A law firm partner in an LLP does not lose his liability protection if the LLP fails to obtain or maintain professional liability insurance as required by Rule 1:21-1C(a)(3).

The defendant partner successfully argued that he is shielded from liability as a partner in a limited liability partnership (LLP) and is not vicariously liable for the alleged legal malpractice of his former partner despite the LLP’s failure to purchase a tail insurance policy. By the time the plaintiff filed its complaint, the inactive LLP’s claims-made policy had expired and the inactive LLP was uninsured. The Appellate Court reversed the motion judge’s order denying the defendant’s motion to dismiss the complaint, concluding that 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 general partnership. This ruling is applicable both to active LLPs providing legal services as well as LLPs that have ceased the active practice of law. Although practitioners may find some comfort in this decision, they must remain cognizant of Rule 1:21-1C(a)(2), which states that “[a]ny violation of [Rule 1:21-1C] by the limited liability partnership shall be grounds for the Supreme Court to terminate or suspend the limited liability partnership’s right to practice law or otherwise to discipline it.” Also noteworthy in this case, the Appellate Court held that the requirement to serve an Affidavit of Merit in actions involving claims of malpractice or negligence by a licensed person in his profession or occupation also applies where a plaintiff asserts claims under a theory of vicarious liability against partners of a law firm for a fellow partner’s malpractice or negligence.

Case Law Alerts, 1st Quarter, January 2015