Lawyers Professional Liability policies use no standard form. Even though most policies are worded different, they generally cover the same risks and exposures. But as the saying goes the devil is in the details. Case in point is the definition of “an insured”. Most polices cover current attorneys, employees and partners along with past attorneys employees and partners under the firm’s policy. There are normally reporting requirements spelled out by each carrier to inform the carrier of the comings and goings of attorneys. But from a coverage standpoint, even after attorneys, employees or partners the firm, that firm still has coverage for past acts of departed staff. There is no real need under most circumstances to purchase an individual Extended Reporting Period Endorsement (ERP). This is a typical definition of an “Insured” that protects past attorneys acts, from the Professional Solutions policy:
“9. Insured means:
a. The entity or person listed on the Declarations as the Named Insured and any Predecessor Firm thereof, but only in rendering or failing to render Professional Legal Services on behalf of the Named Insured or Predecessor Firm;
b. Any current partner, director, stockholder, shareholder, or employed lawyer of any person or entity specified in item a. above; but only in rendering or failing to render Professional Legal Services on behalf of the Named Insured or Predecessor Firm;
c. Any non-lawyer who is a past or present employee of the Named Insured or Predecessor Firm for acts or omissions within the scope of such person’s employment for the Named Insured or Predecessor Firm;
d. Any lawyer who is a past partner, officer, director, stockholder, shareholder, employee of the Named Insured or Predecessor Firm, but only in relation to Professional Legal Services rendered on behalf of the Named Insured;
e. Any former employee, former or current of counsel or independent contractor of the Named Insured or Predecessor firm, but only while acting within the scope of their employment for, and on behalf of, the Named Insured;
f. Any lawyer who has retired from the Named Insured, but only arising from Professional Legal Services rendered on behalf of the Named Insured or Predecessor Firm before retirement, which are otherwise covered by this Policy; and
g. The heirs, executors, administrators, assigns and legal representatives of any Insured, but only in their capacity as such in the event of any Insured’s death, incapacity or bankruptcy, and only for claims based on Professional Legal Services rendered prior to such Insured’s death, incapacity or bankruptcy, and only to the extent that such Insured would otherwise be covered by this Policy.”
There are a few Lawyers Professional Liability policies written that define an “insured” differently. Those policies only provide coverage for the attorneys that are with the firm during the policy period. Given this scenario, any time an attorney or partner leaves the firm it is important for the firm’s past acts protection to have an individual Extended Reporting Period endorsement (ERP or Tail) purchased. If this is not done, the firm could have an uninsured exposure for departed attorneys past acts. This is a sample of the wording that only insures the attorneys and partners that are currently at the firm:
Any lawyer who is a regular employee of the Named Insured and who is named in the Application”
Under this “Insured” definition, the true cost of the policies for a firm that has attorneys that come in go could be higher than the premium might indicate. In this case the firm needs to purchase an ERP for each attorney that leaves the firm. It is also important for a firm to understand which type of definition of “insured” is contained in the policy. Failure to do so could result in an uninsured loss.
Lawyers Professional Liability Insurance policies are contracts. This is an important contract for the firm to have read and understand as the definition of an insured is not created equally.