Friday, November 14, 2014

Lack Of Malpractice Insurance Does Not Turn LLC Into General Partnership

The New Jersey Appellate Division has reversed a lower court order and dismissed a legal malpractice claim.

Under the facts of this case, [attorney] Ward argues that he is shielded from liability as a partner in a limited liability partnership ("LLP") and is therefore not vicariously liable for the alleged legal malpractice of his former partner, defendant John Olivo. Ward also contends that he is otherwise entitled to a dismissal of the complaint because plaintiff Mortgage Grader, Inc. ("MG") failed to serve an affidavit of merit ("AOM") on Ward or substantially comply with the AMS.

The primary issue is whether Ward loses his liability protection as a partner in an LLP if the LLP failed to purchase a tail insurance policy. 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 by Rule 1:21-1C(a)(3), the LLP does not revert to a general partnership ("GP") under the Uniform Partnership Act ("UPA"),

Further

 if attorneys practice as an LLP, and the LLP fails to maintain malpractice insurance as required by the court rules, then the Supreme Court may terminate or suspend the LLP's right to practice law or otherwise discipline it. As currently written, however, the court rules do not authorize a trial court to sanction a partner of an LLP for practicing law as an LLP without the required professional liability insurance by converting an otherwise properly organized LLP into a GP.

(Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2014/11/the-new-jersey-appellate-division-has-reversed-a-lower-court-order-and-dismissed-a-legal-malpractice-claim.html

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