Illinois Supreme Court Holds Innocent Insured Doctrine Can’t Save Law Partner

One of two partners in a law firm was disbarred on consent. That attorney had completed and signed a renewal application for legal malpractice coverage on behalf of the firm two years previously. Without his partner’s knowledge he answered “no” to the question of whether any member of the firm was aware of circumstances that might give rise to a claim not yet reported. Consequently, the insurer sought complete rescission of the insurance policy under Section 154 of Illinois Insurance Code based on a material misrepresentation on the firm’s written application that materially affected the acceptance of the risk by the insurer. Such a misrepresentation goes to contract formation. The Illinois high court rescinded the policy. It held that the “innocent insured” doctrine was not applicable and the Insurance Code governed as an expression of public policy. Illinois State Bar Association Mutual Insurance Co. v. Law Office of Tuzzolino and Terpinas, 2015 IL 117096 (February 20, 2015).

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