Insurance issues related to executive orders

Due to potential financial and reputational risks, law firms targeted by executive orders should assess insurance policies, anticipate claims and seek broker advice.

A U.S. Government Memorandum dated March 22, 2025 (the memo) and its associated fact sheet, directed the U.S. attorney general and the secretary of Homeland Security to stringently enforce accountability measures against attorneys and law firms that had allegedly previously engaged in improper conduct. The memo stated an intent to address concerns about the misuse of the legal system, particularly when such misconduct threatens national security, public safety or election integrity. The administration also issued separate executive orders (EOs) specifically aimed at several high-profile law firms.

Law firms that are currently dealing with an EO, the possibility of an EO or have concerns about how they could be potentially affected by the situation, would be well advised to review their insurance policies and consider next steps. This article is intended as a first step toward exploring the intersection between these EOs and potential insurance coverage.

Key provisions of the memo

The memo directed the attorney general (AG) and the secretary of Homeland Security to take several key actions, including:

• Sanctions for frivolous litigation: The memo instructed the AG to prioritize seeking sanctions against attorneys and law firms that engage in frivolous, unreasonable, or vexatious litigation against the United States, including litigation deemed to be for improper purposes, such as harassment or causing unnecessary delays

• Enforcement of professional conduct regulations: Both the AG and the secretary were directed to prioritize the enforcement of their respective regulations governing attorney conduct and discipline including referring attorneys and law firms for disciplinary action when their conduct appears to violate professional conduct rules

• Review of past conduct: The AG was also directed to review the conduct of attorneys and law firms over the past eight years in litigation against the federal government. If misconduct is identified, additional actions such as reassessment of security clearances or termination of federal contracts may be recommended

The EOs that were aimed at specific law firms direct various agencies to take certain actions against those firms, in most cases suspending federal security clearances for law firm personnel, cutting contracts between the firm and government, preventing the law firm from working directly with the federal government and its contractors and preventing law firm personnel from entering federal buildings.

Insurance implications of the executive orders

The question of whether the EOs or actions taken by agencies as a result of the EOs constitute claims against law firms will depend on the exact language of a law firm’s lawyers’ professional liability (LPL) policies or management liability policies. One thing to keep in mind is that neither type of policy generally requires that claims be brought by clients or that they allege malpractice.

Law firms that are affected or potentially affected should consult their insurance brokers on the best course of action, which may include providing notice to carriers if only on a precautionary basis. Carriers that take the position that the EOs and related actions are not claims may be likely to accept notices as placeholders for potential future claims pursuant to notice of circumstance provisions in their policies.

Note that law firms generally do not have any obligation to provide notice before a claim is made against them, but if they elect to provide an optional notice of circumstance with sufficient detail, a subsequent claim that arises from those circumstances will have potential coverage under the current policy (even if the subsequent claim is not made until a later policy year).

If a law firm chooses to provide a notice of circumstance to a carrier, it may discuss with its broker various future claims that could arise from the situation, including potential claims by a law firm’s clients.

Any such notice of potential claims should ideally make clear that the law firm does not believe that any potential allegations discussed therein would be well founded or have a basis in fact. Nonetheless, it is possible that claims may arise from a law firm’s inability to timely respond to deadlines or failure to properly investigate due to restrictions placed by the EOs.

There may also be allegations that an attorney did not zealously represent a client due to concern about potential repercussions. Clients may also assert breach of contract for a firm’s failure to provide contracted for legal services as outlined in an engagement agreement or fraudulent inducement arising from failure to adequately disclose potential conflicts. Such allegations may also lead to demands for the return of fees paid to the firm.

Additionally, if an EO instructs a federal agency to rescind or terminate a contract because an affected entity is represented by a certain firm, then there may be a claim against a law firm for tortious interference with a contract. A client may also claim that an attorney and law firm withdrawing from affected representation in an untimely manner has caused harm to them. These examples are not the totality of potential claims and should not be understood as such.

It is also possible that the existence of a relevant EO and the law firm’s actions in response could lead to employment practices liability claims. As a result, law firms should consider discussing how to address these risks and other insured risks with their broker as well.

A law firm may experience serious financial and reputational harms if it is targeted by an EO for the past acts of its attorneys. Regardless of whether a law firm chooses to settle or challenge the EO, it may lose current and prospective clients.

Best practices for law firms to consider

• Review your files and clients to determine which ones are or might be considered adverse to the United States, relate to governmental contracting and/or regulatory investigations

• Consider whether the memo or the EOs directly or indirectly affect your firm or your clients or might in the future

• Speak with clients to ensure that there is proactive and open communication about any potential impact on the legal services being provided

• Ensure that your internal policies are up to date

• Consult with counsel regarding any questions and legal implications of taking or continuing representation in certain actions

• Speak with your insurance brokers and claim advocates and review your LPL and other policies if there is a claim or the concern of a potential claim. Insurance carriers will interpret the terms and conditions of their policies to make an initial determination as to coverage, after which law firms can discuss with their brokers the appropriate next steps.

Conclusion

Law firms that have been faced with EOs or the threat of an EO may have to make difficult decisions regarding how they respond. Other law firms may want to consider proactively their exposure to an EO. In either case, law firms should not forget to consider their insurance policies, how they might be affected and how they might provide assistance to law firms in these situations. It is never too soon to discuss potential exposures and potentially relevant insurance coverage with your insurance brokers.

Authors

Theresa Panensky
WTW West Region Leader, Claims Advocate of the Claims & Legal Group – FINEX

Scott Michael Lupiani
Partner, Pierson Ferdinand LLP

Lawrence Fine
Management Liability Coverage Leader FINEX North America