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Insurer’s decision to drop whistleblower lawyer raises concerns

Mark S. Zaid

A lawyer who represented a whistleblower whose complaint led to President Trump’s impeachment said he’s been contacted by brokers to help him secure professional liability coverage since his current insurer, The Hanover Insurance Group, refused to renew his malpractice coverage.

The insurer said it decided not to renew coverage for Washington-based sole practitioner Mark S. Zaid based on an assessment of the risk, but Mr. Zaid said he had not received an adequate explanation of the decision.

An interest in avoiding a politically sensitive subject likely played a role in the decision, some observers said, noting there is usually plenty of capacity available for attorneys who represent whistleblowers.

Worcester, Massachusetts-based Hanover, whose decision not to renew Mr. Zaid’s coverage was reported by The New York Times last week, said it made the call because of its underwriting guidelines. Mr. Zaid said that in addition to the past policy year, he has been insured with Hanover in other policy years, although not sequentially.

But Mr. Zaid, who has represented whistleblowers for about 25 years without a claim, said he was surprised when “out of the blue“ Hanover informed him that his attorney malpractice coverage, which expires in October, will not be renewed by the insurer.

Mr. Zaid, one of the whistleblower’s attorneys, has been quoted in the news media about his client’s allegations that Mr. Trump used his power to solicit interference from Ukraine in the upcoming presidential election, which led to the president’s impeachment last year.

Hanover said in a statement that certain specialized practices, including work for whistleblowers, was outside its underwriting guidelines.

“Politics play absolutely no part in these decisions,” the insurer said.

“Based on new information about the significant focus Mr. Zaid’s firm places on whistleblower work, which was considered at renewal, we informed Mr. Zaid we did not intend to renew his policy, providing more notice than is required by law,” the statement said.

Hanover said that subsequent to that notice it had explained its position to Mr. Zaid and that liability coverage for firms with significant whistleblower practices is readily available in the surplus lines market.

“For the record, our company fully supports the spirit and intent of whistleblower laws and recognizes the value of these laws in a democracy,” the statement said.

Mr. Zaid said he has been forthcoming about his whistleblower work. “Why would that happen all of a sudden?” he asked in an interview. The insurer “really didn’t give me a good explanation,” he said.

Several brokers have contacted him since The New York Times article was published about securing alternative coverage, Mr. Zaid said.

Coverage for firms that represent whistleblowers is easier to obtain in some years than others, said David K. Colapinto, of Kohn, Kohn & Colapinto LLP in Washington, which specializes in whistleblower cases.

“I’ve never seen a situation where someone was denied a renewal of a policy for the reasons that Hanover gave to Zaid,” he said. “It’s just baffling.”

Mr. Colapinto said he’s known Mr. Zaid since he began his practice “and he’s been consistent with his area of practice.

Mr. Colapinto added that he was concerned that the situation would discourage other attorneys with small practices from taking on whistleblower cases.

“I have never seen any data or any studies to support that whistleblower cases are riskier in terms of legal malpractice claims,” he said. Hanover should have been more transparent, he said.

There’s nothing unique about whistleblower work from the perspective of professional malpractice risks, said Michael Ronickher, a partner with Constantine Canon LLP in Washington, a firm of more than 65 attorneys that specializes in whistleblower work, among other areas.

“There are plenty of lawyers who do very high-profile cases in class actions in particular, and they’re covered and don’t seem to have any particular issues,” he said.

Lawyers who specialize in whistleblower work were surprised to learn about Mr. Zaid’s situation, Mr. Ronickher said.

“I know people have not had issues getting coverage, and it was hard not to think there was some other motive potentially behind (Hanover’s) decision,” Mr. Ronickher said.

Some observers attribute the denial to a desire to avoid political controversy.

Eileen Garczynski, senior vice president and equity partner at McLean, Virginia-based specialty broker Ames & Gough, which has several whistleblower attorney clients, said, “I venture to guess”’ Hanover’s rejection of the coverage was because of a “lack of appetite for anything politically related,” rather than because of Mr. Zaid’s whistleblower work.

David Derigiotis, national professional practice leader for the H.W. Kaufman Group in Farmington Hills, Michigan, said the situation “is a reflection of the appetite within the standard lines market compared with that in the (excess and surplus lines) market.” An account like Mr. Zaid’s is “the perfect thing for the E&S industry,” where there is freedom of rate and form, he said.

He said, “I can’t say I’m surprised to see that type of knee-jerk reaction, even though I think it has everything to do with the high-profile nature of this particular client (rather) than it does with the area of practice.”