rise to a claim against an insured.

D&O. There is no coverage for any claim for which the insured has coverage under any directors and officers liability insurance or similar insurance policy.

Fines and Punitive Damages. There is no coverage for fines, sanctions, taxes or penalties, punitive or exemplary damages, or for matters that are uninsurable under the law. However, this exclusion does not apply to defense expenses incurred in connection with a disciplinary, disbarment or similar proceeding regarding solely an insured's status as a member of a bar or bar association.

Conditions

There are quite a few conditions that affect the employed lawyers professional liability policy.

Territory. The policy applies to wrongful acts occurring and claims made anywhere in the world. This is worldwide coverage for the insured.

Reporting of Claims and Wrongful Acts. If a claim is made against any insured, the insured or the company shall immediately forward to the underwriter every demand, notice, summons, complaint, or other process received by the insured or the company. All notices of claims and of wrongful acts must be sent by certified mail to the underwriter at the address set forth in the Declarations.

If an insured or the company becomes aware of a wrongful act during the policy period, an act that may subsequently give rise to a claim, notice of this is to be sent to the underwriter. If this is done during the policy period, the underwriter will treat any such subsequently resulting claim as if it had been made against the insured during the policy period. This notice of a wrongful act should include a description of the act, the identities of the potential claimants, the consequences that have resulted or may result from the act, the damages resulting from the act, and the circumstances by which the insured first became aware of the act. The insured or the company should also request coverage under the policy terms for any subsequently resulting claim for the wrongful act.

Additional Reporting Time. If a claim is first made against an insured during the last fourteen calendar days of the policy period, this claim is treated as if it had been reported to the underwriter during the policy period. This is so if the insureds or the company make reasonable efforts to report the claim immediately and the insureds or the company give the underwriter written notice of the claim no later than fourteen calendar days after the end of the policy period.

Timing and Interrelationship of Claims. A claim that is a written notice received by an insured is first made when any insured or the company receives a written notice. A claim that is a judicial, administrative, bar association, or other proceeding against any insured is first made when any insured or the company first becomes aware of the filing. All related claims are treated as a single claim made at the time of the first of such claims.

Defense and Settlement of Claims. The underwriter has the right and duty to defend any covered claim through counsel of its choice. This is so even if the allegations of the claim are groundless, false, or fraudulent.

No insured may admit any liability for or settle any claim without the underwriter's consent. The underwriter has the right to investigate and conduct negotiations, and with the consent of the insureds, enter into such settlement of any claim as the underwriter deems appropriate. If any insured against whom a claim is made refuses to consent to a settlement acceptable to the underwriter, the underwriter's liability for defense expenses and loss will not exceed the amount for which the claim could have been settled, plus any defense expenses incurred up to the date any insured refused to settle the claim.

Limit of Liability; Retention. The amount stated in Item 3 of the Declarations is the maximum limit of liability for all defense expenses and all loss from all claims. This is regardless of the number of claims, the number of persons included within the definition of insured, or the number of claimants.

Defense expenses are part of and not in addition to the stated limit of liability and payment of defense expenses will reduce (and may actually exhaust) the limit of liability. If the limit of liability is exhausted prior to the conclusion of any claim, the underwriter has the right to withdraw from the defense of the claim and then have no further obligations of any kind or nature whatsoever under this policy. This is done by tendering control of the defense to the insureds.

The obligation of the underwriter to pay defense expenses and loss in connection with any claim is only in excess of the retention. The retention is an amount borne by the insured and the company at their own expense. And, while the underwriter has no obligation to pay any part of the retention amount, it may, at its own discretion, pay the retention. In which case, the insured and the company must repay the underwriter any amounts so paid; if not, the amount paid by the underwriter will reduce the applicable limit of liability available to the insured and the company.

The retention applicable to insuring agreement B (as noted previously), applies to defense expenses and loss resulting from any claim if indemnification by the company is required by law or is legally permissible. This is unless the company is unable to make such indemnification solely by reason of its financial insolvency.

Other Insurance. All defense expenses and loss payable under this policy is in excess of, and will not contribute with, other insurance. This policy will not be subject to the terms of any other insurance.

Changes in Risk. In the event that the company acquires any other entity or merges with another entity, or acquires a subsidiary after the inception date of the policy, the policy will provide coverage with respect to persons who become insureds as a result of the acquisition. This is for claims based solely on wrongful acts occurring subsequent to the effective date of the acquisition.

In the event any subsidiary ceases to be a subsidiary prior to the expiration date of the policy, the policy will continue to apply with respect to such subsidiary, but only in respect of claims against insureds based solely on wrongful acts occurring prior to the date that the subsidiary ceases to be a subsidiary. Wrongful acts occurring after that cessation date are not covered by this policy.

