Another Law Firm that we were working with many years ago to provide coverage at renewal was being non-renewed by their current Lawyers Professional Liability Insurance Carrier because of claims severity and frequency. This combination meant that it was prohibitively expensive to find a Malpractice Insurance policy that covered their prior acts. This 13 member firm was looking at premiums with prior acts of over $350,000 for a $1 million of coverage. Without prior acts the premiums were around $125,000. The extended reporting period endorsement was going to cost around $100,000 for an unlimited time period.
Faced with these numbers the Law Firm decided to report to their incumbent malpractice insurance carrier every case that they ever worked on as a potential claim. There were no circumstances or explanation as to what the claim might be, so the firm did not meet the requirements of their malpractice insurance policy claim requirements. The firm was hoping to trigger the normal claims made policy discovery clause that states that matters that were discovered and reported during the policy period continue to have coverage after coverage has expired.
The firm went ahead with purchasing the $125,000 Attorney Malpractice that did not have prior acts coverage.
Couple of issues can arise with this:
1. Every time the firm comes up for renewal for the next few years if the firm wants to look at other coverage alternatives, it must disclose to new carriers all of the reporting claims/incidents. This tends to make the Law Firm a very undesirable risk for many years to come.
2. More importantly, most claims made Lawyers Professional Liability Policies have provisions that speak to previously reported claims/incidents that occurred prior to current coverage. So even is the covered acts may have been within the current policy’s provisions, the exclusions for prior reporting to other insurance carriers may come into play. And if the acts occurred after the old “non-renewed” policy had expired, there will be no coverage from the old attorney malpractice carrier.