If the company ceases to exist, whether due to acquisition by another entity or merger with another entity or due to liquidation of the company, no coverage is afforded to the company for any claim based on any wrongful act occurring subsequent to the date of this event. However, the bankruptcy or insolvency of an insured or an insured's estate will not relieve the underwriter of any of its obligations under this policy.

Cancellation. The underwriter may not cancel this policy except for failure to pay a premium when due. If this is the case, twenty days written notice has to be sent to the named insured.

The company may cancel the policy by surrendering it or by mailing or delivering to the underwriter notice stating when the cancellation will be effective. If the policy is cancelled by the company, the earned premium will be computed in accordance with the customary short rate table and procedure. Premium adjustment may be made either at the time cancellation is effective or as soon as practicable after cancellation becomes effective.

Discovery Period. The coverage afforded under the policy will be extended to apply to loss from claims against the insureds first made and reported to the underwriter during the discovery period as defined. However, this is based on several conditions:

first, the underwriter fails or refuses to renew the policy, or the company cancels or declines to renew the policy;

second, within thirty days of the end of the policy period, the company pays the additional premium required, which is seventy-five percent of the one year premium set forth in Item 5 of the declarations;

third, such claims are for wrongful acts committed before the effective date of the cancellation or nonrenewal of the policy.

Note that the company is not entitled to purchase a discovery period in the event that the policy is cancelled by the underwriter.

Exhaustion. If the limit of liability is exhausted by the payment of defense expenses and/or loss, all obligations of the underwriter under the policy are completely fulfilled and exhausted. The underwriter then has no further obligations of any kind or nature whatsoever under the policy and the premium is fully earned.

Cooperation and Subrogation. In the event of a claim, or a notice of a wrongful act that may give rise to a claim, the insureds and the company must provide the underwriter with all information, assistance, and cooperation as the underwriter may reasonably request. The insureds and the company may do nothing to prejudice the underwriter's position or the potential or actual rights of recovery.

In the event of payment under this policy, the underwriter will be subrogated to and entitled to an assignment of all of the rights of recovery of the insureds and of the company. The insureds and the company have to execute all papers and do everything necessary to secure such rights.

Representations. This condition simply states the fact that the particulars and statements contained in the application are true, accurate and complete, and that the policy is issued in reliance on the truth of that representation. The application information is deemed to be incorporated into and to constitute part of the policy and are material to the underwriter's acceptance of the risk.

However, this condition goes on to declare that the policy shall not be avoided as to any insured on account of the untruth of the particulars and statements contained in the application unless the following points are present: the insured knew of the untruth, or the person providing the statement knew of the untruth. In the first scenario, the untruth is imputed only to the particular insured; in the second scenario, the untruth is imputed to all insureds.

Protection for Innocent Insureds. If coverage is denied based on dishonest, fraudulent, or criminal act or the willful violation of any law, this denial applies only to that particular insured who commits such acts. The exclusion would not apply to any insured who neither committed, personally knew of nor acquiesced in such acts.

No Action Against the Underwriter. No action may be taken against the underwriter unless there has been full compliance with all of the terms of the policy, and the amount of the obligation of the insureds to pay has been finally determined. No person or entity will have any right under the policy to join the underwriter as a party to any claim against any insured to determine the liability of such insured.

Authorization and Notices. The person or entity first named in Item 1 of the Declarations will act on behalf of the company and all insureds. This applies to giving and receiving notices and other communications, effecting or accepting any endorsements to or cancellation of the policy, the payment of premium, the receipt of any return premiums, and the purchase of any discovery period.

Changes. Notice to any agent or knowledge possessed by any agent or other person acting on behalf of the underwriter will not effect a waiver or change in any part of the policy, or estop the underwriter from asserting any right under the policy terms.

No Transfer or Assignment of Insured Interest. No transfer or assignment of interest under the policy or of any cause of action against the underwriter arising out of its performance (or failure to perform) in accordance with the terms and conditions of the policy will be effective without the underwriter's written consent.

Headings. The descriptions in the headings and subheadings of the policy are solely for convenience and form no part of the terms, conditions, and limitations of the policy.

Entire Agreement. This condition states that the insureds and the company agree that the policy (including the application and any endorsements) constitutes the entire agreement existing between the insureds, the company, and the underwriter. Furthermore, the terms, conditions, limitations, and endorsements of the policy may not be waived or changed except by written endorsement issued to form a part of the policy.

Underwriter's Signature. This condition declares that the policy shall not be valid unless countersigned on the Declarations page by a duly authorized representative of the underwriter.